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in »he ARAB COUNTRIES

. INDUSTRIAL DEVELOPMENT 1 IN THE ARAB COUNTRIES

PART I Progress and prob Urns PART II Development of key industries PART III Industrial situation in Iraq • Jordan • Kuwait • Lebanon Saudi Arabia • Syria and Yemen

Selected documents presented to the Symposium on Industrial Development in the Arab Countries

Kuwait, 1-10 March 1966

I UNITED NATIONS N«w York, 1967 NOTE

„^S«n»i.| .he Italulx». o( «. Ir«»wri.

L ÌD/C0NF.I/R.B.P./6

j UNITEDUNITI NATIONS PUBLICATION Skies No.: 66. IIB. 23

Price: »2.50 (or equivalent m other currencies) CONTENTS ¡'age INTRODUCTION 1

PAK I. PKOGXESS AND PROBLEMS

A. Co-oferation in the Arab world to footnote programmes of industrial development

1. Integration of industrial development in the Arab world 3 2. Industrial development planning in the Arab countries 5 3. Industrial planning, programming and policies in selected countries of the Middle East g 4. Financing of manufacturing industry in selected countries of the Middle East 13 5. Industrial co-ordination among the Arab countries 15 6. Standardization and industrial development within the framework of an Arab common market Ig 7. Co-ordination of the sugar and paper industries in the Arab countries 20 8. Co-operation with foreign industrial firms in the establishment of industrial projects in Kuwait 22 B. Problems of industrialization 1. Industrial development and the first five-year plan in Kuwait 23 2. Industrial planning in Iraq in the light of the over-all economir P»n 27 3. Industrial manpower problems in Iraq 30 4. Industrial estates in Kuwait 31 5. The Lebanese experience in industrial research and studies and pro- vision of basic technological services for industrial development 33 6. Standardization of specifications and measures: a necessary step for the achievement of industrial and economic co-ordination amonr the Arab States * 35

PAIT II. DEVELOPMENT OF KEY INDUSTRIES

1. Prospects of petrochemical development in the Arab countries 37 2. Development of the petrochemical industry in the Organization of Petroleum Exporting Countries (OPEC) and non-member Arab countries 39 3. Petrochemicals : a practical start in the direction of Arab industrial co-operation 42 4. Petrochemical projects in Iraq 42 5. Sectoral studies on selected industries in Middle Eastern countries 44 6. Creation of an iron and steel industry in the Arab countries 47 7. The fishing industry in the Arab countries 49 8. The Arab potash project 51 Ui é Pap, 9. The food industry in Syria ^ 10. The spinning and weaving industry in Syria 5^ 11. Small-scak industries in Iraq jg

12 1 industries in Kuwait and their im ¿OTLT * P"* on the national ' 60 PA.T III. THE IKDUlTmiAL «TUAT«» IN THE AHA» COUNTWES

1. The industrial situation in Iraq « 2. The industrial situation in Jordan g3 3. The industrial situation in Kuwait 92

4. The industrial situation in Lebanon l06

5. The industrial situation in Saudi Arabia j {2

6. The industrial situation in Syria u6 7. The industrial situation in Yemen 135 INTRODUCTION

iJKÄÄvm^ ^T^ at ^ ei«h teent h ««^ ¡" 1963 adopted resolution 19W (XVIII) calling for the convening off an InternationalT Symposium on Industrial Development, to be preceded as appropriate by regional and siib- regtonal symposia which would prepare the ground for the international symposium. In accordance with this resolution, regional symposia were held in Asia and ft u ,££ iD5cem^er 1965)- Airi•1 (January 1966) and Latin America (March 1966) under the auspices of the United Nations economic commissions of the «spectiye regions, in co-operation with the United Nations Centre for Industria Development at Headquarters. During the same period, a Symposium on Industrial Development in the Arab Countries was held from 1 to 10 March 1966 v,tat,on oi the ?í • !" T . Government of Kuwait, with the technical co-operation of the United Nations and m particular of the United Nations Economic and Social Office in Beirut. The present volume contains extracts of selected documents presented to the Symposium on Industrial Development in the Arab Countries. The purpose of the regional meetings was to study the existing situation and future prospects for industrial development in each region and to consider possible action which could be taken on a national, regional and international level to accelerate industrial development. .. Î9f ,he «""*»?» participating in the Symposium on Industrial Development in Africa. UK following countries also participated in the Symposium on the Industrial Development of the Arab Countries : Algeria, Libya, Morocco, Sudan. Tunisia and the United Arab Republic

)

1

Part I. PROGRESS AND PROBLEMS A. in tk* Armb world t* •/ iman*triti

1. htofratlM «C H»eh»s«rial n\ the Ara» wary*

In the Arab countries there is a strong desire to explained by the reliance of the authorities on tariff develop the industrial sector of the economy. This desire protection for local industries. is reflected in the numerous economic development plans The result may be unhealthy competition, as evidenced that have been, or are about to be implemented. However, regardless of the varying degrees of progress in the case of two industries in particular. The first is the iron and steel industry, which already exists m that have been achieved, particularly during the last the United Arab Republic, has been started in Tunis«, decade, one cannot consider that the Arab world, looked and is being planned in Iraq and Syria The latter two upon a« a unit, has developed sufficiently to warrant its countries seem to have planned for the establishment of inclusion among the industrially advanced regions or such an industry despite the fact that sucres* m this neM countries of the world. requires the fulfillment of certain conditions such aa Arab industries are mainly of the light consumer the existence o." a large market, whether internal or goods type that rely on the processing of available external; invstment of very considerable human and domestic raw materials to meet part of the local demand. financial resources; and the establishment fir existence Furtliermore, the small-scale establishment is the of subsidiary industries based on the waste» and dominant type of industrial enterprise in the Arab world. by-products of the iron and steel industry. The second Small-scale production has contributed to the ineffi- example is the petrochemical industry. This is a ciency that prevails in Arab industrial establishments. highly complex and dynamic industry that uses *àv»œeé Reliance on primitive methods and equipment has had technological processes and requires considerable capital the inevitable result that Arab industry has failed to and large markets. The petrochemical industry also laces benefit from recent scientific and technological advances. strong competition from industrial countries that have This gives rise to two problems: first, the high acquired wide experience and have greater potent wHfie* production costs affect local consumers and the ability in this field Nevertheless, Arab countries producing of Arab industrial products to compete in foreign petroleum and natural gas are insisting on, or seriously markets; secondly, Arab industries are in general considering, the establishment of petrochemical compelled to operate behind tariff walls. industries The results may prove to be disappointing in With regard to the extractive industries (mining and the long run. quarrying), it can be safely said that this vital field Other examples may be found which show the risk« has not lieen sufficiently developed. Furthermore, the implicit in the tendency to industrialize each Aran role played by most Arab countries has been confined country in isolation from the developments that are to the extraction and export of minerals (phosphate, taking place in other Arab countries iron ore, manganese, petroleum etc.) in crude form. Modification of this policy is desirable as part of the Co-operation among the various Arab countries in over-all industrialization policies that are being the matter of the type and size of the industry to he formulated. developed WA assist in achieving the following; results ; Despite prevailin¿ industrial backwardness in the (a) Develop specialization in production, whereby Arab countries, progress is being made. Development is, each country concentrates on branches of industrial however, individualistic in inclination, aim and style. activity in which it has a comparative advantage; Misa Each political entity in the Arab world formulates and will lead to tne acquisition of experience and skills, implements industrialization plans within its political raise standards of efficiency, and improve tV quality frontiers and with a view to the realization of its own of output to the extent necessary to enable «wen particular amis. However, it may not be appropriate to industries to compete with gonds produced m countries condemn this approach as it contains the solution, or well established in the field of inoWmliration ; part of the solution, to the problem of industrial under- (b) Minimize handicapa resulting from the scarcity development. of some factors of production such as capital, raw This individualistic tendency does not take sufficiently materials and skilled labour; into account a number of other factors, the most (c) Permit the best use to lie made of the natural important of which is the limited size of the domestic endowments of each country ; this will discourage the market in each Arab country. establishment of industries m countries where they Observation of a number of existing industries in do not posses« the necessary ingredients for success ; more than one Arab country shows that the ideal size ((/) Gradually raise the rate of development, of an industrial project is often not given sufficient especiafly in countries which have not been growing consideration by the authorities concerned with as fast as other countries in the area ; industrial development. This attitude may, perhaps, be (#) Exercise a deaerante impact on the other sector* 1 Payer presente! by the Uniaa of Arab Eafimcrs. of tne ecosnsny, thereby expanding the volume of trade Mu* rial • tas Arab wm,tw f^ZST"^ """f *" Ar*b ««"triea. «pecitfly m the Acid oí transport and communications ; domestic and external markets, and the problems (/) Permit thr Arab countries in the long term to encountered by industrial enterprises ; this stepVequire. that Arab countries supplj the proposed agenc/with take their place among the industrially advanced regions accurate information and statistics ; snd countries of the world, thereby enhancing their economic bargain»* position on the international level ; (*) To examine current industrial programmes and (g) Lead to the eventual transformation of the Arab pbn, ,n each country separately in order to coordinate efforts in this field, minimize conflict and prevent the countries into a smffc mark«, representing a practical rise of unhealthy competition, 'IVtirll (,'wtio«°f establishing an Arab common market on a firm and sound basis. (c) To examine the possibilities for industrial production _,n areas selected for regional cooperation Notwithstanding these potential advantages of such examination to concentrate on a limited period mtegratKjn. ,t ,s acknowledged that there will be some ot hve or ten years ; ^ w small so e industries that can tat he established on a purely domestic In,». This will apply to certain (d¡i To estimate, in accordance with principles to be industries for whose products the deXnd is mainly agreed upon, the implementation period, the costs £ local, either becan.se it is related to standards of living local and foreign currencies and the required4 technicïï nS tn r bwau Mt rnal and organizational skills. «amicai insufficientmi£ T?\ Such industriesV ° would* have 'to be establishedd""»nd is Upon completion of this study, a joint plan of action as domestic industrie* in accordance with the should be formulated. This plan would define the ordì orcurrsfcmre, and requirements of each country aCCOrded t0 the different 1 m0re ;irt atPE??'.? ** and areaS im WuSS IS'VT ^T" P '^'^'y with those trítí; TT ,°í P^"tation in major industries that can satisfy demand in more than h ,k one cnuntry. or whr.se establishment on the basis of îndîA inïres. ; ' "^ ** ^ ^^ *"* ,n mm tl Arab f0VeS S C a Pr0C ,Ur WOU d 1 1 the ^nlint * " """"^ P the ft nrt -,n ?Jeft,' S: Kx.' P*loitatio"" '* achèvement of A number of objections may be raised to integration; Assuraruekssí;an(e thatri:í workr was Pcommenced" °i only«¡e resourceson those first integration, which calls for the establishment of nece^iv^1"1"" "¡"V" °r ^ of ^ *»"«S ^h cmimon market, may result in conflict with necessary ,,r success had been ensured; Application of ¿ fi.,nd"strlal mttrrsn which will 1* adversely the principle of the division of labour on a regkSlfevel affecte, bv the implementation of such a step; secondly and spec,al,zat,on m branches of industry^Sng^he mtegratx», may necessitate the introduction of busk ZdhT "IT/ t0!X,StiT m,1,,Strial Plans and «trurtures; Idvlncef A Tat"m ^"^ tht nmr* industrially advanced Arab countrie. at tlie expense of the poorer »nd Jess mdustriali/ed countries. ' Agreement would also be required on a common «l»., for industrial financing. Such an a^ZT^Ä No doubt some industries may be adversely affected a rWmH or even cea.se operation. However, this may prove to be c over the steps described below. * * •»»"" «the general interest of industrial development in the Í St a A ah S financins imtk io Arab countries. In the long run, it may he desinale that banknan»)) wouldwoüld beí established,/rl!Í a its Capitol to consist« " (orn# ¡TT1** «<»»»»">». established without cartful study, should cease operation T contributions by member, of the ArTLeaguT^nd o« SbSSTofihratinf " th< Arab «25i«2 ^íuírwkh Lconír,üLK,nariM wouM •» «««i »

¿2 wiH^hLl £? ^«"dictions and weaknesses M« wUlewible development to proceed at a faster mce ^Ätst^^^^ -SS- ä J^**"**"*»«» (or bank) would nifi nadiMBa. «rly ihy^ i«Jei,ie»t.»ion Surh plans may ha Md long-term loans to finance the expansion renew«! W «d construction of ifKfc»tri«l proJSkZL¡T^Í

It must be emphasiied that no on« Arab coantrv reMv»--/!j 77'kÄn SufficientWOttW coNateralto fe Ux the th y c ¡TSirlÄ ' ^ ^«3 aavaM*" those « "«f*^tive m »wi, *F?U£ti0n " f""iWe S»*h ^tion wTn the inTerest •Í «M the countries concerned *

We discuss below the measure« nr*A*ji ** »4 SZal^Li k? °* *f Vrk«-Ara. Baak. Such ^s^A;,hArtbí ï^'S^ -— *

•»r optaiwwg loans, both from Ara» count üu ,%mA "T. •"d ,"*w fequsreiBeiits, and to «turfy th. *£«* A ^iai body w«,« ^/i S'STL 2; with respect to types, coats and marketing in the Merest te be charnd os the Ioana. Raffici,.? — - "^* kt pwvided íor the rtpaysatsit of the immZû* PragrcM MMI prvblMts currency in which they were extended. The special of building this road is to link the sea ports of Beirut, body would also undertake, in collaboration with the Tripoli and Latakia, on the one hand, to those of Basra, proposed industrial institution and the country Kuwait and Dammam on the Arabian Gulf, on the concerned, the task of negotiating loans to finance the other, with subsidiary roads branching to important industrial development plan with private foreign centres in Iraq, Jordan, Saudi Arabia and Syria. institutions and the United Nations. The United Nations can also assist in the programme A prerequisite for the launching of a successful of integrating industrial development in the Arab industrialization programme is the presence of highly countries through its different organs and specialized qualified human resources. This requires the adoption agencies and through other institutions that are closely of the measures indicated below. Arab institutes must be related to it by providing technical experience and established to deal with statistics, planning, admi- know-how along the lines indie; »ed below. nistration and management (with curricula emphasizing, above all, matters relating to the industrial sector). The United Nations could organize geological Such institutes would provide sufficient num!>ers of missions to co-operate with Arab specialists in graduates for employment in various common Arab undertaking comprehensive geological surveys and projects. exploration works to determine the availability of There must be an increase in the exchange of minerals, location and magnitude of reserves, and to industrial experts and technicians between Arab assess the prospects of the commercial exploitation of countries. In that connexion, it might be advisable to such deposits. Such operations should lie comprehensive prepare a list of such experts and technicians, arranged and on a large scale. It is important to point out that according to their different fields of specialization. it is not enough for the United Nations to provide leaving to each Arab country the freedom of choice of experts and technicians; it should, rather, provide experts and technicians. modern equipment and machinery. Restrictions must be removed on the movement of The United Nations could provide assistance in the industrial labour, especially skilled lattnur, and sufficient fields of statistics, technology and industrial management material and social amenities provided for the labour and planning. While it is true that the United Nations force. has extended assistance to the Arab countries in other Agreement must t>e reached among the Arab countries areas, it is important to place more emphasis on the concerning the standardization of specifications of industrial aspects of economic development. The l Inited industrial products. Nations could contribute financially and technically to the establishment of the proposed institutions. In fact, Industrial development will be deficient and will fail the United Nations might find it necessary to establish to attain its real objective, namely, integration, if it is such institutions and to finance the training programmes. not accompanied by a co-ordinated and comprehensive plan in the field of transportation and communication. The International Bank for Reconstruction and This requires, first, the standardization of gauges and Development might also have to expand the scope of the raising of efficiency of the railway system, and, its activities in the field of industry in co-operation with secondly, the expansion of inland road networks the proposed Arab industrial bank. connecting neighbouring Arab countries with one The organization by the United Nations of periodic another. Perhaps the time has come to reactivate one conferences for the Arab countries to discuss the such project, namely, the inland road connecting the different aspects of industrial development would be Mediterranean Sea to the Arabian Gulf. The purpose useful.

2. laxIsMtrial development pi—»"I I» «•»» Arab eotmtrfea3

A CENtAAL »VIEW OF INDUSTRIALIZATION IN THE in this Iraqi industrial programme is estimated at AlAl COUNTS»» ID 187.2 million. In the United Arab Republic, industrial production Efforts are being made to develop the industrial has increased very considerably over the last ten years sector in member countries of the Arab League. In as a result of the execution of the industrial projects Saudi Arabia, iron and steel and cement industries are included in the first industrial programme, 1957-1960, being established. In Kuwait, progress is being made in and in the first five-year plan, which ended in July 1965. the cement and petrochemical industries. The Sudan is At present, an extensive industrial programme giving special attention to the development of the sugar, representing an investment of LE 1,000 million is in cotton spinning, weaving, tanning, paper, cement, progress in the second five-year plan, 1965-1970. One plastics and foodstuffs industries. In Jordan, cotton of the main targets of the present industrial programme textiles, oil refining, rope, hides, cement and batteries in the United Arab Republic is the promotion of heavy are making headway. In Iraq, similar progress is being industry such as iron and steel, engineering and made in the textile and food-preserving industries and chemicals. m od refining. Iraq has recently embarked on the implementation of an extensive industrial programme Industrial development in the area is characterized within the five-year plan 1965-1969. Total investment by several features. First, the average rate of industrial development varies considerably from one country to _AP*ï*r«. •""•"fc- »y th* ftntnl Secretariat of the Lcagi» another. Second, the levd of industrial development in oí Ara* Staks. the Arab League countries is, in general, still in the Industrial development in Ih« Arab countries first phase.3 Even in Egypt, the most industrially The main problems facing industrial development advanced country of the area, industrialization is still in planning in the Arab countries are enumerated below. the first phase, though ahout to enter the second phase. Third, in thes-; countries industrial activities are not yet Choice of the production technique co-ordinated or integrated at the regional level. Choice of production technique is closely related to It is expedient to highlight some of the social the two main factors of production, capital and labour. features of the region which affect the progress of The national reconciliation of these two factors will industrialization in the Arab countries. Two such ultimately shape the level of economic and social characteristics suggest themselves. First, the level of development in any country as well as influence the economic and social progress in all the Arab countries structure of its industrial growth. indicates that these countries are still in the early stages of development in terms of the level of per capita The importance of this choice in the Arab world is income, production, education (especially higher clear in view of the wide variations in the availability education), scientific research, and the level of of lalxjut ami capital. Thus, whereas in Kuwait there is an abundance of capital funds and a shortage of technological progress and administrative organization. labour, other countries, such as Egypt, suffer from a Second, there is a marked contrast in the degree of sectoral growtli of industry between one Arab country reversed relationship between the two factors. More- over, countries like Sudan and Jordan suffer from a and the other. This sectoral contrast persists in the shortage in both capital and skilled labour. economic and social fields in Arab countries irrespective of the prevailing political régimes and economic systems. These variations in the availability of capital and labour pose an acute problem, especially in drawing up These features of the social milieu in the Arab countries, together with the contrasting level of a common or regional plan for industrial development in the area as a whole. What renders the problem even industrial development, undoubtedly exercise a consid- more acute are the divergences in the economic systems erable effect on the shape of their future and on the choice of industrial policy. as well as in the social and political régimes in the Arab countries, as most of the decisions regarding the quality of the factor of production to be employed have MAJOR PROBLEMS OF INDUSTRIAL DEVELOPMENT social and economic implications. PLANNING IN THE ARAB COUNTRIES The process of industrial development in the Choice of the type of industry developing countries gives rise to many problems, some Countries with recent experience in industrial of which are purely economic or political, while others development are confronted with a choice of the type have socio-economic dimensions. Among the latter is the of industry to te established. This choice assumes controversy regarding the ultimate goal of industrial greater significance in countries with comprehensive development: is it to raise production or to increase planning and in those in which the State plays a the opportunities of remunerative employment in the significant role in economic activity. In the private country ? enterprise or capitalist countries, effective demand is Where these problems can be approached on an the chief determinant of the nature of industrial output. individual country basis, their solution is greatly The situation is different in the centrally planned facilitated. However, if the problems under consideration economies. Here, while the demand for capital goods are regional, covering many countries with varying may be limited by the small demand for consumer goods economic, social and political characteristics, their the State may nevertheless decide to give priority to solution becomes difficult. Tt may well be that what the promotion of industries producing capital goods for suits one region or country may not apply to the other, which the demand is expected to rise, pari passu, with because of the political, economic and social differences industrialization. Accordingly, industries producing in the various countries. capital goods may be favoured at the expense of those With this in mind, an attempt is made below to outline producing consumer goods during the first stages of the main problems confronting the progress of industrial industrialization. development in the Arab countries. However, it should The choice of the type of industry is not confined to be emphasized that the discussion of these problems a selection of one of the three basic groups of industry does not aim at providing decisive solutions and specific (i.e. industries producing consumer goods, capital goods opinions or policies. The aim is to encourage a discussion or intermediate goods), but also includes the selection which may prove helpful to the co-ordination of of the type of industry within each group. industrial development. Variations in the levels of economic and educational :* hiiliiMii.il pluses indicate the relative position of various development among the various Arab countries are a industrial un:S m the industrial structure (>f a country. Pro- factor in the choice of industries. In Egypt, for example, test Moll ¡nan divides the process of industrialization into the level of education and economic development in four main ¡.liases, deluding on the relative im|>oi tance of in- general, and the level of higher education and industrial dustries producing consumer goods ami those producing capital goods. In the first phase, consumed goods rank high in indus- growth in particular, seem to encourage the expansion trial production, amounting to about five times the net produc- of industries producing capital goods. In the Sudan, tion of capital goods. With the development of industry, ca'iital the same considerations do not appear to warrant the goo !s gradually grow in important« until the ratio is reversed, i.e. when their production amounts to five times the production encouragement of such industries, but call for the of consumer goods, at which stage the fourth or last -.hase of expansion of industries producing consumer goods. industrialization will he reached. See W. (',. Hoffman. The Conditions in Kuwait, which enjoys the highest Ormvth vf Industrial Economics (Oxford University Press, 1958), pp. 1-5. Wcordingly, the statement that industrialization Per capita income in the world, seem to favour the in a certain country is still in it« first phase indicates that establishment of industries producing luxury consumer production of traditional consumer goods still constitutes the goods. On the other hand, conditions in Jordan (where bulk of total industrial production. the level of per capita income is much lower than that ProgreM and problems

of Kuwait) may favour the development of industries CoNCLl.'StON producing essential consumer goods. The foregoing analysis has posed some problems Selection of location for industrial projects pertaining to industrial development planning in the The location for industrial projects has hecome one Arab world. Among these problems mention has lieen of the important factors of industrial development made of the choice of the means or techniques of planning in the Aral) world owing to the size of the area production; the decision as to the type of industry to and the great variations in geographic, economic, social, be established or promoted ; and the selection of suitable political, national and historical circumstances. Each locations for the establishment of industrial projects. country is divided into various regions, districts or Chief among the causes of these problems are the provinces (mohafazats), and each of these regions differs circumstances that the industrial movement in the from the other with respect to natural and human individual Arab country's, as well as in the Arab world resources, as well as geographic structure. There are as a whole, is still in its cv.rly stages, and that variations also variations in income among various regions within exist in many aspects of social and economic life among the same country. the Arab countries as a whole and even within each If, for the sake of argument, each country in the individual country. Arab world is regarded as a single region, the wide These difficulties call for the rapid co-ordination of discrepancy in the income levels of the various Arab the industrialization process in the Arab countries. regions becomes apparent. Thus, per capita income in While the present paper does not aim at providing Kuwait is ten times greater than that of the decisive solutions for the acceleration of the industrial neighbouring region of Jordan. If the variations in the process in the Arab countries, the brief analysis economic, political and social circumstances prevailing presented here may contribute towards formulating in the Arab world are also taken into account, the general guidelines that can he used to facilitate the magnitude of the difficulties involved in the problem of process of industrial development planning in the Arab the regional allocation of industries and projects world. becomes apparent. As a first step in this direction, an estimate should FACTORS INFLUENCING INDUSTRIAL DEVELOPMENT be made of the Arab countries' requirements of manufactured goods in the form of consumption, The factors enumerated below also merit consideration. intermediate, or capital products in the fields of Size of the market engineering equipment and machinery ; iron and steel ; petrochemicals ; cement ; petroleum products ; leather Chief among the factors affecting industrial products; (including shoes), and all kinds of textiles development in the newly industrialized countries is (i.e., cotton, woollen and synthetic). the size of the market. This factor, moreover, contributes Having established the industrial demand, the next to the shape, type and location of industries to be would l>e to arrive at an optimum allocation of the established or promoted, especially if the area of the industries concerned on the basis of existing production country concerned is relatively vast, as happens to l>e potential and possibilities in each country. It was the case in the Arab world. The size of the market is mentioned above that the selection of suitable sites for closely linked with the size of population and level of the establishment of industrial projects presents an income. important problem to industrial development planning All Arab countries suffer, in one way or another, in the Arab countries. For commodities whose from the problem of the narrowness of the market. production does not require large capital funds, the Jordan is severely restricted in this regard. Prospects selection of the location of industry may become of industrial development in Syria, Libya and Jordan relatively easy. However, when it comes to industries stem to be doubtful, essentially because of the requiring large investment outlays, e.g. iron and steel, narrowness of the local market. Nevertheless, if oil refining, and machinery and equipment industries, industrial expansion were planned on the basis of the r great difficulties may arise. For this reason it would l)e size of the ma ket in the Arab world as a whole, then expedient to prepare studies on the economic conditions the prospects of Arab industrialization would improve. of each Arab country within the framework of the Natural resources general economic situation in the Arab world as a whole. These studies should cover the following: The most convenient form of industrialization in the distribution of natural resources; distribution of human developing countries lies in the expansion of those resources ; preparation of scientific, advanced and industries that depend basically on locally produced raw uniform systems of national accounts ; preparation of materials. This implies, inter alia, that the greater the detailed studies on inter-Arab trade ; and preparation supply and variety of natural resources in a developing of detailed studies on the Arab countries' present needs country, the easier will its industrialization become, for manufactured goods and the present potential of and vice versa. each of them for satisfying those needs. Viewed individually, most of the Arab countries, if It is believed that, in the light of such studies, it not all, suffer from shortages of raw materials. Kuwait, would be possible to select the most suitable location for Saudi Arabia and Libya, for example, are rich in oil the establishment of industrial projects intended to resources, but lack minerals (e.g. coal and copper) as satisfy the bulk of the Arab countries' requirements for well as agricultural raw materials. Tunisia is endowed manufactured goods. with abundant iron ore resources, but suffers from a scarcity of coal. Nevertheless, when viewed as a group, Once the optimum allocation of industrial projects the Arab countries become a highly endowed entity with among the Arab countries is achieved, each country a wide variety of mineral and agricultural raw materials. may proceed to apply whatever means or techniques of IiriMtrUI feTetepmeitt ta the Arab cwntriM production it deems necessary in the light of its own run policies designed to provide scientific and sound social and economic circumstances. solutions to the problems of industrial development planning in the Arab world requires the setting up of These are some of the preliminary steps which may a full-fledged research organization. It is hoped that provide a basis for the process of industrial development the establishment of such a body will receive adequate planning in the Arab world. The formulation of long- consideration from Arab countries.

3. Industrial planning, programming and poUefot in »elected countries of the Middle East4

Prior to recent trends in planning, development Until recently, the manufacturing sector played a activities in the public sectors were undertaken in most limited role in the development programmes and plans of the countries of the Middle East through develop- discussed above. The last two Iraqi five-year plans ment or extraordinary budget programmes. Such showed a marked shift in emphasis from agriculture to activities, however, were modest in magnitude and industry, with a consequent rise in the share of comprised mainly a few projects, primarily of an infra- manufacturing industries in the total investment structural type, selected on an ad hoc basis. More allocation of the public sector. In Jordan, most of the recently, development plans in most of the countries public investment in the field of manufacturing in the covered by this study have either been formulated and period 1953/54-1964/65 was confined to the purchase executed or are in the process of being formulated. The by the Government of equity capital in the major following list shows the numl>er of development plans manufacturing industries and to government contri- butions to the industrial development fund. chronologically and by country : In Syria's 1946-1056 extraordinary budget actual Iraq: expenditure on industry amounted to 13.6 per cent of First plan, 1951-1056 total expenditure. The share of this sector in the total Second plan, 1055-1059 allocation of the extraordinary budget (1956-1961) Third plan, 1956-1961 comprised 16.4 per cent. The first attempt at planning Provisional plan, 1059/60 — 1061/62 the industrial sector in Syria was made in 1958, when Detailed five-vear plan. 1 Or,1/62—1965/66 the first live-year industrial plan was formulated. In Five-year plan, 1065-1969 that plan, implementation of most projects in the Jordan : manufacturing sector was entrusted to the private sector. Five-year plan, 1962-1967 In Lebanon, the recently announced five-year plan Seven-year plan, 1964-1970 (not officially released) (1965-1969) is a continuation of the Government's Kuwait: policy of confining its activities to infrastructure (as was Five-year plan, 1066-1970 (being formulated) the case in the 1959-1964 plan), leaving other economic activities as much as possible to private initiative. Lebanon: The allocations for industrial development in Saudi Five-year plan, 1959-1064 Five-year plan, 1965-1969 Arabia in 1963 and 1964 were modest, amounting to about 5 per cent of the total allocations for development. Saudi Arabia: The recent establishment of the General Organisation Five-year plan, 1965-1969 (being formulated) for Petroleum and Minerals (PETROMIN) in Saudi Syrian Arab Republic: Arabia and its vast programme, which includes twenty- Ten-year perspective plan, 1958-1967 seven industrial projects at an estimated total cost of First five-year plan, 1960/61—1964/65 about SR 1,000 million, indicates a trend towards Second five-year plan, 1965-1969 (being revised) a greater emphasis on this sector. At the beginning, planning in Iraq, Jordan and Syria In all three countries for which integrated plans have meant mainly a series of unrelated development projects been prepared, the planned growth rate in the industrial in the public sector. In subsequent years, the planning sectors has been set at a higher level than those of the of the public sector was more systematic and attempts corresponding aggregate plans. were made to cover the private sector. Over-all targets While the planned growth rate of the industrial sector and projections at various levels of aggregation were in Iraq was found to be equal to the actual rate of also made available. Thus for Lebanon has not entered industrial growth, that of Jordan was considerably lower the field of development planning proper. Both of than the actual rate realized in the preceding period«. Lebanon's five-year plans are, in fact, only partial In contrast, the planned rate of industrial growth in programmes related to public investment, emphasising Syria was higher than the actual rate achieved. infrastructure and other basic facilities. Km ait and In the most recent plans of Iraq and Jordan, the Saudi Arabia are presently engaged in formulating their industrial sector received the second highest share of development plans. total investment. In Syria, the industrial sector was The planned growth rates in Iraq and Syria have given the third highest share of total investment. The been set at slightly higher levels than those attained in manufacturing sector alone received about one-half of the recent past. In contrast, the planned growth rate the total investment allocations for the industrial sector in the two Jordanian plans was set at a level lower in Iraq and was relegated to second place in Jordan than that which was actually realized prior to each of and Syria. the two planning periods. Comparing the investment patterns in Jordan's five- 4 year and seven-year plans, we find that, in the latter, Paper presented jointly by the Centre for Industrial De- vi'loiment and the United Nations Economic and Social Office more funds were allocated to the development of in Beirut. industry (primarily mining) and tourism, with a Progrean and problem* remlting reduction in the share of the manufacturing set for the planning period as p whole, reflected in part sector in tota! investment. the boom in the agricultural sector; that sector, although ; Other planning objectives in those countries include depressed in 1960-1961, exp<. enced good harvests in those enumerated below. subsequent years. Actual animal investment had fallen short by about 22 per cent of the annual investment Economic diversification target, a fall mainly attributable to the failure of the Diversification is considered an important long-run public sector to achieve its investment targets. The development objective, ;md the industrial sector is to private sector had partly compensated for such failure play an important role towards attaining that objective. by over-fulfilling its targets. In various countries of the Middle Mast, the problem of In the manufacturing sector, except for investment diversification has been given special importance for figures, no adequate sectoral largets are given. This is two reasons: first, most of those countries suffer from due, in part at least, to the fact that a good number of recurring droughts, causing periodic fluctuations in the projects included in the manufacturing sector could agricultural output, and, secondly, it is the strong desire not be adequately prepared, either technically or of the oil-producing countries of the Middle East to economically, and hence the expected contributions could reduce their dependence on the petroleum sector. not be assessed. For those reasons, and because of the relatively inadequate implementation and follow-up Creation oj new job opportunities machinery, full assessment of actual ]>erformance in the manufacturing sector is not possible. Available data This is one of the objectives of planning in Iraq, Syria indicate, however, that expenditure on manufacturing and Jordan, although it has been relegated to secondary fell short of the set target, The public sector showed a importance. Thus, in Jordan's five-year plan (1962- lower performance than the private sector. Under- 1967), employment was given second priority. In the fulfilment in the public sector may be attributed to a seven-year plan, it was relegated to third place. Iraq's number of factors. Projects included in the public sector five-year plan (1965-1969) takes cognizance of the had been inadequately studied, resulting in delays in the problem and considers reduction in the volume of execution of certain projects as well as in the abandon- unemployment a major social objective, the ultimate ment of others. Furthermore, the administrative solution of which is a long-term project. machinery for the execution and supervision of govern- ment projects was still in the process of being organized. Improvement in the payments position In the private sector, the level of performance was Jordan's seven-year plan (1964-1970) was formulated probably attributable, inter alia, to an attitude of un- on a new basis, namely, a reduction in foreign budget- certainty on the part of the private investor. ary support, this being the most important departure In Iraq, data relating to the performance of the from the assumptions of earlier plans. The manufacturing manufacturing sector are also fragmentary. Plans prior sector is expected to contribute to this improvement in to the recently announced plan covered only the public two ways : on the one hand, imports of manufacturing sector's investment programmes. Actual investment in products are planned to remain at approximately the those programmes has consistently fallen short of 1963 level ; on the other hand, local production is planned targets. Data relating to the three years 1961- planned to increase over the seven-year period by an 1963 of the five-year plan (1961/62-1965/66), indicate amount sufficient to fulfil the projected increase in that actual investment averaged about 52.5 per cent consumption with only a small portion of the increase of total actual allocations for those years, an order going to exports. In Iraq, the manufacturing sector is of magnitude similar to actual performance in the also expected to contribute during the planned period preceding years. The industrial sector's performance 1965-1969 to an improvement in the balance of trade, was among the lowest, representing 29.3 per cent ; that primarily through import substitution. of the manufacturing sector alone amounting to about 10 per cent. This is to be explained, in part, by the Geographical distribution relative political instability which probably weakened the In the latest Iraqi plan (1965-1969), the needs of decision-making powers of the various government backward regions of the country are stated to have been authorities; moreover, although Iraq has been taken into account in selecting the location of certain developing the machinery for the formulation, development projects. Similar factors are stated to have implementation and supervision of project execution, been taken into consideration in Syria's second five-year such machinery is still inadequately staffed. The poor plan. performance may also be attributed to the fact that most of the projects included in the plan were not Economic co-ordination fully studied from either the technical or the economic points of view. This is another concern of planners and is explicitly mentioned in the latest Iraqi plan. Several countries are It is too early to assess the results of the Jordanian now reconsidering their industrial development policies seven-year plan, which is in its first year of operation. so as to take account not only of their domestic markets However, work on a number of manufacturing projects but also of external markets, especially those of is known to have started. neighbouring countries. Because of inadequacy or unavailability of data, In Syria, fragmentary and incomplete implementation modest techniques of planning have been adopted in the data covering part of the first five-year plan (1960/61 formulation of these plans. Projections of consumption to December 1963) indicate that the net national product demand were made on the basis of limited family budget fell slightly short of the planned target set in the annual studies and other studies giving the income elasticity plan for 1960-1961 and exceeded those targets in the of demand for consumer goods and services in certain subsequent two and one-half years. Such performance countries with similar conditiens. Estimates of the which, on the average, was higher than the growth rate labour force in certain cases were made on the basis of 10 Indu»tri»l development in the Arab countries population distribution by age, sex, social conditions amounts of public funds have been committed to and the expected annual rate of increase in population. r manufacturing, as evidenced by the very ¡arge These projections epresent the supply of labour. In investment programme of PETROMIN in Saudi other cases it was assumed that the growth in Arabia and the increasing public funds committed by employment would cortespond to the planned growth the Kuwait Government to the Shuaiba industrial in GNP after taking into consideration the increase in complex and the extension of loans to a number of productivity. large-scale manufacturing projects, such as the ammonia Planning the industrial sector and sub-sectors varied plant and the petroleum refinery in Kuwait. Unlike in the three countries from rather fragmentary to Jordan, however, insufficiency of private capital is not comparatively detailed planning. In Iraq, Jordan and the primary cause of government participation. Rather, Syria, projections were made for consumption, it is the desire to accelerate the pace of industrial production and contribution to employment. Only development and diversify economic activities in order limited information is available to indicate the techniques to relieve the country of complete dependence on used in preparing those estimates. In Iraq, projections petroleum. of consumption by major industrial sub-sector were Until recently, Iraq and Syria held strongly to the based on assumed income elasticities derived from the principle that the bulk of manufacturing activities should family budget for Baghdad. As to the projection of the be left to the private sector. The recent nationalization production pattern, some use is known to have been measures in Iraq and Syria shifted ownership of the made of the data contained in A Study of Industrial important manufacturing industries to the public sector. Growth, published by the United Nations. •"' Government policies and measures undertaken to In Jordan, the rise in consumption was based on the promote industrialization in the various countries of th* expected increase in population, and on an assumed Middle East are varied. They range from provision oí small increase in the standard of living. Estimates of basic services, as in Lebanon to active encouragement, value added in manufacturing were assumed to be in guidance and indirect control, as in Jordan, Kuwait and the same proportion as that of the value added to the Saudi Arabia, or even direct control and management, value of total production in 1961. Imports were as recently introduced in Iraq and Syria. assumed to be maintained at about the 1963 level. Co-ordination of different economic and social policies Projections of aggregate employment in the manufac- 'ias already been recognized by most countries in the turing sector were based on a growth rate equivalent region as a prerequisite to economic planning. Iraq has to that of production, adjustment being made for the already made reference to the fact that the achievement estimated increase in productivity for the duration of of the objectives of planning depends to a large extent the plan. Foreign exchange requirements included on the degree of co-ordination of such policies. estimates of imports required for production (i.e. raw materials, fuel etc.) as well as the imported component Maintenance of monetary stability and the creation of investment. of a financial environment conducive to growth are the main functions of monetary authorities. This implies, A number of criteria have been proposed for project inter alia, the existence of a proportionate relationship evaluation. In the Syrian plan, the main criteria were between the flow of money and the full utilization of stated as follows : contribution to national income ; available resources. Evidence of internal stability financial needs of the project in both local and foreign attained in most countries of the Middle East is exchange ; economic viability ; foreign exchange savings ; provided by the behaviour of prices in relation to contribution to employment and maturation period of growth in income and money supply. The fact that prices the project. have risen moderately in recent years indicates the Similar general criteria have been "proposed in both existence of a balanced relationship between the money Jordan and Iraq. It is, however, apparent that only supply and the level of output. simple evaluation and not systematically applied methods Internal financing is the major source of financing based on the above general criteria were followed in the for Iraq and Syria. In contrast, about 40 per cent of selection of projects and the connexion with the over- all targets of the plans. the total of Jordan's investment programme is expected to be provided externally. In Iraq, oil royalties are the In most of the countries under study, the public major source of development financing, while in Syria sectors have been increasingly involved, through direct revenues from taxation are heavily relied upon as a and indirect measures, in the development of the source of financing planned investment. Foreign loans manufacturing sectors. Lebanon has been an exception to Jordan are expected to increase throughout the seven- to that trend. year plan. In contrast, Syria and Iraq have not relied In Jordan, for example, although industrial policy is in the past on large external financing, although more also based on the assumption that industry belongs recently both countries have been moving away from mainly to the private sector, it is generally recognized earlier investment policies and practices by resorting that the role of the Government in that field is crucial. to external sources of finance. One of the most effective instruments for the Except in the case of the petroleum-producing encouragement of industry in Jordan has been the countries, it does not seem likely, however, that internal purchase by the Government of shares in new industrial measures alone will be sufficient to generate the volume firms. Thus, the Jordan Government has subscribed to of investment needed to meet targets of the magnitude the capital of seven major manufacturing industries to required to stimulate industrialization on a relatively the extent of JD 1.6 million, representing about 39 per large scale. It seems essential that every effort should cent of their total paid-up capital. be made to obtain foreign investment. In Kuwait and Saudi Arabia, where economic policies Although not practised in the past, resort to internal are by and large similar to those in Jordan, greater borrowing and deficit financing is presently planned on 5 a modest scale by some of the countries under United Nations publication, Sales No.: 63.II.B.2. consideration. Progresa and problems 11 Almost every country in the region has developed permitted provided that the capital involved is imported monetary institutions whose statutes lend themselves to and exported through official channels. In Lebanon, adequate monetary policies designed to regulate the Kuwait and Saudi Arabia, capital is allowed to flow flow of money, stabilize fluctuations in economic freely into or out of the country without restrictions. activities and create the necessary environment for Indications are that, despite the various incentive economic growth. Central banks in most of those measures adopted, foreign investment capital has failed countries have been vested with sufficient powers to to be attracted into the region on any significant scale. regulate money and credit creation and reconcile it with Practically every country in the region has the real needs of those countries' progressively expand- promulgated laws for the encouragement and promotion ing economies. Jordan, however, does not possess that of the private industrial sector. Most industrial laws type of flexibility. Its central bank lacks the legal powers provide incentives such as tax exemptions and tariff to modify the currency reserve requirement and may, protection, as well as other forms of assistance; in some therefore, be unable to expand or contract the quantity cases, they grant monopoly concessions, (eligibility for of money should the need arise for making additional the benefits specified in most of the incentive laws has funds available for financing Jordan's development plans. been made subject to the prior registration and licensing Despite the fact that the proportion of gross national of industrial enterprises. Most of these laws require product saved is high in most of the countries for which that applications for the establishment of new industrial data are available, there are strong indications that the projects should be accompanied by detailed economic proportion of disposable income saved by the private and technical studies. sector is low. The Governments of Jordan and Saudi Arabia have In order to mobilize private savings, Jordan plans, granted a number of concessions for the promotion and among other things, to encourage the growth of savings development of specific industrial undertakings. In deposits in commercial banks by influencing the rate of Jordan, some of these concessions are exclusive and interest paid on such deposits. In addition, Jordan plans extend over periods varying from thirty to fifty years. to establish convenient banking facilities in urban and For the duration of the concession, Jordan has rural areas, and to mobilize the substantial volume of undertaken to ensure such firms absolute protection, hoarded wealth. including prohibition of the establishment of rival firms. In Saudi Arabia, the mobilization of private savings In the field of policies related to the protection of poses a problem since interest is prohibited on religious domestic industries, countries of the Middle East may and legal grounds. The possibilities of financing with be classified into two main groups : those that have borrowed money are therefore somewhat restricted. relied heavily on both quantitative and qualitative In a number of countries, substantial amounts of import restrictions, primarily for revenue and the domestic savings are known to have been invested conservation of foreign exchange and secondarily for abroad. There are reasons to believe that considerable protection reasons ; and those that have, for one reason Jordanian, Kuwaiti, Saudi Arabian and Lebanese funds or another, refrained from the ini|x>sition of restrictive are invested in foreign securities, partly because of measures. uncertainties, and partly because of lack of attractive Iraq, Jordan and Syria have relied relatively heavily domestic investment opportunities. Jordrn has on restrictions relating to high tariffs and quantitative entertained for some time the idea of adopting measures restrictions. Imports of only a few goods into Lebanon to encourage the growth of an organized capital market. are prohibited. Although tariffs have so far been imposed The fact that private savings are scarce and cannot in Lebanon primarily for revenue purposes, the new be relied upon to supply investment funds on a scale industrial law as outlined in the draft legislation has set considered adequate, makes it difficult to sustain planned the country's future tariff policy on new lines. rates of growth in the industrial sectors without Neither Kuwait nor Saudi Arabia has tariff restrictions establishing and improving the existing specialized of significance on imports or any licensing requirements, financial institutions and providing credit facilities on except in regard to a few prohibited items. It has been a wider scale. Credit assistance is especially important the established policy of both Governments to minimize to small and medium-sized industries. Shortage of as much as possible the imposition of restrictions on the financial resources for plant expansion and renewal, and private sector. The fact that both countries depend for working capital, is the real problem of those heavily on imports has caused importers to assume a industries. For a variety of reasons, commercial banks dominating market position and to extend their power are unlikely to meet their urgent needs. in different directions. Industrial banks have either been established or are This situation has not only presented the Saudi being planned in practically every country of the region. Arabian industrial entrepreneurs with considerable The amount of and the conditions under which credit distributional difficulties, but has also contributed to the was extended to industry in the past varied from one slow growth of industries. In 1960, an International country to another but was, on the whole, far from Bank for Reconstruction and Development mission to adequate to meet the progressively expanding credit Saudi Arabia expressed the view that the granting of needs of industry. Recently, steps have been taken by all temporary protection in the form of import duties on those countries to strengthen credit availability for competing products from abroad was sound where the industry by creating or planning for the creation of type of enterprise gave reasonable prospects of eventually stronger and more effective specialized institutions. becoming competitive. On 27 May 1962, royal decree To supplement domestic savings, laws designed to No. 50 published provisions permitting the Ministry encourage the inflow of foreign investment funds have of Commerce and Industry to recommend to the Council been enacted in several countries. Foreign capital is of Ministers the adoption of measures suitable for the treated on an equal footing with domestic capital protection of local production. employed in similar industries; repatriation, in foreign Kuwait, too, has recently provided for the use of currencies, of reasonable annual profits and capital is import tariffs as an instrument for the encouragement Progress and problems 13 purposes; fourthly, training of manpower in skills programme, covering such aspects as recruitment of designed to match employment needs and, fifthly, labour, nomination for training, improvement of placement of trained workers. training institutions, provision of better equipment and An adequate assessment of future demand for labour higher teaching standards, improvement of educational requires a quantitative and qualitative analysis of the curricula, introduction of accelerated vocational training, types of jobs that will be created as a result of plan and assurance of employment opiwrtunities. Reports implementation. In some plans no demand projections recently issued in Iraq, Jordan and Syria call for the were made, and employment targets appear to have adoption of complete manpower planning. been determined solely in relation to supply. In other In the early ninetceti-sixties. increased efforts to plans, although the number of industrial jobs that would improve labour productivity were noticeable in each l>e created during the plan period was estimated, no country of the region. In Iraq, where vocational and other details were given. Such a state of affairs indicates, technical training is given in vocational training centres, first, how little the manpower situation appears to have industrial schools, technical institutes and engineering lieen considered in the formulation of the plan and, colleges, certain measures were recommended for secondly, the need for some form of plan formulation improving labour productivity. in order to absorb manpower surpluses. Furthermore, the classification of manpower requirements has not been Remedial proposals similar to those recommended for accompanied by details of specific training policies. Iraq have also t»een made in Syria. There, a manpower classification has been prepared and manpower studies National Governments in ench of these countries are are under way. Tentative assessments of future increasingly displaying interest in manpower planning requirements for engineering and technically trained but, as yet, comprehensive policies covering all stages personnel for the period of 1965-1969 were produced by of such planning (i.e. assessment of job opportunities, the directorate for technical education of the Ministry vocational guidance, recruitment schemes, training and of Education. In addition, the Syrian Ministry of operation of a job placement system) have not been Industry was reported to have planned for the adequately formulated. The nearest approach to man- introduction of accelerated industrial training courses power planning is to be found in Iraq. Through the for adult workers in 1964. An apprenticeship training Ministry of Planning, the supply of manpower for the programme, consisting of two years' schooling and one- plan i>eriod was assessed. On the demand side, year s training in industry was to be launched within government ministries were requested to prepare details the coming five years. In Jordan, Kuwait and Saudi of their manpower requirements, analysed in terms of Arabia, data available on jwlicies and plans for skills and quality. An assessment was then made of vocational training are less extensive; such data as available training facilities and recommendations exist, however, suggest that progress is l>eing made in submitted suggesting changes in the country's manpower this field.

4. Financing of manufacturing industry in «elected countries of the Middle East'

The present study covers the following six countries : remains insignificant. This is largely due to the limited Iraq, Jordan, Kuwait, Lebanon, Saudi Arabia and size of the domestic market and the inadequacy of Syria. It deals with the institutional framework and export possibilities. government polices for the promotion of industrial financing, and provides a quantitative assessment of the However, owing to the favourable geographical loca- role and relative importance of the contribution of tion and economic environment prevailing in Lebanon, various sources of industrial financing (commercial there is some investment of foreign ca| ital in industries banks, specialized financial institutions, Government, other than oil refining. In the case of Iraq and Syria, foreign sources and the domestic private sector). Refer- although the existing legislation may I>e regarded as ence is also made to working capital requirements and favourable to foreign investment, general political their financing. conditions constitute a deterrent factor. Fiscal legislation providing for tax exemption for It may be said that the role of the central banks of new industrial establishments exists in all six countries the region in promoting industrial financing has been in varying degrees. The period of tax exemption ranges very limited. Those banks have not developed to the from three years in Syria to ten years in Kuwait, stage at which they would be able to influence the legislation providing tor partial exemption on re- commercial banks to channel substantial funds to invested earnings exists in Iraq, and a draft law con- industry. taining such a provision is currently under considera- In addition to indirect measures in the form of tion in Lebanon. Legislation providing for statutory legislation to encourage and promote industrial reserves exists only in Jordan. financing, the Governments of the countries covered As far as foreign capital is concerned, a generally by this study are taking certain direct measures liberal policy for the encouragement of foreign invest- designed to increase the availability of industrial ment exists in most of the countries under considera- financial resources. These measures consist of direct tion. Foreign capital in most of these countries is en- provision of capital to specialized financial institutions titled to all the privileges enjoyed by national capital. and government industries, participation in mixed com- However, despite this incentive, actual foreign invest- panies, and direct loans to industry. ment in manufacturing industry, other than oil refining, The industrial banks of Iraq and Syria and the •Paper presented jointly by the Centre for Industrial De- Kuwait Credit and Savings Bank are fully government- velopment and the United Nations Economic and Social Office owned, while the Jordan Industrial Development Bank, m Beirat. the Development Bank of Jordan and the BCAIF li Industri»! development in the Arab rountrie» (Banque de credit agricole, industriel et foncier) of finance foreign trade. Their role in providing industrial Lebanon are mixed enterprises. credit is relatively insignificant. Direct participation by Government in industry Based on their operations, the following are purely varies from one country to another. Iraq was the most credit institutions: the Development Bank of Jordan, active in establishing fully government-owned indus- the Industrial Development Fund of Jordan, the tries. Before nationalization, in terms of invested Kuwait Credit Bank (incorporated with the Credit and capital, these industries constituted more than one- Savings Bank), and the BCAIF of Lebanon. It is also half of î'ie entire industrial sector. There are no fully |x>ssible to include in this category the Syrian Industrial government-owned industries in Jordan (with the ex- Hank as its participation in industrial enterprises is ception of those run by the army), and no such indus- negligible. Thus the Industrial Hank of Iraq is the tries exist in Lebanon. The efforts of the Saudi Arabian only institution which, in addition to providing credits Government in this area have not been very successful. has participated to a considerable extent in the equity- Before the first nationalization measures of 1961 in capital oí a number of industrial companies. Syria, the only government industry was the Horns Contrary to what might have been expected, and with oil refinery. At the present time, there seem to be the exception of Iraq, it is the commercial banks and certain financial difficulties facing the nationalized in- not the specialized financial institutions which have dustries which may prompt the Syrian Government to provided the bulk of industrial credits. In Jordan, take measures to provide additional finance. Kuwait, Lebanon and Syria, industrial credits from Un- So far, only the Governments of Jordan and Kuwait commercial banks are estimated to be between six and have participated to any considerable extent in the eight times as great as those extended by the specialized equity capital of industrial enterprises. The participa- financial institutions. In the absence of a specialized tion of the former amounts to about one-fourth of the financial institution in Saudi Arabia, all industrial combined paid-up capital of ID 9.2 million of eight credits in that country are extended by commercial large industrial companies, and that of the latter to banks. By contrast, credits from the Iraqi Industrial three-fifths of the combined paid-up capital of KD 18.9 Bank are estimated to be 50 per cent greater than the million of six major industries. The Saudi Arabian estimated industrial credits from commercial banks. Government has more recently, through PETROMIN, Foreign private investment in the region has been (General Organization for Petroleum and Minerals) concentrated mainly in the oil-refining industry. embarked on the promotion and establishment of Foreign private investment in manufacturing industry fourteen large industries which will be financed largely other than oil refining is greatest in Lebanon, estimated by the Government in conjunction with the private at alunit $17 million, followed by Kuwait and Saudi sector. The Government plans to provide three-fifths Arabia, where it is estimated to be between $2 to 3 of the total equity of the thirteen projected mixed million. Foreign investments are insignificant (less than companies. $1 million) in Iraq and Jordan. In the case of Syria, Government financing in the form of loans was industrial capital owned by nationals of Kuwait, Saudi provided by the Iraqi Government to the Daura and Arabia, Lebanon and Iraq, is estimated at 2 per cent Al-Qayara oil refinery. Apart from participating in the of the total capital invested in industry. equity capital of the PETKOMIN projects referred to The role of international financial institutions in above, the Saudi Arabian Government will also provide industrial financing in those countries was negligible up loans through that body to finance part of the fixed to the end of 1965. capital of those projects. The only significant bilateral aid was provided by Most commercial bank loans to industry are given the Soviet Union to Iraq, involving an amount of ID for less than one year. Ho .'er, part of such short- 50 million, later raised to ID 65.2 million. Syria and term loans become, in effect, medium-term loans that Lebanon received $5 million each from USAID go to finance fixed capital, as many of them are subject (United States Agency for International Development), to renewal. There is, of course no way to ascertain the of which, however, only a small proportion was utilized importance of such loans. by Syria; Jordan received $0.5 million from the same Statistics on industrial credits from commercial source. banks must be treated with caution. First, many indus- Foreign suppliers' credit in the form of instalment trialists in the Middle East are, at the same time, mer- credit is extensively utilized, in particular for the chants and/or dealers in real estate. It is therefore not importation of expensive capital goods. uncommon that a credit obtained for industrial pur- poses ends up as a commercial credit. Secondly, there Assessment of the role of the domestic private sector is no way to assess the degree of accuracy of the figures is possible only in terms of invested capital. Data con- on industrial loans from commercial banks. cerning accumulated reserves and retained profits are not available. On that basis, it is estimated that more The proportion of outstanding industrial credits to than 90 per cent of the industrial sector is owned by total claims on the private sector of commercial banks the domestic private sector in Lebanon and Saudi at the end of 1964 was 6 per cent in Iraq, 9 per cent Arabia and more than 80 per cent in Jordan. After in Kuwait, 12 per cent in Lebanon, 11 per cent in nationalization in Iraq, only one-fourth of the industrial Jordan and 24 per cent in Syria. The relatively high sector remained in private hands. In the case of Syria, proportion of industrial credits to total credits extended virtually the entire organized industrial sector has been by commercial banks in Syria reflects the increasing nationalized, leaving only the small establishments in indebtedness of Syrian industry to the banking system the hands of the private sector. Statistic« in Kuwait are as a result of the declining role of self-financing since insufficient to provide a basis for such estimates. In 1961. Figures for Saudi Arabia are not available. the case of eleven industrial joint-stock companies, Traditionally, foreign banks in the region primarily representing the bulk of Kuwaiti industry (combined l*rof(r*sa and pr*M»ma

paid-up capital KU 20 million), one-third of the share, stem lo realize the imjiortance ni working capital is owned by the domestic private sector requirements and the financing of those requirements An adequate study of such requirements would serve It "iay he noted that there is only one stock exchange many useful purptwes. Failure of industrial develop- in tl ,• region, located in Beirut, but its role is in any ment projects or unnecessary idleness of slants after ras«- insignificant so far ^ the promotion of industria! their construction might lie prevented hy taking acci unit financing is conci i ned. if such requirement-, in indu-tn il dc\elopment plans Hankers could UM- such studies as a guide m judging It may generally he stateti that, as in many other credit applications, and management agencies afw| developing countries, planning authorities and other company managers as a guide in judging of the relative agencies in the region concerned with finance do not efficient-v of an industry

5. Industrial ro-ordinMian f the Aral» Irto»«1

Kconomic development in the Arab countries is adhere to the capitalistic system, and differences in the characterized by the following stages of economic development reached by different (a) Low productive capacity ant!, consequently, low Arab countries, and in the si/c and progress of their rates of growth of national income, arising from lack industries of balance among the various cornjxjnents and improj>er lîefore considering the question of coordination, it utilization of natural resources ; is perhaps appropriate to refer briefly to certain factt>rs (/') Unbalanced growth of the different productive that affect the choice of industrial location, ami how sectors, especially the industrial sector, which remains this has influenced tlie development of Arab industries primitive and relies on non-capitalistic production in the ¡«st. Those factors are methods ; I'roximity to tli* sources of r..w materials, in view (r) Unbalanced expansion in the capital and con- of the temlency to establish projects near the site of Miinci goods industries, with the latter predominating ; raw materials; (d) lj\ck of managerial and other skills essential Availability and low cost of laUiur, ,ince tliere is a for the raising oí industrial production, and inadequate tendency to establish industrial projects near populated guidance in the techniques of agricultural production ; areas ; (f ) Low productivity ; ProsjK'cts of making list- of internal and external (I) Inadequate transport and communication facil- funds ; ities. I'roximity to markets ; In short, if economic development is to proceed Mode of consumption ; satisfactorily in the Arab countries, it is necessary to Historical factors, as in the case of the spinning and develop the productive base in each country. In this weaving industries in Syria and the United Arab process, however, care must be taken to avoid un- Republic ; most industries were organized in such a necessary concentration on the agricultural sector a id manner as in some way to complement those of the to lay increasing emphasis on the industrial sector. capitalist States which commanded influence at on« The Arab countries are well aware of these circum- time or another in those countries, and stances and are taking action towards a solution. But Ixxation. as determined hy the theory of comparative the wide discrepancies in the degree of development advantage and of relative |>roduction costs. among various Arab countries and in their natural, Industrial co-ordination among the Arab rotitttrirs technical and financial resources have led to a »tate of should make use of the known principle of the di visir >n discord and weakness which has adversely affected the of labour, so that one country may s|>ecialiie in produc- prospects of industrial development, both on the coun- ing one commodity, or in one of the processes required try and regional levels. for its production. This division of labour ami special- Industrial co-ordination implies surveying, assessing ization can lead to two knporunt results: mass produc- and determining economic potentialities and available tion and industrial integration. natural resources in each Arab country with a view to Industrial coordination among the Arab countries ascertaining the extent to which those resources are will provide a link between industries ami their out- utilized and exploring the possibility of exploiting those put, so that the output of some industries, in one or resources in the best possible manner. more Arab countries, will form the raw materials lor other industries in other Arab countries. Co-ordéna Industrial co-ordination should be understood and Hon will undoubtedly help to create additional demand discussed within the context of agricultural, social and for industrial products, strengthen the centres ot financial co-ordination in view of the interdependence production, and enhance the Arab economy as a whole that exists between various economic sectors. Indus- Furthermore, industrial co-ordination is essential for trial co-ordination amotur Arab countries should be the achievement of Arab economic unky. understood and applied in the light of the over-all principles of economic planning. Such co-ordination is Industrial co-ordination among the Arab countries beset by a number oí serious difficulties, such as differ- may be justified on tlie following grounds. ence» in economic systems, some countries having S< arcity of capital, with a tendency to concentrate on adopted Arab socialistic methods, while others still agri ultural investments ; 7 Paper preientH by the General Secretariat •«* the I Narrowness of the domestic market, reflecting a of Arab States general weakness in demand due to k>w ptr cm pu* Mmtrial l in Ih« Arab sanatr»»* mrntne, low population density, and high transport In addition to the need for making a choice lietween coats ; this weakens the demand for industrial product* balanced and unbalanced growth, light and heavy in- and makes it difficult for industrial plants to attain the dustries, there is a third choice which has to be made, optimum volume of production needed to achieve sub- namely, between capital-intensive and labour-intensive stantial economies in production and marketing ; production methods. Actually the problem is not one Shortage of skilled worker» and their uneven of clioostng one ahernnMve to the exclusion of the other, distribution ; hut that of reconciling the two approaches. lTneven distribution of natural resources, and Reliance on cajiital- intensi ve methods by the Arab countries is justified on grounds of prevailing poverty, Low productivtty, reflecting tlie use of poor equip- k)w rates of savings, income, and productivity, and a ment, a general weakness in the level of skills, and the rapid rate of jxipulation growth. This method could non-applicat k>u of modern scientific management also lead to substantial increases in the national income. techniques. In addition, it is consistent with tlie preference for Further justification for Arab industrial co-ordina- unbalanced growth and heavy industries. tion can be found in the resolution!* and charter of the We should, however, take into consideration two Arab League. Article 4 of the charter provides for important problems that present themselves in tlie establishment of a permanent committee to lay connexion with capital-intensive industries. The first down the bases of co-operation among tlie Arab coun- is the shortage of financial resources, which may con- tries, in the form of draft agreements. This has led stitute an obstacle in the way of meeting the cost of to the establishment of tlie Permanent Committee for the capital-intensive method. The second is the prob- Kconomic Affairs, the F.ronomic Council and the F.co- lem of disguised unemployment, which calls for the nomic Unity Council. This is in addition to the Kco- adoption of labour intensive methods. nomic Unity Convention, which ensures co-ordination Capital-intensive methods should be used in the bask of agricultural and industrial policies, and internal industries, which are indispensable for rapid economic trade, and the standardization of economic legislation, development. Consequently, when planning Arab indus- whereby the citiiem of the contracting countries trial co-ordination policy, the largest share of capital engaged in agriculture, industry and trade are given resources and technical skills should be reserved for similar treatment Similarly, the agreement governing tlie basic industries, ami tlie remainder for the con- the establishment of the Arab Common Market sumer goods industries, relying on labour-intensive provides that preference shall be accorded to the ex- methods. Should the needs and interests of the capital change of industrial products. and consumer industries conflict, preference should be Industrial coordination among the Arab countries given to tlie former. should take into account three different cases, namely, Another very important problem which obstructs the case of industries yet to be established in the Arab Arab industrial co-ordination relates to the pattern of countries; that of existing industries; and the case of investment, on the manner of distributing investment Arab countries which have not yet embarked on indus- resources among the different sectors of the national trialization. economy and the choice of a suitable criterion for Co-onlination of future industrialisation policy faces evaluating the different investment alternatives and a numlier of theoretical and practical problems, such choosing among them. as choosing between balanced and unbalanced growth. The choice of the pattern of investment constitutes In the rase of the Arab countries, k is preferable to one of the most complicated problems facing Arab follow a policy <»f unbalanced growth, whereby a base economic planners. When formulating industrial of capital goods industries will be established which in planning policy, the economic conditions prevailing in turn will serve as a base for rapid economic develop- each Arab country must be taken into consideration. It ment. should be noted that considerations concerning the Furthermore, industrial co->cilination among the relative importance of investment between the différent Arab countries requires a choice between heavy and sectors, and within each sector, will have a great effect light industries. Ve believe that preference should be on the development strategy to be followed. Such con- given to heavy industries. It must be pointed out, how- siderations should be based on a careful analysis of the ever, that a policy which emphasises light industries has structure of the national economy, the desired economic the foitowin ; points in its favour : ami industrial targets, and the available means to be 1 employed to achieve them. These targets and priorities Light industrie -- require small initial capital, and the depend to a great extent on the stage of growth through coat of replacement and maintenance is low, suiting the which the country is passing. needs of the Arab countries, where capital it scarce ; Industria] co-ordination policy among the Arab coun- Light iadustties, because they use labour-intensive tries may be carried out on trie same tines, and using technique«, are capable of providing relatively large the same pattern of investment, as that adopted by the employment opportunities; socialist countries. It consists of a number of stages, Light industries have a high output-capital ratio, which arc described bal»«. and a relatively short investment period; In the first stage, the development of the agricultural The training experience gained m the light industries sector is carried out. Simultaneously, the basts for in- W very useful in learning the more advanced and dustria] development will be hud down, requiring the complex techniques required for the establishment of fulfilment of two ccjtdkions, namely, the establishment heavy industries; of projects in the field of power generation and com- munication, and the establishment of smaS and rural light industries do nut give rise to inflation, as is industries side by side, their labour-intensive nature the case with heavy industries. being such as to http in combating the frSffFCM SIM pV#WtMM 17 employment, in addition to effecting a rapid increase in Integration, moreover, will help to unify industries output which mitigates inflationary pressures scattered throughout the Arab countries, and to In the second stage, investment resources should he organize and consolidate the industrial policy which used mainly for the development of the basic heavy in- constitutes the basis for the achievement of an over-all dustries, which provide the necessary industrial struc- economic unity among the Arab countries. Further- ture on which to hase subsequent development. At that more, economic planning Incomes easier, in integrated stage, it (1 *s not seem advisable to invest the available production units. resources in the manufacture of consumer goods, since As to the actual manner of co-ordinating existing that might lead to competition with the rural industries industries, it is necessary first to study them analyt- which need encouragement. ically in order to evaluate each separately and estimate the prospects of performance and success, and finally to In the third stage, emphasis should continue to lie formulate recommendations for their reorganization. laid on developing the bask heavy industries, and more funds should be channelled to that sector to cover It is also necessary to consider these industries industries in addition to those established in the second horizontally by concluding agreements l>etween those stage. It is possible at that stage to divert investments at similar stages of production, so that each industry to specific industries such as ship-building, railways maintains its technical independence but pursues its and aircraft. Some funds may also be allocated to general policy in accordance with provisions stipulated develop consumer goods industries in such a manner in the agreement. In addition, these industries could, if that they will not directly compete with the small and necessary, be integrated by means of what is known as rural industries. By the time the third stage is over, forward or backward linkage. the national economy sliould have developed sufficiently In the event that existing industries refuse to lie to eliminate the residue of underdevelopment and subjected to co-ordination, the problem could be solved stagnation. by assigning them specific markets to be shared on One of the most important bases for co-ordinating the basis of expected competition, proximity to or remoteness from factories, and with due regard to industrial development among the Arab countries i. transport and shipping costs. In this case, it is desir- the establishment of uniform and general criteria for able that these industries adhere to a well co-ordinated the »election and approval of investment projects with a view to avoiding inconsistency, duplication and eco- industrialization and investment policy. nomic loss. There remains the case of those Arab countries which are at present unable to participate in a co-ordinated Any analysis and evaluation of sectoral investments industrial programme owing to their poor natural and in connexion with the establishment of industrial co- economic resources. In order to promote industrial co- operation among the Arab countries must take the ordination in those countries, the following steps may following points into consideration : That priority be considered : should be given to projects forming part of the indus- To urge those countries to buy Arab industrial pro- trial base, so as to give an impetus to the growth of ducts even if such products are more expensive and of the national economy; That priority should be given inferior quality by comparison with similar imported to projects which help to achieved Iwlanced growth, so as to prevent the rise of any real or monetary gaps in foreign products ; the national economy, and That priority should be To encourage the nationals of those countries to given to projects that correspond to social needs so as invest their idle funds in the co-ordinated Arab indus- to help in meeting and satisfying the desires and prefer- trialization programmes by allowing them to share in ences of individuals. the profits, and demonstrating the economic and financial gains which could be derived from such Turning to the case of existing industries in the Arab activities ; countries, we find that these industries were established To promote the spirit of Arab nationalism in them ; on the buis of local tpecialiiation or of the needs of the national economy. Co-ordination of those industrie» is To persuade the Governments of those countries to necessary for the following reasons: it will help in impose high or prohibitive customs tariffs on competing solving the problem of the shortage and uneven dis- foreign industrial products; tribution of the factors of production, and make it To urge the Governments of those countries to possible to establish large production units that could contribute to financing Arab industrial co-ordination; take advantage of economies of scale ; it will result in the Arab League made a sincere effort in that direction marketing advantages, especially under the Arsb when it asked its secretariat to prepare a questionnaire Common Market, and will help in overcoming foreign on industrial co-ordination and send it to the member competition, and it will strengthen existing industries States; the secretariat has not, however, received the through industrial integration. necessary data so that the committee concerned has been unable to meet since 1961. In the past, some measure of integration was achieved between the industries of some Arab countries The Arab league's secretariat took the opportunity and those of the Western countries. Such integration of the presence of Arab experts on industrial co- when achieved to serve the interests of the foreign ordination in Cairo in July 1963 to approach them on country concerned, is a quite different matter from co- the subject. The experts advised the secretariat to send ordination among the Arab countries in the interest of a memorandum to the member States requesting them all Arabs. History shows that there has always been to prepare the necessary data on industrial co-ordina- competition between foreign and Arab industrial pro- tion. They also advised the secretariat to invite Arab ducts and that the Utter have always been at a experts in that field to visit the member States in order disadvantage. This is additional justification for indus- to explain the importance of industrial co-ordination ; trial integration among the Arab countries. to obtain the required data and statistics, together with i« Industrial étyrìtpmnt im the Ara» emiMtriM a report on the industrial situation in each Aral* coun- of the Arab countries. The following should also be try, nnd to |»ersuade the responsible authorities in those taken into account in the planning and ini|Jementat»oii countries to establish technical machinery to complete of co-ordination a un mg the Arab countries: the submission of the required data in preparation for The »i/e of the industrial units to l»e grouped ; convening the necessary meetings. The co-efficient s of cost and productivity in the Arab industrial co-ordination should I* promoted by establishments to l>e grouped and co-ordinated; the establishment of joint planning hoards responsible Modes of management and production: for the formulation and co-ordination of industrial plans and programmes: follow-up machinery should also I*1 Whether unit» belong to the private 01 to the public established to ensure the proper implementation of such sector . plans. Industrial co-ordination will also require the Development oí a general target for the grouping or compilation and standardization of industrial statistic». co-ordination of industries, and In this connexion, it is advisable to establish joint Development of coordination in the agricultural, social central stati-tical organs to undeitake the compilation and services fields related to production and classification of statistical data. The Arab League's secretariat submitted the report ! fïort» should IK- made to standardize planning of the Aral) industrial co-ordination experts to the terminology and >y»tenis of national accounting in IVonomic Council at its ninth regular session (9 to 1/ order to provide the uniform data needed for the December, l%3). The Kcotioniic Council then adopted planning of Arab indu»trinl co-ordination programmes. resolution Xo. 21(1, of 17 December 1%.V in which it urged the Arab countries to furnish the data requested Finally, we turn to the constructive steps that ha\e in the questionnaires. The resolution also provided for hern taken by the Technical Committee on Industrial the formation of a committee of e>q>erts to devote itself Co-ordination. That committee issued the following to that ta»k to prepare a study on the subject of recommendations : industrial co-ordination in the Arab countries. That the Arab countries should supply the secretariat The Kconomic Council also resolved that an eco- with all surveys and studies on industrialization and nomic planning and industrial co-ordination committee industrial policy ; »hould be formed to work under its supervision, ft« That the Arab countries should furnish the secretariat function» would Ite to standardize the basis for studying with studies related to their economic plans. esj>ec- investment project» and the criteria for choosing among ially industrial plans ; them; to standardize a framework for development plans and programmes, including the classification ot That the secretariat should obtain the studies and data and the standardization of planning terminology ; reports issued by the United Nations on industry and and to organize the exchange of information and the industrialization policy, to be presented to the com- results of studies undertaken by the planning depart- mittee at its next meeting. ments of the Arab countries. The meeting of the eco- The Arab exports on industrial co-ordination nomic planning and industrial co-ordination committee suggested that co-ordination might start with the main i» scheduled to be held in Kuwait on 15 November projects included in the respective development plans 1«*>5.

6. Standardisai mm MM) laMtNatrial 4evelaaa»ft wfcltm the framework mi M* Arab ramme« market

The Arab world has witnessed a great change in its Interest in the application of standardization methods economic structure in recent years. This stage in the in the economic and industrial fields has extended also history of the Arab countries has been characterized by to Mie field of specifications. The Arab countries have persistent efforts to develop all aspects of their social issued successive specification» fixing the standards of and ••conomic life. Kffotts in regard to measures and quality for both local and imported products. This specifications have achieved notable success, because interest was soon directed to the organization of most Arab countries realize the importance of stan- specialized machinery to deal with specifications and dardizing their system of measures and eliminating the measures and the establishment of national organiza- diversity of local systems prevailing in each country and tions for the purpose of regulating this activity in each the foreign systems which arc incompatible with Arab individual country, and to participation in international needs, Kffocts in this field, though of a scattered nature, efforts in this fiekl. National organizations were have crystallized in the decision to adopt the decimal successively established in the United Arab Republic, nvetric system of measurement. This system has been Morocco, Lebanon and Iraq. These four Arab organiza- adopted by most Arab countries and is expected to tions have joined the International Organization for become universal within a few years. The Arab coun- Standardization in Geneva. Sudan, Saudi Arabia, tries will thus have taken an effective and constructive Kuwait and Libya are at present endeavouring to step in the direction of economic unity. establish similar organizations. Some Arab countries have taken part in international The Arab countries have realized that co-ordination activities in regard to standardization and measures. and standardization of measures and specifications at Thus the United Arab Republic, Morocco, Tunisia and lioth the Arab and the international levels is necessary Jordan joined the Internationa] Bureau of Weights for the success of Arab industrial and economic co- and Measures and the International Organization for operation and in order to create a recognized status for Standardization -Arab production in international markets. Conse- quently the Arab Lconomic Council, at its sixth session, • Paper prêtent«! by th« Councii tor Arab Etonomk Unity. and upon the suggestion of the United Arab Republic,

imi l*raffrcM sud >fiMwi 19 decided to establish a permanent technical committee -hould, as soon as they were formed, join the Interna- for specifications and measures to unify the different tional Organization for Standardization in order to systems existing in the Arah countries. strengthen the Arab position. Tn accordance with the council's decision, the com- Three years later, the committee held its second mittee was formed and held its first meeting at the meeting in the offices of the Arah League secretariat \rah League secretariat in Cairo from 21 to 26 January iti Cairo from 1 to ú May l'*>4. The meeting was 1 rV> 1. It was attended by representatives from Iraq, attended by representatives from Irai], Jordan. Kuwait. lord.ni. Kuwait, I^ebnnnn, Saudi Arabia. Yemen, the Lebanon, Libya, Morocco, Tunisia and the United United Arah Republic and Algeria. Arab Republic. The committee discussed the agenda and made the following recommendations: At its first meeting, the committee decided that its main object would be to co-ordinate and standardize That member States should exchange information on sjweifications and measures in the Arab States prepar- standard specifications, methods of standardization atory tn the establishment of the Arab organization for and technical training facilities in the Arab countries, measures. To that end. it would continue endeavours and endeavour to standardize technical terminology; aimed at establishing national organizations for spe- That member States should complete the formation of cifications and measures in the Arab States; arrange their national organizations concerned with specifica- for the national organizations to join similar interna- tions and measures preparatory to joining the In- tional organizations, and take all necessary steps to ternational Organization for Standardization in facilitate the exchange of information among the Arab Geneva and the International Bureau of Weights and States regarding the following : Measures in Taris ; Applied specifications, and those to 1>e enforced in the That the first Arab conference on Specifications and future, with respect to raw materials, local and measures should l>e held for one week to discuss the imported products ; following subjects: Fxisting and future facilities for testing conformity The role of standardization in industrial co-ordina- with the standards and specifications laid down and tion and trade among the Arab countries; the methods and systems followed ; The role of specifications and measures in the Applied system of measures and weights, stamping, promotion of Arab exports ; calibration, application of the decimal metric system Technical and administrative problems faced in and the problems which might obstruct application, the formulation and application of specifications if any : and measures. Particulars regarding available specialists and experts The committee discussed and approved in principle in the field of standardization in the Arab countries, the proposal presented by the United Arab Republic and for an agreement on the establishment of an organ- Annual plans in the held of standardization, starting ization for specifications and measures of the Arab with the 1%2 plan. I .eague. The committee also undertook to facilitate the ex- At its meeting of 6 December 1064, the Arab Kco- change of views and observations regarding draft notnic Council took note of the report of tlie technical specifications prepared in the Arab countries before committee and of the proposed agreement for the their adoption; to make use of technical training establishment of an Arab organization for specifications possibilities at the different levels through the existing and measures. The council also took note of another machinery and organizations and those to be established draft agreement for the establishment of the Arab in the Arab States ; to organize seminars for specialists organization for specifications and measures prepared and persons interested in specifications and measures by the Lebanese authorities. The Council thereupon isuch seminars to be held during the meetings of the recommended that the two draft agreements for the Immanent committee) and to arrange visits for experts, establishment of the organization be referred to the and to endeavour to unify technical and scientific term- technical committee for specifications and measures for i lo'ngy in the Arab countries. study and recommendations; approved the holding of the first Arab conference for specifications and The committee discussed tlie imj»ortance of stan- measures and tlie proposed agenda for the conference dardization in the economic field, especially in con- and approved the committee's suggestion that a sum of nexion with facilitating industrial co-ordination among £K 15,000 be allocated to meet the costs of the confer- the Arab countries and promoting production and ence and that the Arab league secretariat be asked to trade. Some delegations presented specific memoranda take the necessary steps to earmark that amount in its on the subject. The committee also discussed in detail the current position of specifications and measures in budget. the Arab countries, and the progress made in impk- The Arab League secretariat took active steps to menting the Fxonomic Council's resolutions calling on implement the Lconomic Council's decision concerning the Arab Stetes to enact the necessary legislation for the study of the two draft agreements for the establish- the establishment of national organizations and urging ment of the Arab organization for specifications and the member States to exchange information in the field measures. When it was realized that the technical of measures and specifications. It was found at the committee would not be able to hold its third meeting meeting that some States had already established na- during June 1965, the secretariat placed the subject on tional organizations and others were in the course of the agenda of the economic planning and industrial co- doing so. In view of the great importance attached to ordination committee which met in Kuwait on 15 such national organizations, the committee recom- November 1%5. The committee experts on sjjecifica- mended their establishment during 1961. The committee tions and measures lield a number of meetings during liso recon in tended that the national organizations which they were able to study the two drafts and Industrial écTeloament in the Arab countries prepare a final draft agreement, which the committee The Arab Kconomic Council approved the agreement approved and requested the secretariat include in the during meetings held in Cairo on 7 December 1965, committee's report for submission to the Kconomic and referred it to the Arab member States for ratifica- Council at its eleventh session. The committee recom- mended also that the Arab States should authorize their tion. The agreement will become effective as soon as delegates at the said meeting to sign the agreement on the instruments of ratification of live members have behalf of their (iovernments in order to exj>edite its txrn dejK>sited with the secretariat in accordance with ratification. the provisions of article 17 of the agreement.

7. Co-ordination of the tugar and paper indnatriea in the Arab count ríe«

TlIK Sl<~..\« INDUSTRY IX THE A«AB COUNTMES it/-" In 1963, sugar consumption in the Arab countries Surgir ,,inr Other crofi inircusr amounted to 1,851,183 tons, while production amounted Valuc of proiliH'li'in 108.8 82.9 259 \alue a«lile«l 67.0 62.1 1.1.9 to only 425.800 tons. Thus Arab countries had to Net income to farmers import 1.425.38.1 tons of sugar. On the basis of the 61.-' 48.6 12.0 ICxports 2(1.1.0 104. t 98.6 average price over the past ten years of LE 38.4 per Kffcrt on halante of payment* 1814 97.4 86.0 ton. this represents sugar imports «luring 1963 valued at LE 54.734,707. Another comparative study of the economics of sugar extraction from sugar l>ects in Syria shows that the The United Arab Republic and Morocco produce value of sugar exports from one acre amounts to £E most of their re<|iiirements, the United Arab Republic 103.5, conijwred to iE 203 in the United Arab Re- utilizing domestic raw materials and Morocco relying public, which uses sugar cane. on imjK>rted raw sugar. In Algeria, there is a sugar- The foregoing indicates that studies would be desir- l>eet factory with an annual productive capacity of 3,500 able in each Arab country on the economics of sugar tons. This factory, which was established in 1953, extraction from other agricultural crops, similar to ceased working during 1961-1962. Tunisia has a sugar- those undertaken by the United Arab Republic. In beet factory which was established in 1962. In Sudan, this way. it would be possible to cultivate high vield which produces high quality sugar-cane, two factories crops thus maximizing the value added and the net in- were built at al-J unid and Kushm-al-Karia. When come of the farmer. Furthermore, if consideration working at full capacity, these two factories satisfy 80 were given to the world market prices of the crops per cent of domestic sugar requirements. The three under study, it would l>e possible to evaluate the plants existing in Imitation, comprising two sugar impact of cultivating each of these crops on the balance refineries and a sugar-beet factory, can satisfy the of payments. It should lie noted that the prevailing unit domestic need for sugar. In Syria, the sugar refinery price of sugar beet is relatively higher than the unit and the sugar-beet factory can meet oidy half the local price of sugar cane liecause the sugar content of the demand for sugar. Iraq has one sugar-beet factory former is generally lower than that of the latter. This with an annual capacity of 1,000 tons. should be taken into consideration when the proposed In order to increase sugar production in the Arab economic studies on sugar production are undertaken. countries and ensure industrial integration, it is neces- Industries for the extraction of sugar from sugar sary to reconsider the programmes of those countries beet have been established in countries where the cul- with a view to establishing economical sugar plants that tivation of sugar cane is uneconomical. Sweden, for can supply raw sugar at low cost. The formation of a example, is 'imiting the expansion in sugar-beet cultiv- union among the Arab countries to supervise planning ation to produce only the amounts necessary to extract and organization and to train technicians would be 50 per cent of its requirements of refined sugar, due desirable. Moreover, there is a need for setting up a to the high cost of cultivating and processing sugar permanent board to deal with the marketing and dis- beet. To meet local demand for sugar, Sweden supple- tribution of the raw sugar needed by the factories in ments its domestic production by imports. The applica- order to eliminate uneconomical and fragmentary pur- tion of such a policy would undoubtedly be feasible in chases of raw sugar by individual factories. Arab countries aspiring to economic co-operation and integration, in view of the availability of high quality It is also desirable to review land productivity with sugar cane cultivated in some of those countries, such respect to various crops so as to adopt the crop rota- as the United Arab Republic, Sudan and southern tion that wotdd maximize the income of farmers as well Iraq. It is evident that the establishment of an export- as the national income. In this way it would be possible oriented sugar industry will require subsidies in all the not only to improve agricultural integration but also to producing countries, and especially in those cultivating contribute to the over-all industrial integration of the sugar beet. Such subsidies may be financed by means Arab countries. of production and consumption taxes. A comparative study of the economici of sugar-cane Total sugar requirements of the Arab countries are cultivation in the United Arab Republic reveals the estimated at about 2 million tons per year, of which following : about 75 per cent is at present imported. This well Justine» a policy aimed at sdf-sumciency in sugar production. However, the countries cultivating sugar •Paper presented hy the Council of Arab Economic Unity. beet should see to it that one-half of their local demand I'rogrfKH and problems 21 for sugar is satisfied from locally produced sugar, and crops in that it lias long fibres, which can be used as a the remaining lialf by imjiorts of refined sugar from partial substitute for imports of soft wood. Its silicon other Aral) countries cultivating and processing high content is relatively high, varying Ijetween 5 and 6 per quality sugar cane. cent, so that it lends itself more readily to certain It is estimated that total sugar consumption in the processing methods than to others. Aval) countries will increase to 3.172.000 tons in 1970 Rccrfs and to 6.849,000 tons by the end of 1°-80. The need These ave a type of hardwood to be found in some to commence planning an increase in sugar production countries of the area, particularly Irai), where 1 million without delay to meet the rising demand is self-evident. tons per year may be obtained from an area of 200,000 The estimated value of sugar consumption in 1°70 acres. Reeds constitute a basic raw material in Iraq for and 1080 is estimated at LI7. 146 and 345 million res- the manufacture of paper, since about 400,000 tons of pectively. Failure of the Arab countries to expand paper pulp may be obtained from 1 million tons of reeds. their productive capacity to the extent commensurate l/n'/ii husks with this rise in demand would mean that substantial Large quantities of wheat, barley and rice are grown funds would have to be spent on the imjxirt of sugar in the area. Most of the husk of the first two cereals from non-Arab countries. is used as animal feed. The United Arab Republic has a plentiful supply of rice husks which, if fully exploited, TlIK I'AI'KR INDUSTRY IN THE ARAB COUNTRIK.S could be used to produce some 400,000 tons of paper Shortage of forest land is a common feature of the 1>, ulp annually. This, however, is not economically Arab countries. The main sources of paper pulp which practicable owing to the high cost of cleaning and may be used to satisfy consumption for a number transporting the husks; the gathering of husks must of years to come are described below. be limited to within a radius of about 200 km from the factory. In addition, the silicon ratio is high, rang- Wood ing from 8 to 10 per cent, which means that processing must be limited to certain methods. Most of the wood is hardwood, found in the Arab countries of North Africa, especially the Sudan. It is ¡'.sparto also possible to plant fast growing camphor and poplar '1 his grows in all the Arab countries, of North Africa trees. These resources are sufficient to meet the and is considered one of the best raw materials for the domestic requirements of the Arab countries and are production of paper, despite its short fibres. However, expected to cover part of the deficit in the consumption the gathering of esparto is costly (LK 10 per ton) and of paper pulp in Western Kurope, estimated at lietween requires a large supply of manpower. For these 1 and 3 million tons by 1975. reasons, esparto cannot he relied u]xm to meet the increasing consumption of paper in the area unless a Field crops mechanical method of harvesting is devised. The principal field crops with similar features as The paper industry requires, in addition to raw regards harvesting, wrapping and distribution are des- materials, an adequate supply of water. Owing to the crilxîd l)elow. meagre water resources in sonic countries of the area, Sugar cayir research is lieing conducted into the possibility of utiliz- ing industrial "left-over" water, as well as salt water in This is used mainly for the extraction of sugar, bui certain phases of industry. The drainage of industrial it could be exploited' by the paper industries with a "left-over" water poses another iui|X)rtatit problem. view to achieving economies of scale and reducing the Such water requires chemical treatment before being cost of raw materials in both industries. It is essential drained into the rivers. Where the ratio of silicon in that the capacity of the sugar production unit should the raw material is low, the chemical treatment is not fall below 1 million tons of sugar annually, and relatively easy; but where the ratio is high, treatment that the distance between the two plants should not becomes uneconomical. In the latter case, the paper exceed 50 kilometres, so that the price of the raw plants would have to he established on the sea coast material might remain economical. and discharge the waste water without resorting to In the United Arab Republic, sugar cane is cul- chemical treatment tivated in large quantities for use in the extraction of sugar and constitutes a basic material for manufacturing The paper industry also requires certain basic paper. By the end of the present five-year plan, total minerals such as salt, limestone and sulphur. The first rugar-cane production in the United Arab Republic is two are available in the Arab countries, but there is a estimated to reach 1 25 million tons, from which about deficiency of sulphur. Fuel presents no problem for 400,000 tons of paper pulp may be produced. most countries of the aren. From the technical point of view, sugar cane is one In addition, the availability of experienced staff is of of the most suitable field crops for manufacturing paper vital importance to the pajx-r industry. The opening of pulp owing to its very low content of silicon (2 per vocational and training centres where such industries cent), compared with other crop» in which such con- exist mav provide the solution to the shortage of tent varies between 7 and IG per cent. This reduces technicians. the cost of processing sugar cane, irrespective of the The economics of the paper industry depend., largely method used. on the availability and ease of gathering raw materials. Bamboo In order to meet the demands of local consumption and This grows naturally in some countries of the region, exerts, consideration must Ix; given to the size of IKirtkularly the Sudan. It is also j»ssible to cultivate the production unit to be established and the optimum improved varieties. Hamlmo differs from other field balance between the production of pulp and paper. 22 Industrial development in the Arab countriea If conditions warrant only the establishment of small The two principal producers of paper in the Arab production units to satisfy local consumption require- countries are Morocco and Algeria. Morocco produces ments, such units should be designed to manufacture a approximately 18,500 tons per annum of paper pulp variety of paper products. Irrespective of any such from local wood as a source of raw material. About considerations, however, each paper project should be 14,000 tons of this production represents exports. studied separately with a view to improving its produc- Algeria produces about 23,000 tons of paper pulp per tivity. annum. The paper industry in the other Arab countries The proposed integration of the paper industry in is based essentially on the import of pulp, and local the Arab countries will serve to eliminate many of the scrap which is used in the manufacture of cardboard risks involved in the establishment of small plants. and cheap wrapping paper. Large-scale production by socialized plants is desir- Taking into consideration the rate of population able when a suitable source of raw materials is avail- growth, the level of per capita income and the expected able, provided an adequate market is available for the expansion in education and industrialization, the annual product in the countries of the area. The establishment increase in paper consumption in the Arab countries is of an integrated paper plant producing paper pulp and expected to be alnnit 7.3 per cent. Thus by 1970 the two or three kinds of paper, but with a predominance total paper consumption in those countries will reach of pulp production to cover the need of other paper 715,000 tons, valued on the basis of current prices at factories producing paper only, will be of great eco- LE 71.5 million. By 1980, total consumption will nomic benefit to the area. amount to 1,440,000 tons, valued at LE 144 million. Tn 1%3 paper consumption in the Arab countries Failure to expand the paper industry to meet the in- amounted to 438,400 tons, while production amounted creasing demand will result in the Arab countries to 176.600 tons. The bulk of the raw material required having to divert substantial financial resources to the for this production was imported. The net imports of import of paper and paper products. paper thus totalled 273,300 tons. On the basis of an It is therefore most necessary to plan for the expan- average price of the various kinds of paper of LH 100 sion of paper production in the Arab countries on the l>er ton, this represents paper imports during 1963 basis of local raw materials to meet domestic consump- valued at LE 26,180,000. tion in the area up to 1980.

8. Co-operation with foreign industrial firms in the establishment of industrial projects in Kuwait1u

As a result of shortage of capital and lack of admin- scale ranging from 5 per cent on a net annual income istrative and technical experience, developing countries of KI) 5.250 to 50 per cent on a net annual income of are facing immense economic problems in the im- Kl) 375.000. Income tax is not imposed on the income plementation of their development programmes. In of foreign partners who participate with local enter- recent years, those problems have increased owing to prises in industrial projects. the deterioration in international trade, the decline in Existing legislation also protects the rights of foreign exchange earnings from raw materials partners in industrial projects through registration of produced, and the high rates of population growth, trade-marks with the Ministry of Trade for a renewable which have delayed the achievement of better living period of ten years, patents for a period of fifteen years standards. renewable for five additional years, and industrial Although Kuwait has ample resource» of foreign ex- models and patterns for a period of five years renewable change, it suffers more than other countries of the area for two additional periods. Employment regulations from limited local markets and the absence of skilled place no obstacles in the way of the entry of foreigners manpower. It has endeavoured to deal with these to the country, or the renewal of their residence. In- deficiencies through co-operation with large industrial come earned in Kuwait is not subject to income tax or firms to obtain assistance in the development of the any other tax, and no restriction is placed on its trans- economy. fer from the country. In the process of developing its economy, Kuwait has The promulgation of industrial law No. 6 of 1965, laid great emphasis on industrialization. A study of which clearly defines the facilities offered by the State the industrial potentialities of the country reveal an to industrial projects established in Kuwait, whether obvious need tor skilled labour, raw materials (ex- locally owned or of mixed ownership, encourages cluding petroleum and natural gas), markets for foreign industrial firms to participate with local enter- manufactured products, and technical experience. An prises in industrial activities. Article 14 of the law endeavour has been made to secure these essential grants industrial projects exemption from taxes, in- requirements by co-operation with experienced indus- cluding income tax, and from the payment of customs trial firms. duty on imported machines, equipment, accessories, raw materials and semi-manufactured materials. The law For this reason, legislation lias been introduced en- also provides for the possibility of raising the customs couraging participation of foreign capital in the estab- dut}- on imported goods for a maximum period of ten lishment of industrial projects, provided foreign owner- years in order to protect growing industries from ship is limited to 49 per cent of the total investment. Repatriation of foreign capital and profits is permitted foreign competition. Industrial projects established in without restrictions. Income tax is imposed only on Kuwait, whether Kuwaiti-owned or of joint ownership with a foreign industrial institution, may obtain from totally foreign-owned enterprises, and is on a graduated the Government through the Credit and Savings Bank io paper presented by tlic Ministry of Trade ami Industry long-term loans at a low rate of interest, as well as land of Kuwait. at nominal prices. Progress and problems 23 Co-operation between foreign and domestic industrial ively high labour costs. The need to imjiort raw tu ins in Kuwait takes the following forms: participation materials has also proved costly. The resulting high in capital ; participation in capital and in management, unit cost of the finished products has made competition and provision of technical experience and advice. in the open market difficult. An example of an industrial project is described Further problems have been experienced in the below. technical management of projects. Although the laws in force place the general management of industrial THE KUWAITI-DANISH DAIRY PRODUCTS COMPANY firms in the hands of Kuwaiti nationals, it will lie some time l>efore sufficient experience has l«?en obtained by The company's capital is KD 250,000, 51 per cent Kuwaiti nationals in the detailed operation of the owned by Kuwaitis and the remainder by the Danish plants, including technical sujiervision. production partners.' The project is organized as a limited liability control, and laboratory ojH-rations. Reliance will, conse- companv. The building and construction of the plant quently, have to be placed on the industrial firms con- was undertaken by a Kuwaiti company, with the Danish cerned to train Kuwaiti nationals to assume then' partners preparing the plans and maps and providing responsibilities in as short a time as possible. the plant with the necessary machines and equipment. Apart from the general problems faced by Kuwaiti Under the agreement, the Danish company is to industries, certain projects in which foreign industrial provide technical experience and equipment. There are enterprises have participated have had to face other at present three Danish dairy experts and chemical problems. While some of these have resulted from non- engineers in Kuwait. The Danish group is to under- adherence to the terms of agreements necessitating the take the operation and maintenance of the plant free appointment of technical experts to supervise the execu- of charge as long as the project remains in operation. tion of the agreements—others have resulted from the There is at present a small laboratory in which research selection of industrial companies with long experience and experiments are carried out in co-operation with and exceptional technical skills, involving the Govern- the Danish laboratories in Copenhagen, with a view ment and other national enterprises in heavy expenses. to improving the quality of production. The Danish The comparatively high cost of technical and industrial group also provides training courses for workers, the advice has contributed to raising the cost of existing expense of which is borne by the Kuwaiti-Danish industrial projects. company. The economic conditions governing co-oj>eration be- Marketing in Kuwait is carried out by the Kuwaiti tween industrial enterprises in the advanced countries and Danish partners through a special sales section and the developing countries indicate that some of under the supervision of the general manager. Raw these enterprises still hold strongly to their privileges materials consisting of dried and frozen milk are pur- and are reluctant to relinquish them in order to satisfy chased from the Danish company in Denmark at world the increasing need of developing countries, even though prices. such co-operation is in the interest of those enterprises, The free use of the Danish company's trade-mark since most developing countries have started imple- was agreed upon by the company. menting industrialization programmes. It is not enough that agreement be reached on the provision of an indus- The company is managed by a five-man board of trial model, the use of trade-marks, or the supply of directors, three of whom represent the Kuwaiti and two technical and administrative exjierience ; it is important the Danish interests. The general manager, who may that agreements should also include the provision of be either Kuwaiti or Danish, is appointed by the board. essential information on modern methods of production Subsequently the Government entered into an and the latest scientific discoveries and manufacturing agreement with two other companies for the imple- designs, and that industrial firms should not keep so- mentation of the first stage of a petrochemical project called production secrets, industrial research centres for Kuwait. and laboratories for themselves alone, since the avail- Some of the important problems facing the develop- ability of such information and facilities to the projects ment of local industries are lack of industrial and of the developing countries will expand the basis of co-operation, strengthen confidence, and hence serve technical experience, scarcity of raw materials, and lack of administrative experience. This has resulted in relat- the mutual interests of both parties.

B. Problem» of indtutrUdiwatUm

1. Industrial development and the fir»! five-year plan in Kuwait"

Government's redundant payroll, and overcrowding in In Kuwait's first five-year plan for economic develop- the commercial sector, afford further reasons for giving ment (1966-1971), some of the important objectives importance to industry in the country. are : diversification of the economy by broadening its base, maintenance of a high rate of growth in national Industrialization in Kuwait is handicapped by a num- income, increase in the scope of gainful employment, ber of factors. These may be briefly stated as : absence and rapid development of human resources. Certain of raw materials other than crude oil and natural gas ; negative features of the economy of Kuwait, such as narrowness of the home market; inadequacy of fresh lack of employment opportunities in agriculture, the wr.ter; high labour costs; paucity of technical, organ- >'- Paper presented by the Kuwait Planning Board. izational and entrepreneurial skills, and the absence of 24 Industrial development in the Arab emmtriet

motivation to join the industrial labour force because ¿Tildi Of QOVtTHMtnt of the plentiful employment opportunities that the fiarHtifmtio* Government provides. ( ftrenHagr ) These handicaps to industrialization are to a certain Kuwait National Petroleum Company 60 National Industries Company 51 extent counterbalanced by the advantages which accrue Petrochemical Industries Company m to Kuwait from the vast supplies of capital, abundant Kuwait Flour Mills Company 50 cheap natural gas as a source of |K>wer, access to a Kuwait Asbestos Industries Company 38.5 great variety of refined petroleum products, and a Kuwait Chemical Fertilizer (government share favourable geographical situation at the head of the belongs to Kuwait Petrochemical Industries) 48 Arabian Gulf. Added to these natural advantages are Kuwait Prefabricated Housing Company (govern- the Government's liberal |»licy regarding the import ment share belongs to Kuwait National Indus- of workers and technicians, together with freedom in tries and Kuwait Investment Company) 48 the remittance of earnings and profits. In 1961, the Kuwait Investment Company was Industrial development in Kuwait in recent years has established with a paid-up capital of KD 7.5 million. not Iwen governed by a carefully worked-out long-range of which the Government share was 50 per cent, for strategy, but by a series of ad hoc decisions that the purpose of participating in national companies with appeared to be most profitable and expedient at the a view to encouraging industrialization. time. The Government, while showing every willingness To stimulate development in the manufacturing to quicken the pace of industrial growth, has been sector, the Government is building the infrastructure hani|>ered in giving effect to this desire by the absence for an industrial area at Shuaiba. Under the direction of a coherent design of optimum industrial development of an independent government authority known as the within the framework of a comprehensive development Shuaiba Industrial Development Board, the ground- plan. work is being laid for a big industrial complex. At present, manufacturing industries do not play a In addition to creating the infrastructure of an significant role in the economy of Kuwait. The value industrial area at Shuaiba, the Government is helping added by industry in the gross domestic product for the the process of industrialization by providing easy and year 1965-1%6 has been estimated at KD 25 million cheap financing facilities for industries. A credit bank out of a total KD 835 million, representing a ratio with a wide scope of operations covering industrial, of 3 per cent only. The role of industry in the field of agricultural and real-estate loans was set up in October employment has been more significant than its contribu- 1960 with a capital of KD 7.5 million entirely sub- tion to the domestic product. According to the indus- scrilied by the Government. Besides lending, this bank trial census taken in 1964—which was the first of its was permitted to establish companies and participate in kind in Kuwait—the total number of persons employed their capitili. It was absorbed in an expanded Credit in industrial establishments (excluding oil production) and Savings Bank in 1965. This bank has a capital of was 21,607. This was 14 per cent of the then estimated KD 20 million, entirely subscribed by the Government. labour force in the country. About one-third of the It will be managed by an independent authority under industrial workers were engaged in the production of the supervision of the Ministry of Finance. The new "goods", while the remaining two-thirds were in strictly bank exercises most of the functions of its predecessor service activities, primarily the repair of motor vehicles. but has greater authority in the granting of loans for The industries which exist at present in Kuwait social purposes to the citizens of Kuwait. either cater for the local market in construction In March 1965, a new industrial law was adopted to materials, repair and maintenance work, or are based ensure continued and increasing Kuwaiti control of on petroleum and gas. There are a few industries which industry and the establishment of new industries on provide simple consumer requirements such as soft sound economic lines, and to facilitate the proper co- drinks, flour, bread-baking and tailoring. In addition, ordination of industrial activity in the country. Under there are some miscellaneous industries such as printing that law, the establishment and operation of manufac- and publishing and the government-owned chlorine turing units will become exclusively a Kuwaiti sphere, plant at Sbuwaikh. Of the old traditional industries, since licences will be granted only to companies which the only one still existing is boat-building. are 51 per cent Kuwaiti-owned, have an effective Kuwaiti manager and a majority of Kuwaiti nationals The industrial policy followed by the Government *o on the board of directors. However, this law does not far has sought to give maximum encouragement to exclude foreign participation in industry in terms of private enterprise : the Government has also recognized cither capital or technical assistance. The law also that, at the current stage of the country's development, circumstances dictate active support to industry, going empowers the Government to provide assistance to industry in the form of exemption from import duties in many case> as far as actual participation. Regulatory activities in the industrial field have l*en designed to of capital goods and raw materials needed for industry, tariff protection, subsidized power and water rates, ensure its progress on sound economic lines. As a and preference in government urchases for locally result of government participation in industry, Kuwait manufactured products. has a sizable semi-public or joint sector which consists of companies financed by government loans and grants, The precise size and composition of the industrial as well as by private contributions. The companies in development programme in the five-year plan cannot the joint sector enjoy a much greater degree of admin- lie established at present. Important investigations into istrative and managerial autonomy than public agencies. the industrial potential of the country are currently in progress. Consultants have been appointed to survey Government has so far participated in the cnpital of the prospects and determine the economic feasibility ot the following industrial companies : a number of industries which prima fade show Progrès« and problems 25 promise; the full possibilities of gas-based industrial- cost of this refinery is some Kl) 35.5 million, of which ization in Kuwait is also under examination. The KD 7.5 million will have l>een incurred prior to the extent to which industrialization will Ite influenced by inauguration of the plan. The balance of KD 28 million considerations of regional economic cooperation in the is likely to lie spent in the first two years of the plan : Arab world is still in the realm of speculation. KD 23 million in VHSi-VW and KD 5 million in For these reasons, the plan's programme of indus I%7-1%8. trialization furnishes only a broad picture of the The refinery during it* construction phase is prospects as envisaged at present. It is a flexible frame providing job opportunities for 3.000 persons; in its work for industrial growth and is not to lie taken as operation stage it will give employment to 200 persons a rigid and immutable blueprint. The financial invest- only. This refinery has a capacity of ''5,000 barrels per ment figures of the plan should lie construed as day. representing a broad indication of the order of The economic justification for the Kuwait National magnitude of outlays in the industrial sector, which may Petroleum Company's export refinery in Shuaiba is change in the light of information revealed by further that, in addition to being capable of charging a relat- studies, or by new developments which cannot be ively small amount of crude, it will also convert the foreseen at present. ordinary distillates and residual fuels into products The principal criterion for determining the actual which are readily saleable throughout the world lie- «>mi>osition of the industrial programme will be the cause of their high quality or liecause they are in short net return over costs per unit of invested funds. At siipplv. The company has already found markets for the present stage of development in Kuwait, advanced the petroleum products of this refinery in West programming techniques such as input-output analysis Germany, Pakistan and India, in addition to the local and linear programming are not suitable. The fact that market of Kuwait. the economy of Kuwait is centred on one commodity For the financing of the refinery, the Kuwait (oil), that it depends on imports for the bulk of its National Petroleum Company was granted a loan of consumer requirements as well as capital goods, and KD 25 million in July 1965. there is also a proposal to that it has very limited inter-industry relationships, raise more funds by doubling the comjiany's present sharply limits the usefulness of input-output analysis authorized capital of KD 7.5 million through the issue and other advanced mathematical techniques. The of 1 million shares, open Ixitli to public and private paucity and unreliability of the available data is an subscription. added reason why meaningful results cannot be The Arabian Oil Company is expected to complete obtained from such techniques at the present time. a refinery at Kas-al-Khafji with an estimated capacity The plan provides for an investment of KD 100 of 1.5 million metric tons j>er annum. The cost million in industry, of which KÜ 12 million is in the estimates of this refinery are not yet available. They public sector, KD 62 million in the semi-public sector may lie in the region of KD 10 to 12 million. and the balance of KD 26 million in the private sector. No extension in the capacities of the two existing This is 14.3 per cent of the contemplated total plan refineries is contemplated at present by the coni|Kinies investment of KD 700 million. A tentative analysis of concerned. If the capacities of the refineries are sub- this expenditure by year is given in the following sequently expanded, an upward revision will be table : required of the present plan provisions for petro- chemical industries in the private sector. Expenditure on industrial dcvttopMnt during tht »Un ptrUé Petrochemicals have an ini|x>rtant place in the indus- trial development of Kuwait. When examining the (KD million) feasibility of a petrochemical industry in Kuwait, it has to be borne in mind that, while Kuwait has an Public SimipuMic l actor sector ':Jc,t Totol abundance of capital and the great advantage of cheap 5.00 33.00 energy (particularly natural gas), it suffers from the 1966-1967 3.00 25.00 handicap of having virtually no home market for those J.00 11.50 4.50 19.00 1%7-1968 products. The industry has also to reckon with foreign 1968-1969 2.00 7.00 5.00 14.00 1969-1970 2.00 8.50 5.50 16.00 competition from large and well established chemical 1970-1971 2.00 10.00 6.00 18.00 firms. 12.00 62.00 2600 100.00 For a country in Kuwait's jwsition, the central problem is to find petrochemical industries where the cost of fuel, in which the country has a decided Of the proposed total investment of KD 100 million advantage, forms a sufficiently high proportion of total in the industrial sector, KD 60 million is assigned to costs to counteract disadvantages in other costs. This industries based on petroleum and gas. The semi-public is the case with "first stage" petrochemical» such as or joint sector will play a dominant part in this group ammonia and ethylene. Kconomies of scale are also of industries, accounting for KD 54 million; the most significant at that early stage. However, even balance is earmarked for the private sector. such "first stage" petrochemicals !iave to be marketed. For industries outside the petroleum complex, the Kuwait's best policy in that regard would be to set up plan makes a total provision of KD 40 million: KD 12 subsidiary plants in prospective markets to process the million in the public sector, KD 8 million in the semi- "first stage products into marketable form. public sector and KD 20 million in the private sector. Under active examination at the present time is * During the early part of the plan period—some time project for setting up a new ammonia plant scheduled in 1967—the Shuaiba refinery of tlie Kuwait National to be in operation by 1969 with a daily capacity of be- Petroleum Company will go into operation. The total tween 1,100 and 2,000 tons of liquid ammonia. This 26 Industrial development la the Arab CMiatrsta plant will produce urea and 500 tons of methanol. Uke market, there is also the possibility of significant the first petrochemical complex, this plant will be set exports of air-conditioners fmin Kuwait to neighbour- up in the Shuaiba industrial estate. It is expected that 111« countries. These considerations make a strong a number of subsidiary plants for the further processing prima facie case for the setting up of an air-conditioning of these "first stage" produci. will be set up in foreign a sembly plant in Kuwait. The feasibility of this «ountries with the partici¡>atioii of Kuwaiti capital. proposal is Uing studied by a leading firm of interna- Detailed io-t estimato of this project have vet to IK- tional industrial consultants. If the findings of the worked out. feasibility study sup]N>rt the case for setting up an If the present investigations of the feasibility of a assembly plant for air-conditioning equipment, there is whole range of "first Mage" petrochemical industries every likelihood of this !>emg established during the demonstrate the economic viability of such industries, plan period. there is every likelihood that the present provision for Tyres. Imports of tyres in Kuwait were valued at such industries in the plan will have to be revised up- KD 1,452,898 in 1963 and KD 1,330,254 in 1964. The ward quite considerably. market may not be large enough to warrant the estab- Ideally, in order to draw up the best possible lishment of a factory locally to compete with imported programme for investment in non-petroleum industries, tyre«,. It is, however, big enough to sustain a factory a complete technical and economic analysis would be for rebuilt tyres. The feasibility of setting up a tyre needed of a great many alternative possibilities, factory is being examined by consultants. showing die various costs and returns from each. Such Gloss products. A sizable market exists for glass information is only partially available in the country products in Kuwait. The imports of such products in today for industries outside the petroleum complex. l'*>3 and 1964 were valued at KD 589,905 and KD Consequently, any recommendations made at the 592.202 respectively. The size of this market is present time must be based in large part on qualitative sufficient to justify local manufacture. A feasibility judgement rather than on adequate technical data. A study is now being made by consultants. great deal of further study and investigation will be needed as the programme is put into effect, and changes Pharmaceuticals. One of the distinguishing features will no doubt 1* necessary. Looking ahead, the projects of Kuwait as a welfare State is its free health services. descrilied below are the most likely areas of new invest- This has stimulated large imports of pharmaceuticals ment. into the country, valued at KD 1,121,927 in 1963 and KD 1,180,323 in 1964. The size of this demand is ( Murine plant. 'Hie existing chlorine plant operated sufficient to justify the establishment of local manufac- by the Ministry of I'.Ht ricity and Water has a limited ture in at least some of the standard items in wide production capacity To meet the domestic demand for demand. If current investigations into the viability of chlorine during tir plant |ieriod, it is proposed to set this indistry demonstrate its economic feasibility, up a plant with a capacity of 30 tons/day of chlorine. investment expenditure will be incurred on this industry In addition, this plant will have a daily capacity of 60 during the plan period. tons of sodium chloride and 35 tons of caustic soda. It will also produce hydrochloric acid in quantities Blankets. There is a possibility of an industry being sufficient to meet the expected domestic demand. The set up in Kuwait during the plan period to produce a present estimated cost of investment in this plant is range of blankets suitable for the domestic and export Kl) 1.5 million. markets. The total investment required for a blanket factory with a capacity of 1,000 tons annually would Asbestos ccHicni pipes. At present, the Kuwait be approximately KD 250,000. Asbestos Industries Company produces pipes and joint> between 100 and 600 mm in diameter. During the plan Soup. There is also the likelihood of a soap factory period, the AsUstos Industries Company will, in lieing established during the plan period. A feasibility addition to the present range of sizes, produce new study is currently being made. sizes with nominal diameters of 50, 60, 75 and 80 mm. Cotton and rayon products. Studies are currently These smaller pijx-s will t>e produced in lengths of up being made to determine the economic feasibility of to 4 metres. It is also likely that, in the later years of setting up a textile plant in Kuwait during the plan the plan, the eomixmy will produce corrugated asbestos j>eriod. The total imports of cotton and rayon products sheets. The total new investment by the Asbestos In- were valued at KD 4,787,885 in 1963 and KD dustries Company during the plan period is expected to 5,990,470 in 1964. This level of consumption it suf- be some Kl.) 1 million. ficient to warrant consideration of a textile mill which Flour mills. The Kuwait Flour Mills Company is would weave and finish high quality cotton and rayon expected to invest KD 1.5 million during the plan goods. period. It proposes to set up a modern bakery as well Steel re-rolling mill. Careful consideration is also as a spaghetti and biscuits plant for the home market. being given to a steel re-rolling mill to produce Cement. There is likelihood of a cement factory reinforced iron from scrap rolkd sections. It will use being set up by tlie National Industries Company dur- imported steel ingots or billets. These will be rolkd ing the plan period. As Kuwait is a large user oí into bars and light sections, thus supplying the home cement (the value of import» of cement of all kinds market need for such products. According to the report during 1963 and 1964 was KD 3,439,838 and KD of the industrial and process engineering consultants, 3,368,269 respectively), a good case for the establish- a roiling mill with an annual capacity of 30,000 torn ment of a cement works exists. a year, would be appropriate for Kuwait. The over-afl Air-conditioning equipment. Kuwait has at present cost would be in the neighbourhood of KD 3 million. a sizable domestic market for air-conditioners, which is In addition to the industries mentioned above, other expected to register a further growth in the cornine possibilities during the plan period are paint manufac- years. In addition to the sizable and growing home ture, slaughterhouse by-products, batterie«, an aasemtjy

'•••»"«" Procreta M4 »TI»M«*M plant for radio and electrical appliances and miscel- U is proposed in use this power JIKIRKHI.SIN in the plan laneous food industrie». ]*THM1 for the stimulation of industries By the end of 1966, it is expected that all the It lias io be recognized that tlie incentive of free ¡nonstructural work in the Shuaiba industrial estate imports of niatlunery, -pare parts anil raw materials will be completed. Electric generation capacity will be fur the establishment and operation oi indu dies canno» increased to 280 mw by the installation of a new 70 piovide a significant mea,lire ot assistitile to nascent !,!\v unit. The capacity of the water distillation plant industries. 'I lie present level ot custom-, duties is onlv will have been expanded to 10 million gallons per day 4 per cent ad iiiUncm and exemption troni it can have by the end of the plan period. Also, it is expected that only a .small influence in relation to otlut Luto:- ih. t in this period the residential centre for which a site impede industrialization in Kuwait between eastern Ahmadi and Fahahil has been chosen Then is no doubt that, as in othet newly IIHIIIS will be completed. The population of the centre is trialized countries, the (iovernnient will have to protect estimated at 10,000 residents. Work on the oil pier few- new and nascent industries against outside conn**tition loading tankers will be another project which will be through tariffs. If industrialization in Kuwait is to initiated and completed in the plan period. make significant strules, a favourable response to claims There is no doubt that, during the plan period, the for a measure of orotcctioti for mdiistiie, to be estati Shuaiba industrial estate will play a decisive role in fished will be tu essary locating, expanding and strengthening small, medium As regards the duration ol tarili piotection, it should and large industries within the framework of a broad not normally extend hevmid ten years this period programme of industrialization. The expected invest- should in most cases lie sufficient to provide tlie ment expenditure on developments in Shuaiba is KD necessary protective mulinila to new industries and 8 million. enable tliem to reach a stage where they should liecome Fixed capital formation in the industrial field during self-supporting and cease to nff<\ piotection the plan period will come from government loans, loans 1'rogran lies for improving the technical skills of by the Credit and Saving* Hank and other commercial tlie labour force and for the training of business banks, as well as from private and business savings. managers have a vital role in tlie achievement of the The Credit and Savings Bank is expected to play a goals and targets of tlie plan's industrial progi amine. decisive role in the financing of industrial investment. These training programmes are also oí crucial Direct government bans to industry will, as a conse- significance in the country's strategy of long term quence, assume diminishing importance. It is expected growth that the Credit and Savings Hank will have a special It is expected that the present tectum al school will section for industrial financing whose main purpose liecome a unive, sity faculty of engineering during tlie would be to provide the long-term and medium-term plan period. For tlie training of industrial start ot tlie financing necessary for industrialization; to arrange foreman grade, a new technical institute will be opened. where necessary for managerial and technical assistance For the k>wer level staff required by industries, a trade and to keep in close contact with the financial affairs of school will be estabhslied. It is also planned to organize firms to which it makes commitments, and to endeavour practical training programmes by arranging placements to develop a market for the securities in its portfolio with industries and institutions in industrially advanced when they have attained financial maturity countries In addition to training for industry, part- It is also proposed to establish a stock exchange in time courses will be arranged lor the upgrading of Kuwait during the plan period, once the volume of foremen already engaged in industry trade in »hares warrants such a development. Un- As a result oí the plan s industrial programme, it is fortunately at the present time the market in securities expected that the value added by industry to the gross is very limited. The reasons for the delay in the growth national product will increa.se from KD ¿5 million m oí a security market in Kuwait are varied. Direct 1»*.5-1%6 to KD 4* million in 1970-l<>71 Tins repre- government participation and bank finance have so far sents an increase of 5.1 per cent The percentage share lieen used as a substitute for resorting to the security of industry in tlie gross national product will increase narket, and the »mall site of the security market frcjiu 3 per cent m tlie base year YMiS-VXá to 3U per present» difficulties of a purely technical kind with cent in the final year of the plan, 1'»70-1971. The direct respect to the offering of new issues for public increase in employ ment m industries outside service participation. activities is expected to be 1,500 daring the operating During the plan oeriod it is also proposed to »et up stage. The employment increase will doubtless be much a Kuwait bureau of standards. greater dut mg the construction stage of those industrie» Under the new industrial law, power» have been when as many as 4,300 add*tk*wl person» may W given to the Government to promote industrialisation employed. In the service industries the increase in by exempting from duty imports of machinery, spare employment is expected to lie of tlie order of 3.00O parts, and raw materials needed for the establishment These employment estimates are very rough a(>proxi of industrie», as well as by imposing protective tariáV matkms and may undergo considerable revisioti In Ir«, in *• Matt nf

TM« raiVATE AM» MIXED SCCTO«« trial Bank as a purely government owned MtstmttMH Subsequent legislation'tkw No. l¿ oí 1945> described One of the most important step» taken by the Statt the object of the bank as bemg the development tal to encourage industrialiaation in Iraq was the estab- industry in Iraq, this object to be achieved by the lishment, in 1936 (law No. 33 of 1935) o< the Indus- following mens: establishment of industrial pr*}«rt* by the lank ; participation in the capital «Í e» ' " Faff n-iwime fcy tht Mvmrtrj ti Industry •* Ira«. liMiwMtrial irvrimmmont M th« Ara» CMUttrlr«

industrial riMi»|>niii«-s ami tlvose to I* establtslteil in the I lie (io\ eminent decided at that time to entrust the future, arni provision of credit required for development implementation of the major projects to the Develop- |>rojects ment Hoard This agency was createli (law No. 2.1 of Tli«1 Hank took >t'|is lo establish nfw irn!n-.tries aivl P'.sOi to make effective utilization of the new revenues. strengthen existing ones through the extension of k>ans The board studied Iraq's potentialities arni natural .iixl direct participation in tlinr capital. Initially, mn.t resources with a view to formulating a programme, for ¡wojects dealt with the processing of agricultural raw- their economic exploitation and development in order materials These projects «ere comparative!) large and to mcrea-e national income and raise the standard of were to a great extent instrumental in the development living of the |>eopli\ The programme included projects of industrial activity in Iraq However, the bank's m the industrial, electrical and mining sectors. effort» were limited by economic conditions and the The first decision to he ado{4ed by the Development traditional social structure that ]>rev;oled in lra<| at the Hoard regarding industrialization was to draw on the time. services of foreign investment companies to prepare the necessary studies. These companies prepared specifica- A|Mirt frinii the Industrial Hank's role in financing tions and designs for a number of industries and later tlie private and mixed industrial sectors, it becomes supervised their imjjementation. The board also estab- clear that the growth of industry in the private sector has not taken place within the framework of a pre- lished a technical committee of industrial experts (the conceived plan Rather, it is the private investors' clioice third technical committee» to assist in selecting advisers for each apprised project; co-ordinate the work of that ha.s determined which industrial projects should advisers in the event of engaging more than one; serve lie estaMished Thi» process, howe\er, has l>een sub- as liaison between the advisers and the Imard, and make jected to a measure of guidance through the develop- contact« with the government departments concerned ment of laws for the encouragement ami promotion of with the project. industry Among other measures taken by the Development Under the provisions of tlie development law, the Hoard was the prejxiration of preliminary studies for establishment of an industrial project requires that the each pro|H>sed project, on the basis of which the Board capital invested in machinery, tools, and equipment would decide whether a more detailed study was shall be not less than II) .i,(>00. The application for estaMishing the project is to lie submitted to the general iM-ces.suy or whether the project should he rejected. In \')>2, a mission frinii tlie International Hank for Re- administration for the dcvelnpmeiit of domestic indus- tries of the Ministry of Industry, which studies the case construction and Develofxnent (IBRD) prepared an with the help of other agencies such as the industrial initial survey of Iraq's industrial resources and recommended" the establishment of a number of indus- pfenning department and tlie Industrial Hank. The most 14 important factor taken into consideration in these tries. Following the publicntion of the IBRD report , studies is demand, that is, the possibility of marketing a number of establishments engaged in the production of the products of the proposed project in the light oí the certain commodities and equipment submitted prelimin- production capacity of existing projects and those in ary reports on tlie projects with which they were process of estaMisnineiit A summary of these studies concerned. The board was guided by those studies in is then submitted to tin- industrial development com- laying down its first industrial programme. However, mittee composed of rq>resentatives of tlie Ministries during 1«>.S.< and 1954, tlie board received a number of industry, Manning, Finance, Kconomy. ami the of new proposals for industrialization and felt the need Federation of Industries. The committee, in turn, sub- for a general survey, including detailed studies of nuts its recommendations to the Minister of Industry, industries which might be established in Iraq and with whom rests the final decision on wliether to grant preparation of data regarding tlie priorities to be or withhold the license. accorded to those industries. The large financial requirements of sonte projects in The board engaged the Arthur Advisory Company the private sector could be met onlv if the Industrial tor that purpose and, on the basis of its report, prepared Hunk subscribed to their capital. The bank did this its industrial programme for the years 1956-1960. on the basis of generally accepted principles, such as Tlie implementation of an industrial project by the the prevention of the rise of private industrial Itoard had to pass through a number of stages. First, the monopoly, encouragement of industrial projects, ami board required the preparation of a preliminary study, safeguards for tlie interests of the consumer by in- on the basis of which it was decided whether the project sistence on a certain standard of quality and prices. In should be pursued further. In cases where the study some cases, the bank itself decided on the establish nient was encouraging, the board would select an advisory oí industrial projects. firm to make a detailed study. That study usually included information on markets, raw materials, labour, THF. Pl'RLlC SRCTO« transport, availability of water and electricity and an The public sector has pasaed through several stages assessment of the estimated cost of production. In of («rogranmnng and pia lining. The organilation ot short, the implementation of a project depended on its this sector began with the inflow of oil revenues. satisfying a number of economic criteria influencing its l>ro»pects for success. Then followed the selection of The new oil agreement concluded in the early nine- tlie site and preparation of the designs and specifica teen-ftfties greatly increased the country's financial tkms. On the basis of such designs and speciftcatioai, resources In fact, this increase provided an important companies from all parts of the world would be invited ímpetu« te the growth of the induatrial sector and to submit tenders. The specifications would he studied ettminated one of the most important problem« that had 14 anatrar ttd economic and industrial envelopment in Ike Economie Development of hmm. Report of the Mu- mm „f the International Bonk for KeeonstrntHon omä Drveltt- Iran, namely, scarcity of capital and foreign exchange. ment. Uttmmt, aM„ J«*M H«a*ÌM Pratt, W2. I'riHcrr»» and pritMeiRK by I he technical liod y concerned in the Ministry oi Following the revolution of 14 July 1''3N, the Iievi'lojjiiwut ami a report submitted to the l>velop- Ciovernmenl's policy towards industrialization changed ment Hoard for approval radically. 'I he executive authority was reorganized under law No 74 of 1''5'>, which established eighteen T!if next step was tin selection of a company for ministries, among ihein the Ministries of Industry and tin- implementation of tlic project under the su|XTvision Manning. That law pm.ided that the Ministry ol ,,f the advisory linn. The technical committer in tlv Manning should IK- rc-.pon-.ihlc tor establishing the Development Î it wird cornei ned with industry was to detailed economic plan ,au\ the budget of major pro- help lirms inidettaking tin- implementation of tlic jects, as well as for providing the neccssarv manpower project to overcome difficulties sudi as delays in for the implementation of the programme under the customs clearance and transportation of e«|nipti»eiit. guidance of the Council of Ministers anil the Fconoiuii il also assists them in resolving disputes which Manning Hoard, and wiili due regard to the suggestions might arise lietvvccn the companies and local authorities. and plans of the other niinistncs concerned During the implementation jicriod, the technical com mittee. in co-ojierntion with the advisory linns and The Ministry of Manning was also to follow up the tlic coni|Kinies undertaking the iiiiiilementation of the implementation of the economic plan and submit project, sends Irakis ahroad to acquire tlie necessary progress re|>orls to the economic planning boaid. con training for tlie operation of the project. Following sisting of the I'rime Minister, as chairman, and the the implementation stage, the company responsible for ministers of planning. Imance, indiistrv, agrarian re the establishment of tlie project continues to operate form, agriculture, communication-,, public works, the project for a s|¥firic period under the supervision housing and social atl.iii s as nieniln-i's. I he chairman tif the advisory limi. Finally, the company hands over was authorized to invite any other minister to join the project to the ministry concerned for its o|>eration the board. and management. The functions of the Iman I were to he to formulate detailed plans for the implementation of the economic In 1°51, the lioard presented its six-year programme, , [»obey laid down by the Council of Ministers, and lo | )M-l'»5o. The programme, was based on the study study and amend the economic plan presented hv the lirejKired by the 11.KD mission, stressing the necessity Minister of Manning. of giving priority to agricultural development. Of the total cost of the programme, 3 per cent was assigned Tlie Ministry of Industry, under the l'i.V» law, was to projects relating to water control, H |>er cent to to undertake all activities aimed at industrializing the other agricultural projects, and 20 per cent to manufac- country and to stijiervise industrial affairs m lioth the turing, mining and electricity projects. Following a public and private sectors substantial rise in oil revenues, the lioard presented its The Ministry of Industry was lo IM- ri imposed of a second five-year programme. l°55-l(>5'>, representing IIUIHIHT of departments, among them the department twice the outlay of the first programme. Kxcept in of industrial planning, whose functions were to include magnitude, that programme was substantially tlie sanie the prcjiaration of preliminary studies on industrial as its predecessor. In ln5(>, however, owing to the projects and participation in the formulation of the continued increase in oil revenues, the completion of tentative industrial plan, and the department of indus- certain studies and 1-ord Salter» report, this program- trial planning and construction, whose functions were me was replaced by another, the l(>55-l°-bO programme. to lay down s|>eci tica lions for industrial projects, implement them, or supervise their implementation The new programme clearly reflected Lord Salter's when undertaken by consultant linns. recommendations, emphasizing short-term projects Since the almlition of the Development Hoard and which would directly lielp in raising the standard of living. As a result, housing allocations were increased the Ministry of Development in l'>5''. the Ministry of Industry has lieen responsible for preparing the fourfold, those for increased agricultural productivity preliminary studies for industrial projects, preparing or were doubled, and educational health and water supply supervising the preparation of specifications, inviting allocations were substantially increased. Tlie industrial advisers to plan industrial projects, and receiving and programme largely reflected the recommendations studying the companies' offers. The final decision on emlHxlied in tlie report of A. I). Little. the selection of advisory companies or contractors for The 1 >evekjpnient Hoard laid great emphasis on the the implementation of projects, however, rests with the development of the agricultural sector. Indeed, the Planning Hoard. funds allocateti to industrial development »ere, in the As regards the industrial plan, the Ministry of opinion of the majority of I raen economists, very small; Industry -¡trepares the tentative ]»lan and presents it even so, only a part of those allocation* was actually with the relevant studies to tlie Ministry of Manning spent The latter, together with tlie Manning Hoard, prepares the over-all economic ld.m and i IM orjiorates in »t tlie The ( iovernnient's conservative policy with regard to industrialization was not confined to tlie public sector industrial i>lan. but extended to the private sector as well. This policy After the adoption of the |»olic> of sejjarating eco- for the most part reflected the viewpoint of the experts nomic ldanning from imjdeincntalioii. the most im- who reported on lrat| at tlie time. These experts iiortant step taken by the newly established ministrM-i was the preparation of the detailed economic |4aii for stressed the inipirtance of maintaining a stable price l level and combating inflation. Hence they recommended the five years \<*>ì/\'*)2-ì Mà/V**>- Tliat plan did not tlvat the door for imports should be kept wide open and ir fact differ substantially from the last programme of tliat the application of a policy of protection for local the Development Board. Although it ¡aid increased industries should not be vigorously pursued. Some emphasis on the industrial sector, which received M) experts, in fact, criticised tlie laws which encouraged per cent of tlie total allocations as compared with I.Î industrial projects. per cent in the previous plan, iiM»re or k-ss the same iMhMtrkl *vebpM*nt m tlM Arab eMMtriea criticisms as were raised in connexion with the indirect value added. For example, the coefficient of programmes of the Development Board are applicable capital for the artificial silk project amounted to 11.3— to it. These programmes and plans provided for invest- the highest ratio among the industrial projects. That ment projects which did not form an integral part of project is linked, however, with the soft textile project. ,m over-all economic plan and the effect on the economy Consequently, the two projects should be looked upon as a whole was not studied. as one in calculating the relevant ratio. The plan takes The first serious effort to use modern planning tech- into account the indirect effects in the artificial silk niques is made in the current five-year plan (1%5- project, the ceramics projects, as well as the paper and 19*)9). An attempt will be made to describe the main glass project*. features of this plan on the basis of information and Balance of payments effect. Some projects lead to a retx>rts available at the Ministry of Planning. saving of foreign exchange because they either produce The five-year economic plan for 1965-1969 aims at exportable commodities or serve to replace imports. increasing national inconje at a minimum average rate Against that gain in foreign exchange must be con- of 8 per cent per annum and a growth rate of 12 per sidered the loss consequent upon the establishment of cent per annum for the industrial sector over the plan such a project as a result of the following: the fixed period. In calculating the expectations of growth in capital cost includes imports such as equipment, the Iraqi industrial sector and the expectations of the machinery, and the ini|>orted materials used in building growth of demand for the different branches of this and construction works, and the annual operating costs sector, the economic plan relied on two methods to of production also include the cost ot imported raw determine the best rate of growth. The first was to materials and payments in foreign currencies to meet study the position of the industrial sector in the base the cost of foreign experts and training scholarships. year and calculate the changes in demand for its The foreign cost continent of fixed capital should difterent branches during the plan period, using the be considered in relation to its life span. This means coefficient of income elasticity of demand for the that, in order to estimate the annual cost involved, it different industrial products and fixing, accordingly, is not enough to divide total cost by tlie expected life the rate of growth of each branch. The second was to of the fixed asset. Account must be taken of the fact study the development of the Iraqi industrial sector that a machine represents a frozen asset, or funds, and expected growth of its different branches on the which could, otherwise, yield interest (assumed at 4 basis of the formula laid down by the United Nations per cent by the plan). On tliat basis, the plan calculates and to apply the standard equation on the assumption the net foreign currency saved in each industrial pro- that tlie industrial growth in Iraq was equal to that ject, or the direct effect of the project on the balance of of a country whose per capita income was similar to payments. that of Iraq. The two approaches produced similar results, showing generally how the Iraqi industrial Effect on employment. For purposes of comparison, sector was likely to grow during the years of the plan. the plan calculates tlie ratio of required capital to the number of workers that a project is expected to em- The share of the Government in the industrial plan ploy. Tliat ratio shows how many dinars are required covers seventeen industrial projects. Those projects to provide employment for one worker. Unlike the two were selected on the basis of their effect on such im- previous ratios, however, it cannot be taken as a portant economic parameters as the national income, criterion for according priority to a particular project, balance of payments and employment, and in certain since labour is one of the factors of production in tlie cases certain indirect effects of the project were also use of which economy must be exercised. The fact that taken into account. a project employs a large number of workers is not Ljject on national income. In order to compare and sufficient to give it priority, except where large reserves evaluate industrial projects, the ratio oí capital to of unemployed and unskilled manpower exist. In that value added was calculated for all major projects. The case, the provision of employment opportunities may iu projects in which that ratio is low have a more favour- itself be considered a gain. Consequently, the plan able effect on national income than those characterised includes the ratio of capital to unskilled labour, which by a high ratio of capital to value added. That ratio is may be taken as a criterion in according priority. This one of the criteria used to determine the priority of the consideration, however, is not applicable in the case different projects. Care must be taken, however, when of projects employing large numbers of technicians and applying this coefficient, to take into consideration the engineers, which should receive a low priority.

la Inni'*

One of the social objective« of the economic develop- While it might be assumed that a noticeable increase ment programme in Iraq, including the present five- in employment would result from the implementation year plan, is the achievement of full employment for of the projects covered by the plan, this is not neces- all those capable of working and willing to do to. sarily the case if the execution of the pian is achieved Achievement of maximum employment is an important predominantly through improved production techniques short-term objective in th- development plan in view of of the capital-intensive type. Although there it the economic situation prevailing in Iraq and die con- justification on economic grounds for adopting such centration of the labour force in the agricultural sector, techniques, tlie creation of a sufficient number of em- with ks characteristics of seasonal and disguised unem- ployment opportunities may call lor the adoption of ployment, and the scarcity of capital relative to the labour-intensive production technique*. labour supply. No hard and fast rules can be applied ki aO circum- » Paper presented by tht limiMry «i Iwkutry «4 1rs*. stances in choosing between capital-intensive ma PracrcM *** prMtwm 31 ]nl>our-intensive methods. The type of project, its Semi-skilled worker« 6.16S desired social aims, available financial resources and Unskilled worker» 7,224 the current needs of the country are all factors affecting ESTIMATED TOTAL 18,369 the choice of the method to lie applied. The projects implemented by the Ministry of Industry require large Studies on the acquisition of specialized skills to capital investments. They use methods devised to suit meet the foregoing requirements led to the conclusions tlio requirements of industrialized countries and it is described below. nut easy to adapt them to the requirements of develop- Staff for administration, personnel and accounts ing countries, of which Iraq is one. could be drawn from colleges and institutes such as Nevertheless, the Ministry of Industry is at present the schools of commerce, economics and political implementing a number of industrial projects which science, management and accountancy schools in Iraq, require a comparatively large number of technicians, or recruited among graduates of similar foreign skilled and semi-skilled workers. As workers in that schools. It was evident, however, that such graduates category are not available in sufficient numbers in Iraq, needed further training in certain specialized areas of the Ministry has taken several steps to till the gap. The industry such as production management and cost Ministry's activities in this field are sumiiarized Mow. accounting. The Industrial Management Development Centre established in Baghdad with the assistance of TRAINING OF INDUSTRIAL MANPOWER the United Nations undertook to provide tlie required additional training. Tlie department concerned decided The training of the manpower required for industrial also to make use of scholarships awarded for those projects has received considerable attention from the purposes by sister and friendly nations. responsible authorities. Technical and managerial staff, heads of units and Activity in the field of manpower training dates back socialists could be drawn from the higher engineering to the time when vocational and industrial schools institutes in Iraq, and recruited among electrical and began to attract attention, i'roframmes of manpower mechanical engineers, chemists, etc. training thus preceded economic planning. Such It was found that the existing vocational and tech- programmes may be divided into two groups. The first nical schools in Iraq were not able to supply a sufficient provides, inter alia, for the establishment of industrial number of foremen to operate the government factories. and vocational schools ; the second for various training That deficiency necessitated the expansion of the courses, especially those designed to meet the require- capacity of those schools and the use of training ments of a particular industrial project. opportunities abroad. However, it was found that the existing vocational As the skilled and semi skilled workers needed schools did not meet the growing needs of industry, as constituted more than 50 per cent of total manpower their graduates were attracted to other vocations. requirements, it was found necessary to establish special vocational training centres in Iraq to offer the required MANPOWER TRAINING DEPARTMENT training courses. Contracts for tlie establishment of such centres have been signed and construction work is A manpower department was established under the under way. Directorate of Industrial Planning to study the man- The objectives and purposes of the centres may be power requirements of Iraqi industry at different levels. summarized as follows : Ine principal aim of the department is to train the Trepare and train skilled and semi-skilled factory technical staff needed for the operation of industrial projects undertaken by the Ministry of Industry workers ; within the framework of approved industrialisation Raise the vocational standard of semi-skilled workers programmes. The department conducted a general engaged at present in public and private factories, manpower survey ; assessed the shortage in technicians and occupations; and estimated the need for skilled labour, and defined Hold special training courses for skilled workers and t! c sources of industrial manpower and the balance technicians in the public and private scct.ws in order between supply and demand. to increase their experience, upgrade their skills, acquaint them with the latest technical developments The survey revealed that the total number of in their field of specialization and train as many workers needed for government projects was 18,3tj0, technicians as possible ; distributed as follows: Continue supplying the factories and workshop* with Ai'.mmittration, pertonwl and accounts 7« 10 to 15 per cent of their total skilled labour force Technical ana rial staff, to replace those that resign or are forced to leave ip«ri«li*t» Foremen 7« their jobs; Skilled worker i im Concentrate on the practical aspects of training

hi Hawaii i«

An indvstrhl estate may be it a piece of •mail parcels, each of which is reserved for the estab- land embracing a group of factories1 provided with all lishment of a specific factory. the necessary public utilities The land is divieta into Kuwait's experience in the establishment of indus- trial estates dates from t r*52, with the now of wealth from the exploitation of ks oil resources. The approvai '• Payer »ceMttd ay the Kuwait Chawirr el CM»mrct Inoaatry of the project aiming at organtaing the city of Kuwait .12 iiMiuntri») development in the Arab «Mutrie» was the- first >t»]> taken in th.it direction. The organ- carry out preliminary studies, lav down plans, estimate, ization plan of the city ami its suburbs included three expenses and choose a suitable location. An area located such areas : an industrial estate within the limits of on the Arab Gulf, 50 kilometres south of the city of tin city ; an industrial estate in each suburb (those Kuwait, near the village of Shuaiba, was selected. vere abolished later», and an industrial estate near the The project is divided into two main part.: public seaport know n as the Shtiwaikh industrial estate utilities and industrial projects. The authorities then formulated plans for the organ- 'Hie committee has -tarted work on some public ization ot villages and suburbs Kadi of those projects utility projects, including the provision of raw included an industrial estate to serve the respective materials, |Kivver, traiis|x>rt and shipping facilities, in- area. ternal roads, drainage systtms, housing accommodations, Despite the facilities offered hv the (iovernnient in medical units, etc. The remaining projects are still at the form of nominal rents and long-term leases ( fifty the study or planning stage or ready for tenders. years», the demand for parcels in the Shuwaikh and Some details regarding public utility projects appear Interior industrial estates was at first limited. However. lielow with the implementation of the improvement plan (the most important as|>eets of which were the private and J-.lct hi< -power station public building operations) the inaii|Miwer needed for llii^ project consists of three units with a capacity those works liegan to How into the country. Imports of 70 M\V each, or a total of 210 M\\ . Work on the ol building materials and consumers (foods increased project started in June \'X>.\, and the lirst unit was considerably as a result of the steady increase in popu- coinmissioned on 1 April i'X>5. The other two units lation occasioned by the ¡nflu\ of immigrants. Thus, are exacted to go into o|>eratioii sbortlv. The cost of demand for parcels in the industrial estates tiegan to the project is estimated at KD ') million. The source of mount energy for the operation of the generator is natural gas In addition, the increasing number of immigrants and from the liurgan oil held. the rise in the standard of living which acconi]>anied Il'n/ic distillation pro irci the development of the country markedly increased the Work on this project started in July l'XVI and was consumption of fresh foods, vegetables, fruits and dairv ( products which had to be inuiorted in large quantities. completed in \ugtist 1 *>5 at a cost of Kl) 1.5 million. 'I hat necessitated the establishment of cold storage The project has a capacity of .Í million gallons |ier day. hon.ies in the industrial estates. The source of energy for the o|>eration <(f the project is natural gas from the Hurgan oil field Skilled man|M)wer in Kuwait is virtually non-ex- istent, chiefly on account of the imbalance between the Inttikt s tij eoo/ini/ water iiumliers and growth rate of the indigenous j>opulation Work on this project started in September 1(*>4 and and the rate of development, and krause existing tech- was completed towards the end of l'*i5. The project nical services and industries are of very recent origin, can draw up to 20 million gallons of sea-water per namely, 1''52. liour, 12 million for the electric |>ower and distillation The inability of the Kuwaitis to handle the various plants and the remaining H million tor IN' by indus- technical ojierations that developed in Kuwait, and the trial projects fact that industrial estates might not l>e leased to non- A project for a pumping station is still at the tender- Kuwaitis, restricted Kuwaiti investment to storage ing stage. ojjeratiDiis. Other o|>e rations directly handled by Kuwaitis remained on a small scale (*n a broader siale, < )ther utilities are: the Slmaiki seaport ; an oil jetty, such activities were carried out either through actual roads and drainage system; gas (used as energy ûtr partnership with Kuwaitis, in which case the citizen power plants and as a raw material for tlte manufac- provided the ca|(ital and the immigrant undertook the ture of chemical fertilizers and other industrial pro- work of management, or through a nominal partnership ducts) ; street lighting (the project is still tiiuler study ; with a mm-Kuwaiti, in which case the official transac- estimated cost is Kl) 70,UU0>; a housing project (stu- tions were carrier! out in the nam* of the Kuwaiti while dies are under way for a jdoject ktween eastern tli« financing ami management were undertaken by the \hinadi and Kahahil, accommodating some 10,000 non-Kuwaiti Inder such arrangements, the Kuwaiti in |>ersoiis, at an estimated cost of Kl) 5 million) ; an in- wliose name the parcel was rented would receive one dustrial clinic and medical centre : to tie located within months income, or a percentage of the profits That the industrial estate (the project is still umler study; of course constituted a violation of tlie leasing regula- estimated cost is Kl) 1.10,000). tions, under which sut (leasing was forbidden. Industries to which parcels have l(een allotted in the On 14 May ll*>4, a < lev ree was issued by the Amir Shuaiba Industrial I state are: The Kuwaiti Chemical of Kuwait a|»poiiiting a committee to su|»ervise tlie Fertilizer Co., which has commenced work on a factory S hua iba industrial estate project The committee con for tlie production of ammonia at the rate of 400 tons Mated of eight members under the chairmanship of the l>er day , the ammonia will lie converted into urea ami Minister of Finance and Industry or his re|jresentative ammonium sulphate at the average rate of 160.000 ton« The decree deli tied the functions of the committee a« of area and IfiO.OOO t»ms of ammonium sulphate per follows to provide incentives, land ami encouragement year, the area allotted to the comjwny is 1(<6,100 square lor the desired establishment of lieavy industry in metres, and the Kuwait National Petroleum Company ; Kuwait The committee was to exercise its activities the area allotted to the company is .U.V500 square independently of the institutions of the State, hut in metres, but construction has not yet commenced. eo operation with at) government departments under the Industrial estates in Kuwait have lieen established laws and regulations in force In line with it» objectives, as a result of tlie economic progress which has the committee called upon the services of experts to aceomiiapied tlie ex|4ottatk;n of oil resources. At first, PriHrrcMi ••*' arvMems n the estate* were used ;is means of encouraging various intent and meaning of the industrial estate. More activities, such as commereiai activities and services. recently, parcels of land have l>cen given only for the At that time, the industrial estate was taken to mean purpose of establishing industrial activities. Committees an area of economic activity However, the development have been formed to reconsider the distribution of ..»' the economic structure of the country and the desire pared-, and the activities exercised bv their owners to establish a prosjierous industrial sector and to with a view to restricting industrial estates to indus- diversify the sources of national income, changed the trial activities.

The l>ehane»e experience in industrial research and Murile» and provision of baule technological services for industrial development'7

The basic characteristic of the libanese economy is and semi-skilled vocations (industry, services, trade the free enterprise system, in which the major etc.) as they become redundant in agriculture; initiative is taken by private entrq>reneurs. with To develop skilled man|>ower for the traile sector and government assuming only a supporting role. the managerial side of industrv (sales, cost accounting (ioverniiient action has concentrated on the provision etc.) ; of basic facilities and the creation and maintenance of To develop and improve skills on a large scale for an atmosphere favourable to growth and expansion. tourism ; The (iovernment, in co-operation with the private To upgrade the skills of "exportable" manpower. sector or alone, has also tstablished a numlter of institu- tion* basic to industrial oevelopment, among which the These needs were quantified by the directorate for following are related to the subject of this paper and vocational and technical education, and a broad will, therefore, lie treated at some length: programme related to the national needs was for mutated. The effort which the libanese (iovernment A gener;il directorate for vocational and technical is undertaking aims at increased capacity, wider "ducanoti, with a main training centre at Btirut and geographical coverage and vertical development in the four others in the principal town» and cities; a hotel scope of training. school and si nue thirteen apprenticeship training centres which are in the process of being established; Kxisting vocational training facilities in f-ehanon furtheiniorc. an accelerated training centre has been include the following: live technical training scliools estaMished by the Ministry of Social Affairs ami a (Heirut. Dair el Kamar Saida, Zahle, Tri|«>li) and regional civil aviation safety training centre by the seven new schools which are under construction; the Ministry of Public Works, with the help of the l/nitcd hotel school in Beirut; the civil aviation school at Nations ; Beirut International Airport ; the teachers' training programme of the directorate for vocational and tech- LIUXOR. the libanese standards institute, devoted nical education and the accelerated training centre con- to the formulation and promotion of the use and ducted by tlie Ministry of Social Affairs. The l'*i.S application of national standards of quality and codes issue of the l'anorama de ¡'Enseignement technique, i if good practice ; published annually bv the directorate for vocational and The industry institute, a research, consulting and technical education, provides the following information: testing organization providing services to government ;md private enterprise alike in the field« plied research. *»'«&•* yfaéuat, li

VOCATIONAL TRAINING Beirut Art« ft Métier« m m Dair cl kamar 74 tj Between 40,000 and 50.000 children and youth» leave Sakla 74 14 school in Lebanon each year at the certificat (primary), Tri(K>li Ul 12 brertt (intermediate) or baccaiemmt (high school) Zahk 101 16 Beirut h»t

Technical schools which train assistant engineers in Department of technological services (research, con- a four-year course ; candidates are admitted after sulting and testing): Testing division; Standards obtaining a brevet élémentaire or a breitet technique. division ; Mechanical, electrical and structural en- eventually a technical college graduating Arts et gineering division ; Chemical and process engineering Métiers engineers is to be established. division. A plan is now going forward under which thirteen Department of finance and administrative affairs new apprenticeship schools will be built and equipped (internal). by the end of 1966 at a total cost of about LL 25 From the outset, the institute stressed the regional million. These schools will have a total capacity of aspect of its services. Principal accomplishments in about 4,200 students, are expected to take in about this context include: 1,400 students a year and to graduate about 1,000 Participation as technical consultants in the elaboration students each year. In addition, the present technical of the industrial section of the five-year plan for schools and hotel schools are to be expanded so as tr> economic development of Jordan; graduate 700 students in 1967 instead of the 130 at Organization and project studies for the industrial present. Technical and vocational schools for girls are development fund in Jordan ; also being planned. Allocation of funds for new facilities for the next five years, 1966-1970, is of the Elaboration of the standards programme of Jordan ; order of LL 20 million. Participation in the elalwration of plans for the Aswan industrial research centre in the United Arab It will be evident that the success of the vocational Republic ; training programme described is dependent upon the availability of a sufficient number of teachers. A special Participation in the formulation of a programnje for teacher-training programme has been formulated and is an industrial development service in Saudi Arabia ; bring implemented with the assistance of the United Provision of consultative services for the development Nations Special Fund. The capacity of the programme and expansion of the Kuwait research station ; is 300 teachers, with 75 joining each year. Preparation of work plans and assistance in the organi- zation of the industrial research centre of Iraq ; LIB NOR—the Lebanese standards institute Pioneering work in conducting industrial feasibility LIBNOR (Institut libanais de Normalisation) was studies in the region ; established by law in 1962. Since its inception, Preparation of designs and specifications for industrial LIBNOR has published fourteen standards covering vocational schools (Jordan), laboratories (Iran, different commodities ; it has also drafted three codes Saudi Arabia, Jordan), and industrial projects of good practice on electrical distribution systems, f Kuwait, Jordan). boilers and reinforced concrete in structures and Within Lebanon, the principal accomplishments of buildings, and standards on nineteen different com- the institute have been as follows: modities. Formulating a national standards programme, drafting The present programme of LIBNOR includes the the enabling law and serving as secretariat to the drafting of standards on cotton yarns, wool yarns, libanese standards institute ; cotton cloth, bed-sheets, school uniforms, light bulbs, Formulating standards of quality and codes of good chicken feed, ceramic glazed tiles, liquified petroleum practice ; gas bottles and cast iron manhole covers. In due course. F.stnblishing a central research laboratory for cereals, LI H NOR plans to launch a Lebanese stamp of quality including wheat, flour and bread ; denoting conformity with libanese standards. Pioneering work in the field of inspection and certif- In 1953, realizing the need for basic technological and ication services for Lebanese industrial products; management services for industry, the Lebanese asso- Providing basic engineering services for public utility ciation of industrialists, the Lebanese Government, and projects such as fifty-year projections of the water the United State» point IV programme jointly estab- supply and sewage systems of the Beirut metropolis, lished an industry institute as a Lebanese non-profit and design of vocational schools and grain storage organization with financial and administrative indepen- and handling facilities ; dence. The institute was formally recognized as having a public utility statu in 1955. From the start, the Providing the basic technical and economic elements institute was conceived as a self-supporting organization for rationalizing the attitude of government towards charging for services rendered to both the Government certain industrial sectors or specific industrial and the private sector, an«! operating on a regional problems ; basis. Providing industry with quality and production control and laboratory facilities; The aims and objectives of the institute are to furnish professional services in the field of industrial develop- Providing government and the engineering profession ment, including tet rmo-economk nihility studie», with geotechnkal foundation services, and soils and technical, economic and management Co -tilting, project building materials testing facilities; studies, testing, analysis and standard, and applied Generating interest in the science of management research. through an executive development training program- me culminating in the establishment of a Lebanese The institute is organized into a genera] directorate, management association. two service departments, and one internal department as follows : The industry institute has had considerable exper- ience in the rational use of foreign specialists and Department of economics and management services: technology and has provided guidance in adaptation to Economic divistosi; Management division. local requirements. This includes individual "expert:'J Itogresa and problems S3

.supplied by international development agencies and institutions providing technological and research by foreign government technical co-operation program- services with a maximum of administrative and finan- mes. It nKo includes selective associations with foreign cial autonomy in their operations. Only thus can these consulting or research organizations of high repute in institutions attract the required talents, maintain a various socialized areas. dynamic work atmosphere, and exercise the initiative Lebanese experience confirms the necessity for necessary for success.

6. Standardisation of specifications ami aa+a—resi a necessary «top for the achievement mi indue- trial and economie co-ordination among the Arab Stalea1S

The history of successful industrial development has maritime company, the joint Arab construction com- clearly shown the importance of specifications and pany, the joint Arab company for foreign trade, and measures in the solution of many imj>ortant problems the agreement for the co-ordination of Arab oil policy. such as the attainment of ma^s production, the introduc- These steps culminated in the signing of the economic tion of automation in industrial operations, the provision unity agreement and the agreement relating to the of facilities ensuring specialization and co-operation be- Arab common market. tween institutions and companies, and the improvement Hehind al! efforts made to remove trade barriers and of production in terms of quantity, quality and cost. obstacles and behind every action aimed at the creation This development has contributed to raising the of large markets and the achievement of economic standard of living in the industrially advanced countries. integration, stands the basic factor of standardization. Industrialized countries have, consequently, laid great The standardization of terms, definitions and units of emphasis on specifications and measures. Interest in the measurement, apart from its importance for the ex- subject has now spread to the wider international change of culture and scientific knowledge, plays an sphere, and there is a desire to establish co-operation important role in facilitating trade, for it is impossible on standardization of sj>ecincations and measures on a to conclude commercial transactions unless the terms worldwide basis. A number of important international used are standardized. agencies exist for this purpose: the International Meas- The standardization of technical symbols facilitates uremrnt Confederation; the International F.lectrotech- the understanding of industrial blue prints and designs. nical Organization; the International Organization for Standardization ; the International Organization for The standardization of sampling, testing, and exper- Legal Measures. imentation procedure further facilitates the process of delivery, receipt and arbitration in the exchange of International agencies do not, however, eliminate commodities and products. The standardization of the need for regional agencies bound by political, eco- materials, ingredients and products assists in over- nomic or language ties. Such regional groupings may coming technical harriers and facilitates free movement require to adopt standardization in fields and spheres across frontiers. that are not of sufficient interest to international agencies. It is clear that the Arab countries should co-operate in the establishment of s'l^ng and well co-ordinated Further, when a group of countries are members systems for the standardization of specifications and of a common economic market, it becomes necessary to measures. This will serve as a strong foundation for ' tablidi a common system of specifications and their industrial development and the achievement of measures. Countries join a common market in order economic integration. The co-ordination of specifica- to Ixuefit from the technical advantages that charac- tions and measures will enable the Arab countries to terize a large market, and that derive from large-scale increase production, improve quality, lower costs and production and specialization. This requires standard- facilitate and promote the exchange of commodities and ization of specifications and measures among the services. common market countries. In order to achieve these aims and advantages, the The Arab countries have resorted to industrial co- steps suggested below should be considered. ordination and economic integration in order to streng- First, in the interest» of economic development and then industrial production in each Arab country, and integration in the Arab countries, positive and decisive t" provide optimum conditions for the establishment of steps should be taken immediately to establish national large industries. Industrial co-ordination and economic agencies for the standardization of specifications and integration are the means that will lead to the eco- measures in those countries where such agencies have nomic development of the Arab countries, the raising ne* yet been established. of the standard of living and the transformation of their economies from exporters of raw materials into a Secondly, the most appropriate time to start co- strong economic entity. ordinating and unifying specifications and measures is The 1953 convention concluded among the Arab now. Time should not be allowed to pass during which countries for the purpose of facilitating trade exchange industrial companies and factories may be established and regulating transit trade is considered the starting with diverse procedures and peciftcatiom, thus l'oint in the direction of economic co-operation and making future co-ordination more difficult and costly. integration. Thirdly, the Arab organization ior specifications and This step was followed by the establishment of the measures should constitute the effective toi4 for pro- Arab financial institution for economic development, the ductive work in this field. The Arab Governments and international Arab airline organization, the Arab the Arab league should give this agency every possible encouragement, and should spare no effort to provide '" Paper presented by the Union of A rah Engineer». it with all the physical and technical facilities which iMtaMrUI é»vflepm«wt i* IIM Arai CMUMrtM it will need to enable it to carry out it» functions in the Sixthly, in vk-w of the importance of scientific ami best possible manner. technical training in raising the standard oí efficiency of workers in these new fields, an endeavour should be Fourthly. priority should be given to the standard- made to estal>lish a joint Arab centre to provide izntion of technical terms, symbols and specifications training in all types <>f standardization work, such as relating to manufactured and exj>ort commodities. the preparation, issue and aj>|>lkation of specifications. Fifthly, in view of the limited resources at tlie techiiH'al ins|HCtton. quality supervision and the testing sal of the Aral) countries, it is most important that of measures and measuring instruments. nil facilities 1K> extended to promote co-operation in lastly, the co-ordination of specifications awl this field. An endeavour should be made to co-ordinate measures among tlie Arab countries in no way implies available resources ami utilize them for the lienefit of competing with international agencies or non-pnrtkipn- all the Arab countries. Similar endeavours should be tion in their activities. On the contrary, such co-ordina- made to encourage contacts and tl>e exchange of visits tion will, whenever possible. I>e conducted on the liasis lietween specialists and experts, as this will contrilHite of the recommendations of the international agencies. to tlie finding of appropriate solutions to existing It is also important that tri».- Arab states partkipate proldeniv Seminars and conferences should !*• held more actively in internntktnal activities of this kind to |sriod»c.i!lv, as they contribute greatly to the achieve- ensure that their special circumstances are taken into ment of the aims of standardization. constrieration when recommendatkms are formulated. Part II. DEVELOPMENT OF KEY INDUSTRIES

1. Prwprrt« of prtrorltrmiral drvrlopmrat in In» Ara* emmirWw'

This paper discusses the feasibility i if interregional Arab country may not justify the establishment of a co-operation anioni; the Aral) countries for the estab- (K-trocliemical complex within that country, the Arab lishment of a sound and integrated (»etrocliemical indus- common market otters very attractive opjiortunilies for Irv. Such an industry would not only satisfy the basic profitable petrochemical enterprises. needs of the Arab countries for nitrogen fertilizers. An integrated Arali petrochemical industry, while plasties, synthetic fibres and rulilxr, but would also sell having access to a relatively lati*«- Arab common -onie of those products in world markets at eomi>etitive market, should also seek to sell its products profitably (irires, in world markets. This would increase foreign exchange Some specific characteristic- of the petrochemical earnings of tbe Arab countries and jM-nuit economies of industry are descrilied below. scale. However, the need for a careful selection of the products destined for export must IK- emphasized The industry is highly capital-intensive by reason ol Products with a sufficiently low manufacturing cost to llie technical complexity of the processes and the high coni)M-te in world in ¡rkets are required level of automation and chemical engineering involved. The exjxirt of |K-trochcmical products may U- nego The industry is highly dynamic. Processe* and tiated through long term agreements with < loveriiments products are subject to frequent change. in the developing nations, or by long term commercial Investment in the (letrochcmical industry is not pro- arrangements with organizations that consume such portional to capacity but varies according to a factor products. The exchange of (letrocbemical products ranging between 0.5 and OX For an increment of between the Arab industry and other (»•trncliemical capital investment of from 20-45 |KT cent, output may producing nations or organizations will offer significant IM- trebled depending it|>on the type of product and opjxirtunitics for Arab products in foreign markets. process used. For this reason, it is advantageous to Feasibility studies are required to determine which build large capacity units. products are most attractive as a basis for a |>etro The petrochemical industry, being based on a raw chemical industry Such studies would estimate live material made up of several hydrocarlioiis, and em- size of the total Arab market, with forecasts for future ploying chemical reactions which are not always selec- trends; current price levels and future price trends, tive, products several products simultaneously. To and the ability of (jetrocheniical products to replace achieve economies in o]ieration. these co products mint conventional materials, often ini|>orted. They would also U* processed as intermediates for otlier manu- thus demonstrate how |ietrocnemk\-i! products can facturing operations. Hence integrated (»etrochemkal reduce the endence of Arab industries on im|>orted complexes are to be preferred over separate individual raw materials. plants Such complexes facilitate economies in capital and operating costs through the close proximity of M AN !>OVVr« several related (»etrochemical operations. The Arab petrochemical industry can rely to a large Tlie potential of the Arab countries for petrochemical extent on locally available personnel with exfierience production may be assessed on the basis of the con- in tbe operation and maintenance of petroleum refineries »iderations set out below. and nitrogen fertilizer jdants. Consultants supplying process know-how. ami contractors studying petro- KAW MATERIAL» chemical plants may be requested to arrange training Today most ¡wtrochemicals are derived either from programmes in similar plants abroad Provision should natural gas or from naphtha. The Arab countries be made for training sufficient numbers of students possess about 60 per cent of the world's proven reserves ( with secowlary education ) in existing training centres, of oil and more than two-thirds of the proven natural rerinerte» and other chemical plants Finally, tlie gas reservoirs in the world. assistante of the I'nited Nations Centre for Industrial Kenning capacity in Arab countries, however, is only Development can be sought to provide ex|*rts m 5 (»er cent of the world total. The abundance oí natural sjiecific fields, so that universities and technical insti- gas in North Africa and in the Persian Gulf region tutions in tbe various Arab countries may lie enabled provides the raw material for a chemical industry in to offer courses in petroclieniical technology those areas. In the Suea region, gases or naphtha I NVLSI Mr NI ( OSI s derived from refinery operations may I* used. The scale and technical complexity of (»rorlurtion MAIKET POSSI BILIT1E» make petrochemical plants costly to construct. How The principal aim of a petrochemical industry should ever, owing to the profitable nature of the operation, be to satisfy the present and future needs of the Arab petrochemical |4artt investments Usually achieve a return countries. While the local market within an individual of invested capital within five years 1 It is lielieved that tlie Arab countries are in a F»|*r |»r«*irteperations nnd of imports of tyres and other rubber goods amounts to training staff locally and abroad. $55 million per year. With the implementation of econ- omic development plans and a rise in the standard of I «1ST OF PKTHOCHFMICAt. rHODTCTS living, consumption is expected to increase, rendering the production of synthetic rubber a profitable economic The operating costs of a petrochemical plant in an venture. Arab oil-producing country is compared with those of Acrylic fibres. In 1%2, the Arab countries imported a similar plant in a highly industrialized country are wool in the form of tops, yarn, knitted goods and woven shown below. fabrics valued at about $50 million. Acrylic fibres are Capital charges, including depreciation and interest a satisfactory substitute for wool and in abrasion (if any) are higher in the case of the Arab plant resistance and resilience may be preferable to wool. ImjM)rte(| catalysts and chemicals are more costly in an They are suitable for Mankcts and carpets. The basic Arab country owing to shipping and insurance charges. raw material is acrylonitrile, which is produced from Long-term advisory services from expatriate specialists propylene and ammonia. may be necessary in an Arab country. The use of Two other petrochemical products are caprolactam natural gas or naphtha as a raw material and fuel tends and carbon black. to lower the production cost in an Arab plant. Urge- The above examples, while not representing all the scale operation permits a reduction in unit costs for petrochemical products needed by the Arab common labour and capital, thereby placing large units con- market, would form the basis for an integrated kiihutrj structed in an Arab country at an advantage. However, while Mich reduction in production costs i« SF.CONDASY INDUST1IES significant in respei' of basic intermediates such as ethylene and ammonia, it is less so in the case of sub- The development of an integrated Arab petrochemical sequent petrochemical operations. Maintenance costs in industry should be accompanied by the establishment the Arab plant are lower once the necessary skills have of secondary industries to process the various petro- been acquired, owing to lower wage rates. However, chemical products and convert them into finished con- lack of sufficient training during the early years of sumer goods. These secondary industries, which are operation may result in slightlv higher maintenance not as complex or as capital-intensive as the petro- coats. chemical industry, provide opportunities for private enterprise. The public sector can also co-operate with î!ULp2V*le,.fecîor " *"••"•* *** industries, h is PrTKoriir.MicAL PRODUCTS THAT com» rot M THE most desirable, however, that such plants be conti w tod FOUNDATION FOt AN INTtGHATKD INDUSTIT as soon as possible on the basis of a fun! aim«, Nitrogen fertilisers starting operations with imported petrecnctsicakla this manner a market for the end products cosjsj be The arable land area in the Arab world is »boot developed which would be capable of absorbing the 113 millirn hectares excluding forests (95 million) and production of the Arab petrochemical industry M asen pasture (15 million). If a conservative figure of 10 kg as it became available. of nitrogen per liectare is taken as the probable average consumption for Arab countries in 1**70, then a produc- SrprTjsrriNo ACTIVITIES tion of 1.1 J million t.jns of nitrogen would be required In planning an integrated petrochemical industry it Even with existing and projected capacity, a cut can would be necessary to establish on a regional scale the be made for the construction of one or more large-size following agencies and institutions, perhsM in the svntlietic ammonia plants of 1,000 tons per (by capacity order given ; '" Such units vmild produce ammonia much more cheaply than it has ever been produced in any Arab country. An agency to conduct feasibility studies for the prodnc I he ammonia would 1* converted to urea, ammonium tKwi of petrochemical intermediates and their end sulphate or ammonium nitrate as required for Arab peoducti and local and internationaJ market research commewi market requirements such an agency would seek the assistance of petent firms in the advanced industrial ml toy

A technological research centre for the study of the chemical units with capacities large enough to he com possible »plications of plasties, synthetic rubber ami petitive with tlie highlv industrialized countries fibres produced by the petrochemical industry, with Secondly, the'e is definite scope for regional m particular emphasis on tlie possibility oí substituting opération among the \rah countries in the development those product!) íur traditional one- oí an Éiitejji.iteil p«tii*litniii-il industry Tin . Ivnntage. of economies of siile nlit.uiwd in this industry neces \ training centre for petrochemical operators and sitate the pooling of Arab efforts in large production maintenance personnel, units Such a scheme would also eliminate the risk i-f A research institute concerned with ;.pplied research duplication and the develoijment of new processes and products Thirdly, the large reserves of gas and sin plus naphtha in the petrochemical field; it is essential that Arali available at relatively low cost provnle an economic engineers and chemists be trained in that field and production base for the Ai h con m inn tunket, and for that th* skills thus developed he utilized for further entry with certain products into tin international development ; market \n organization for marketing the product- m inter It is impoitant to realize that die petrochemical national nwrkets. industry generate- further industrialization through the consumer product» introduced. It is lielieved that the A number of conclusions arise, from the foregoing integration of the chemical and petrochemical industries discussion, which deserve serious c< >n side ration on a regional scale represents the only solution that will First, no Arab country has a level of consumption satisfy the economic and social objectives of the Arab high enough to warrant the establishment of petro countries

2. Iknlifnt of

The flaring of tremendous quantities of natural gas. Iran produced together with crude oil in the petroleum The Shiraz nitrogenous fertilizer plant is situated m producing countries of the Middle Fast *nd North the southern part of Irriti and utilizes natural gas from Africa, nus always been of major concern not only to n;.ch Sarin oil field Annual capacity of the |4ant is those countries but also to various internatkmril agen 40,000 metric tons of ammonium nitrate ami 40,000 cies. including the United Natkms. Ways and means tons of urea, together with 1 Wi tons |*-r dav of nitric are being sought to utiliw this surplus gas economically, acid. Hans for tlie expansion of the plant are already either as a source of energy or as a raw material m tlie in progress. |)etrochem»cal industry. For tlie member countries of In l(*nC a general survey of the possibilities of estab OPEC, as well as for non niember petndettrn-producmg lishing a petrochemical industry in Iran was carried Arab countries, this problem is a matter of urgency. out by the National Iranian Oil Company (NloC) and Unfortunately, little progress has so far been mnde the Institut français du Pétrole The report rerum towards a practical solution. TI* difficulties are great mended the establishment of a petrochemical complex but not insurmountable. Tlie purpose of this paper is of sufficient capacity to meet internal demands by 1070 to contribute towards an understanding of the nature In accordance with the recommendations made by the of the prf>blem and a realistic solution. institute, the following chemicals are to he produced: A survey is given of the status of the petrochemical 10.000 tons per vear of I'VC and 2.000 tons per year industry in the region under consideration, including of polystyrene: 3,200 tons |*r year of alkylate deter proposed future developments. An appraisal is made of gent; 1,300 tons per year SBK and n.500 tons per year the present and future markets for petrocliemksJ indus of polybutadiene and 5,000 tons per year of caprulactam try products. to be used in the manufacture of nyk*i The complex is to include the following units: a F'ETMKMEMICAL »U»YEY OT OPEC COI'MTIIES AHB propane cracker producing 7,000 tons per year of NOM MEMI** AlA» COUMTEIEt ethylene and 3,500 tons per year of propylene ; a aalt- Imdontst* electrolysis unit producing 14,000 tons per year of chlorine and 13,500 ton» per year of caustic seda; a TW P. N. Pupa* Sriwidjaja nitrogenous fertiliser butadiene unit producing 15,500 tons per year of buta plant recently completed by the Government is mm in diene, and a bentene extraction unit of 12,400 ton» operation. It produces 30,000 tons per year of ammonia per year by steam cracking of naturai gas. The ammonta is An equal partnership between the National Petro utilised to produce 100,000 tons/year of urea. chemical Company of Iran, a subsidiary of NUM., Another nitrogenous fertiliser plant is planned tn ami the Allied Cliemical Corporation was recently Surabaja, East Java. Initially it will produce ammo- announced to establish a major petrochemical complex nium j Iphale and urea at an annual rate of 150,000 in the Bandar Mushur ar

Irmq Kaciltties are to include a i5 tons per day sulphur plant At present no (letrochemHal plants .irr HI operation I be company is to be responsible for marketing the m lra<| However, a plant for recovering sulphur from production and for the operation ,4 the |>lant. In return, knrkuk natural gas is und« r c. instruction The plant is the company will receive 10 per cent of net profits for »o extract 120.0(10 tor of sulphur annuattv from 100 twenty years after commencement of production. The million culm- feet dav of Kirkuk ga,. after which tli«- plant will U- supplied with natural gas from the Ahriaio sweet dry gas and natural gasoline, together with the field FH|nened petroleum gas. are to lie piped separately in kecemh. another agreement was signed between two pipelines to the Haghdad area \ large part oí the I'LTkOMIX and the I-AT subsidiary AMC for a sulphur recovered is to h, transmuted to the southern feasibility study for a joint gas Iwsed' I'VC plant at

fmrt of the country to MI(1,IV the fertilizer plant which Hammam The proposed plant will have an annual will he constructed in the Hasrah area caiNK-ttv of f ,0,000 tons of I'VC AMC is to purchase A project for a large scale |*-tro chemical plant based the entire output for fifteen years on natural gas lias been approved hv tl)e K.conomic Harming I Joan I The firm of C I Mratin ami Co. of / 'nitcrf . frffA krpHhUc (ahfornta. I mtcd States, has Urn engaged as orni The I nited Arab Republic is the largest producer sultnnts for the project It will mclwle units for the of petrochemicals in the region [n l<*>4. its production production of caustic soda, chlorine, ethylene |MI1\ of chtmuals was as follows sulfuric acid. 180,000 ethylcnc and p\( The plant is to utilize natural gas tons, calcium nitrate. 255.000 tons, ammonium sul from th< southern oil held of Kumailah libate. (i2.000 tons; nitric and 112.000 tons acetylene. \nother petrochemical project for a gas hased nitro ' 4S0OO cubie metres gênons fertilizer plant at liasrah i, also planned A I'rtor to the tue year industrial plan, the only petro Japanese consulting firm is preparing the studies and clieiiiical industry m the country was the nitrogenous the tender sjiecitìcaiions. The plant will utilize natural fertilizer plant in Suez utilizing Suez refinery gases gas from the Kumailah held, where ¡i pipeline already from which alxHtt 7.000 V»u i.er year (4 sulphur is exists and is at present feeding gas to the Basrah also recovered The mam products' of that plant are |iower station Initial capacity of the plant is 120.00!) calcium nitrate and ammonium sulphate Plans for tons of ammoiiium sulphate and *0,f)00 tons of mea doubling the capacity to 270,(100 tons j«-r year are in per annum progress K Misait The fuel oil coking plant recently rompieted by the Italian^ firm, ( ompaiua Tecnica d'i Industria Petroli In l'*>4, the kmva.t Chemical hertiliier Company U IIP), produces intermediate distillates from heavy (owmrship 00 |>er ce.it Kuwait Petrochemical Indus' Ualawm on shore crude In addition. n.OOO tons per tries anrodnction of poly- IIowfvrr Standard (hi Company of New |ersey, one ethylene. P\C. acrylon.trile. rnprnlacttim. and noly- of the mam producers of ¡.etroleiini in the country, has buiadiei'ie signed agreements to supply both Spain ami Italy with A rarlion black plant with a capnettv of 5.000 tons Libyan Ikjuiried natural gas, and a liquefaction plant |«r year is also brinç f isidered w* IV Krtis-riHtnl. The Coyernnient (4 Libya is mm ((r rmmidrrWig tlie cstaMishment of a petriiehemical com- S'vrw plex bused mainly .HI natural g.ts, ;,IKì has invite«! a number of ti mis and institutes to prepare the pre- I he HfMiis refinery went into operation in 19J9 liminary stud». The Institut fraudais .hi Pétrole has pTH>r to which no petrolettm industry had existed in sulmutted sudi a sind' to the Libyan < >overnment for the country However, studies have been coenpleted on < oflsideratwo the estaMishment of ;i nkrofrenou.s fertiliier plant at .loins, ut'li/ing rehnery gases and Snam Progetti of Stìnti' I ru I'm will I* 150,000 ions Kr year of ammonium nitrate While im i M-t i oc hern*".. I industry exist.» at present m mmiestH- consurnptMm at present is 100,000 km prr S audi Arabia. « onsHleral4e progres, has fieen made v ear »^ yyuli planning an.l negotiations \ contrai t his Urn sigimi hrtweeti Saudi \rab«ts Algeria M..»c ml ayincv. PI Tk<>\ll\ on the ,«* hand. and the ( K« ,d. nt.il I'ctriiletmi ( orjioralN« and its .«uh \ iirtnirliemiral itKlustry has mrf yet been established m the country However, the Sorirté des Monomars ii.il (>re ami Kertibztrs. IMI the other. ; SM.tlM-se .»rgamzed by II I'aso Natura! Cas Company. »»» «am ...it a feasibility study lor the cotisfrttctKwi of , iHl ton- ¡in .|.a\ ininxmia iilamt near Ihnmmi ^ \ Kep«l an«! the SSM--¿té Nationale des Pétroles d Vitame iSNi'A,. ,s planning a .50.000 tons per \ear butadiene plant ut Arzew, where the gas lique long term basis, offset the higher capital costs of taction plant is situated. providing plant and equipment in this area A nitrogenous fertilizer plant to produce 87,000 tons lite foregoing survey has shown that, while the per ve.tr of ammonia, 20,000 tons jier year of ammonium |*-tnx-hcriiical indiistix is as \el at an eatlv stage of nitrate and 10,1X1) tons per year of urea is lieing linilt development in the ana, it holds a promising future bv the Société algérienne de 1' \zote \\ hile o|ierati(Hi at a profit inav not be achieved in the early stages, the goal of conservation of natural Tunisia resources through the utilisation of natural gas, which is at present wasted and unrecovi i"ible. will have been A nitrogenous fertilizer plant to produce 1't) tons achtev ed |Hr day of amnionia from whieh 200.0(H) tons per year of ammonium phosphate are to 1** produced is to lie In order to ensure the most logical and practical linilt hy the Industries chimiques maghrébines (KM) future development of the pctrnrht mical mdustrv in the near (labes. This plant is to 1M- engineered and linilt Ol'l'I area and the \rah countries of the region, it is hv CT II* of Rome our opinion that a |>ctrochemical ]H>licv should he develojied as an integral part of the general |»olk'\ of 'I he major obstad» to the establishment of i>etro mdustriali/ation of the Arab region To tint end. it is chemical industries in tlie Ol'l•'(' area a-, well as in lion pro|Mised that the Arab league, as a mailer of urgency mcnilier Aral countries of the region is the problem of establish a |Kincl of seicntists and technical socialists M curing sufficientiv large markets Domestic markets to make broad recommendations iov einig the successive are limited and cannot absorb the production of large • lages of developmt'it nere-san foi the establishment complexes having the advantage of eioni miles of seule of a |ietrochcmical mdustrv on i sound hasts An appraisal of present and future markets has shown This paper is submitted to the ( onference as a con that the logical markets for a Middle Kast-based petro- trilnitloii to an understanding of the nature of the chemical complex would IK- the markets of Asia and the difficulties and problems involved and in otdcr to |>oiiit Kar Käst, Notili Africa and the markets in the conn the way to a |»ositive and realistic approach to tlieir tries (»ordering the Mediterranean ami eastern Atlantic solution The recommendations set out riekow are Petrochemical projects, wlieu aimed at the manu presented to the ( onfereiice for its discussion and facture of intermediates such as synthetic ammonia, consideration could i (implement industrialization programmes of the Regional demands should lie pooleil in order to take consuming countries. The manufacture of linislied advantage or the economies of scale which can be products, in addition to lieing highly capital intensiva, achieved in this mdustrv Sm h act Hin inav provide an would conflict with existing interests in the very economic production base for eiitrv into the inter markets on which such a venture would have to relv national market for most of its outlets ( o ordination of petrochemical planniiig in the conn Market research has shown that, by 1'WO the world 11 les of the region is required to avoid duplication of will require 70 million tons of fertilizer, compared with small plants It would I« advantageous, t- 1'*fiU. The needs of developing plants that are complementarv to each other m order countries alone will increase fnun 4 to M.) million tons to avoid destructive coni|ie1itioii m the limited available during the same |ieriod, thus exceeding the total world ma'kets output in ]«>3'M%0. ( o ordination of petrochemical planning should aim Tli« share of nitrogenous fertilizers in these require- at an even distnlmtloii of the Inani h« s of tin- mdustrv ments! will range lietween 14 and 25 million tons (nitro so that each country can serialize m a certain branch gen equivalent i in developing countrn s and the world ind establish a sumcieiitlv large siale of oiMT.ittou as a whole, with sulphates and nitrates of ammonia constituting over 3<) per cent of tlie total Obviously, l.fforts should In- coin erteil towaids the promotion therefore, there are market prospects in the manufacture and encouragement of smaller industiKs based on petro- of ammonia is an intermediate jiroduct cliemical intermediates, in oriler to utilize locally tlie niaximnin aiiKiuut of these intern lediate products Feasibility studies for an ammonia plant built in the Mi, while tlie cost of materials should lie studied, this being of special manufacturing the same product i.i Indù' from naphtha importance in countries i>f the region having relative w uJd be $04.74 Similar studies for a plant liased in scarcity in alternative materials and products such as North Africa have shown tliat one ton of ammonia building materials, trans](urtatimi or pi|ies for irrigation la.ided in western Kurope will cost $2f>.2f>. compared Should the feasibility of tictrocliemical prorturt* lie with $31.70 manufactured in that area established, additional measures may be required to promote consumption, and for the rlevelofxnent and These figures show tlie economic feasibility of adaptation of these products to new purjioses building ammonia plants in the M KWile Kast ami North Africa, provided the Middle Kast has access to the Full use should lie made of the 1 lilted Nations tech markets of Asia, and North Africa has access to nical assistance programme and the special Fund in Kiiropcan and Mediterranean markets, and provided estaUlshiug technual institutes to carry out research in that there is no discrimination against pr<>ducts from the uses of products, pre investment and feasibility those areas studies for tlie implementation of petrot hertiK'al projects and market research, as well as to train technicians. live economic justification for establishing |>etro- chemical industries in this region are based on the Markets within the economically advanced countries following considerations availability of natural gas at such as those of Western Kurofie may lie sought How- low lost as a raw material and fuel ; low labour and ever, the progress of western Kurope towards economic maintenance costs and low cost of utilities by reason of integration constitutes an adverse factor to new entrants cheap and plentiful fuel. These advantages will, on a from outside the region. Securing a market in tliat lafwalrial éavv I to Ik* Arab waatrs—

region may he envisaged through multilateral or bi- new entrants to enter the market require! considerable lateral trade agreements effort in securing ami promoting markets, including Markets outside the economically advanced countries international trade agreements and strong financial may also be sought, for instance, nitrogenous fertilizer» Kicking. Joint ventures Ut ween producing countries of may he exported to the countries of Asia In that con the region and established (»ctrochemieal concerns will nexiou. trade agreements may lie developed l)etween undoubtedly provide a s,,'tition to many problem», |**ential exporters from the Middle last and a number including the siippl> of ev¡>erieii< ed personnel for the of countries of Asia transitional period, training of local labour, technical know how and research, experience in marketing tech- TI* internati«mal market in petrochemicals is in the niques and, above all, possible access to the international hands of a small number of very large companies. For market

retr»eh«it.»fa. « practical Marl la ta* iNrmlaa a« Ara» lw ¿«atrial ra aarratlaa •

This paper does not aim at discussing economic of that industry The facts set out below support the (»operation in general. Rather, it will concentrate on \ iew that the establishment of a petrochemk-alindttstry one of its aspects, namely, co-operation in the held of m Kuwait can serve ^ i starting |w«nt for further Arab petrochemicals Before entering into a discussion of the (o-ojieration subject, however, it may be useful to give a brief summary oí the mam factors necessitating industrial On the one hand. Kuwait is endowed with a cheap cu i»)«ration in the Arab world. source of natura! gas and with substantial financial resources ( Hi the other hand, it suffers from a scarcity Modern developments in science and technology have of manpower and ;> limited market Considering those facilitated the estaldishment of large factories which advantages and disadvantages, one is Isnind to conclude benefit greatly from economies of scale The division that it is possible and desirable to establish the first of the Arab world into a number of small markets stage of a petrocliemical industry in Kuwait Its inter- militates against the establishment in any one country mediate products will acquire an international character oí large plants This situation in itself calls for economic that will greatlv facilitate their marketing in external cooperation between the Arab countries. Such ro market,. This will not lie tlie case if Kuwait concen- operation will undoubtedly expand tlie market and trates on tlie production of fully processed goods Liquid therefore encourage the establishment of large and .immotila and nictliynoj are examples of commodkies protitalJe plants capable of producing goods whose which Kuwait i an produce at louer cost than any etiler quality and prices will enable them to compete in country in the world. domestic and external markets. These factors have led the Kuwaiti authorities to The Arab countries are at present in the early stages establish a fertilizer complex, which will start operati«* of industrialization It is easier for them to co-ordinate in the coming month. The complex consists of aa their industrial programmes at tlie current stage than ammonia factory with a capacity of 400 tons per day it will lie at a more advanced stage to lie used for the manufacture of 5.V) tons per day of It is not nei.ssarily (k-nable for any one country to ure i and 500 tons |>er day of ammonium sulphate. concentrate on the development of all stages of an fertilizers, of course, have a world-wide market industry, sime situations might arise where it might be Nevertheless, Kuwait can derive grt iter economic advisable for more than one country to «ievelop different benefits from confining its activity in the field of petro- stages of the same industry. chemicaJs to the production of liquid ammonia This is Shortage (A capital in the Arab world as a whole desirable as a step in tlie direction of Arab industrial requires that investment capital should be carefully « »-operation. Substantial profits can he derived from allocated It is tlierefore important that measures should the establishment «if a very large factory for the produc- I* taken to jtrevent the duplication of industries tion of liquid ammonia with a rapacity of 1,000 or 2000 urns per day The output of this plant wiH then' be Industrial co-ordination opens up new possibilities tor exported to complementary plants in different parts of economie co-operati««, ft is a well-known fact that the the Arab world, to be used in the produrli«! of emergence of ti« European Common Market was hut fertilizers. an extension of the European Coal and Steel Com- This plan will have the advantage of providm* munity Similarly, for the Arab world, the establishment Kuwait with an expanding Arab market for its ammonia of the hydrocarbon industry may serve as a basis for output and at the same time supplying the Arab cfoaer economic co-operation. S*.!- i!? \ •p sourc* °* *&* «"M"»- Projects Specifically let us take petrochemicals as an example ot this kind are now under study in Kuwait sad the and consider Kuwait as a centre for tlie development L mted Arab Republic. Kuwait is also study«« the possibility of »mular co operata» with noa-Arabcouu- * Paper presented by K«w»it tries, such as India.

•rajaras M Iraq«

Basic raw materials such as oil, natural gas and sodium chloride are available in Iraq in quantities suffi- Until recenti), natural gas was flared by the oil com- cient for the establishment of a petrochemical complex. panies. The (government finally put an end to the loss uíü »tiní ï reSOUrCe ** P•**"? "**»» for its utilisation. A programme was prepared for the construe- * Paper presented by the Ministry of Industry of Iraq t»on of , „din. through wWTga. was to Twin À Unnlfnsst ti hmt «

• lectric generating stations and other industrial projects, The site selected for the plant is m Ahi Khaseeh m be used as fuel International firm* were also re regniti, in the hum of Basra, owing to its proximity to • piestcd to make studies on the utilization of natural the source of supply of natural gas. gas in local industries The results were encouraging lite factory will be supplied with ' million culuc feet nid proved that the establishment of several industrial oí gas per day, to be used as a raw material and fuel projects using natura! gas as a raw material were both Natural gas i-, used in tin- manufacture of ammonia by technically and economical!) feasible. Some r»f these the action of hydrogen, an ingredient of natural gas, projects have been included in the recent five-year and nitrogen. 1 he plant consists ot four inaili produc plan; others will lie included in future five year plans. tion units an ammonia unit with a produ» tive Capacity In the earl> stages, the Ministry of Industry will be of ¿00 tons per day , a urea unit with a productive responsible for the major projects which constitute the capacity of 150 tons per day, an ammonium sulphide nucleus of the petrochemical industry in Iraq. A brief unit with a productive capacity of 4(K) tons jier day, desciiption of these projects follows and a sulphuric acid unit with a productive capacity of 300 tons per day I'xrtsiTloN OF SlI.I'Hf* flou MMUBAI. CAS It is expected that the major part of the ammonium suljihide produced will t>e con Mimed locally and the This project i-. basic to the cstaldishment of petro- surplus exported In view of the great demand for urea ilienncal industries which relv on natural gris as a raw in world markets and its high pine, most of the urea material Natural gas in the Kirkuk nil field* is sour produced will be exported. ami contains a high ratio of hvdrogen sulphide, ranging between 10 and 14 per cent Technical and economic studies, uniti ate considerable promise for this project, for the following reasons: The site for the project was selected near Kirkuk, the source of natural gas, and a pipeline will be con- U>w cost of natural gas as a raw material and as a structed to convey gas to the site of production. fuel, since natural gas is close to the factory and used at a cost of 14 tils per 1,000 cubic feet; this is very ( )n .11 January V*>5, a contract for the estaMishment low compared with prices in other countries; oí a plant to produce sulphur was signed with an \meiH in company at a cost of II) H.2 million, exclusive Abundance of labour at low cost. of the cost of infrastructure projects such as water Proximity of the factory to the |M.it reducing trans supply, electric supply, gas pipeline, railway and ronds. portatton costs, the total cost of which is estimated at ID '* 5 million .\\ail.ibility of sulphur locally I lie company has undertaken to complete the project In addition to the economic benefits to lie derived within a maximum period of twenty-eight month«. The from this project, the use of fertilizers will he beneficial factory is planned to process H4 million cubic feet of to agricultural pr luction Moreover the plant will sour gas daily for the production of 400 few»» of pure provale employment for I,(XX) workers and technicians ulphur (CW .5* prr cent) per day; 45 million cubic feet of pure gas \wr day, and 2.1,000 gallon« of liquid gas l'I \STICS !>er day Availability of raw materials at low cost constitutes Although sulphur is considered a hv product, the the main requirement for the succt ss of this industry jiiantities extracted are substantial and are estimate«! at some 120.000 tons per annum. This in itself represents \atural gas, the principal raw material used in the manufacture of plastics is abundantly available in Ira<| a source which can he used to meet the domestic needs lor this material, including future demands which are As a consequence of the rising local consumption of ex|**rted to emerge as a result of the growth of local plastics, the Ministry of Industry has placed special petrochemical and other industriel emphasis on the establishment of a local industry for the manufacture of plastics A specialized consulting The output of pure gas and other liquid gases from firm is at present preparing technical and economic the factory will be conveyed to Baghdad through a studies for a project for the manufacture of |>lastics. pipeline constructed by the Ministry of Petroleum liefere tlie completion of the sulphur extraction factory. A study ot local markets indicates that Iraq imports The gas will be distributed to large factories m its requirements of plastics in the form of manufactured Baghdad, to he used as a raw material for petrochemical or semimanufactured products. The latter are processed industries. in fifteen private plastic producing factories. The completion of the sulphur extraction factory, Among the more commonly used types are km which was planned on the most modern lines, will result density polyethylene and suspension type PV'C. Poly- in great economie benefit to the country, since sulphur ethylene is largely used for the kjcal manufacture of has a promising world market The yield of pure natural hard pipes, bags, containers, domestic utensils and toys. gas and liquid gases will add support to local industries. PVC is used in the manufacture of flexible pipes, Furthermore, the project wiH provide employment for electric wires, shoes, furniture, kitchen utensils, con some 400 Iraqi labourers, technicians, and engineers tainers, toys, etc for the operation of the plant. Consumption of plastics is some 3,.100 tons per annum. The growth in per capita consumption and the THE CHEMICAL r* UTILIZI* PSOJECT AT BAMA natural increase m population is expected to raise the annual consumption to some ft,400 tons in 1970 and This petrochemical project depends on natural gas 15.000 tons in 1973. produced in the Rumaila oil fields. The gas is sweet and free from sulphur compounds. It can therefore be The productive capacity of manufacturing units for used directly as a raw material or as fuel without plastics was considered when the technical and economic purification, in contrast to the gas of the Kirkuk oil studies of the project were prepared. Emphasis was field«. laid on the following important factors : 44 tmtwtrmJ 4f¥rhfM*n« M I IM Ar»4> Integration of ti«- different productive units, since thcs» such fattore as prue '»Í the raw material, <|uaiititv and fnnstrtute a gronp of economically .IIHJ techtucalh »aine of In pi.uliMis .ml tr,ins|iort facilities integrate«! plants l'olyethy¡,-»c unit Y ht initial râpant v of this unit Marketing^of products in the «loiiM'sttt mark« t especial!» is 5.(lf1t> tf>ns prr \< ir. which tan be increase«! to 10.(100 m the tir-t -t.-iju:«** of production, this remine* the tons if HIT.-—it y I he high compression met I KM I will rV

introduction of new iWS f,,r these priMlixt, and the used tot the production of low .|«-n>it\ polyethylene. priMluctmn «if new article, tli.it ran IM- sul.,tiiiire«l for commonly iis*<| in |rrn| other materials such as wood and iron Pi (' mm I ! initial capacity oi tin, nmt will IM -*,50l> tons |M-r vear which can I»- increased f(, i.rowth m tutore «k-niand ,n>itio fr.mi the overall XM) tons economic «k-velopmetit of the region ( hloriH, ,/>,,/ of,,,/,, SIHUI unii s„|IIMII « hlori«U- Possibility, o! « s.p..1 tmy |>|;isiir product-, lo foreign tvailabl« m \l anilihat \lplia and Manilahat es Samawa markets «ill IM- use«! t.. supply the l'\ ( „„it with ti«- necessary chlorine and at the same time provide rauMtc soda for I IM- Baghdad area has Wn selected as a mutable other («Mai industries lo. it ion for the project liecause of the proximity o( markets aixl the availalHlit\ of raw materials man Hie h«-i<-tit> expect.-d from the establishment of power, roads and raik\a\s |>rtrocl,enii«.d project, are not limited to the profits «Inch t!.«-s.- projet, inav weld Then establishment is I lire«- huh i H allons suitable is raw matti lai lor the 111 M »"l "!"ht*. The contribute to ".freiigtheiiiug the national economy by !*-N>W project will include ti* finir mam units Hst<«l sawng the t«.retKn exchange now required f«»r the import of these- promts It will also provide employ l:thyl,-m- u»it The initial capacity oí this unit will nient opporttimt.es for ,, lar »- mnnU-r of citizens awl I* 7.MH) tons |wr v.ar The raw mHteriHs to U- used K create o „ tumties for the training o, Irani exiwrts tor Ih«- production of ethylene will IM- determined In t1 lt m the te< hnol«i<_.y of the Hidtistn

.V *eetoeai tHmtke» «etreted M ^B HMMT B^AMveew

I hear studies have l*-en prewired at tlie request of engineering * ! vHrs, a labour market etc E*tahtMli the I iute.! Nation« Centre for Industrial Development ments are pred- .i.iinaiitlv small nul medium siwd (Hily lliev are limit« «I to four mdtutml »ector* construction a small tr.-.cti .ti (except in the cas«- of |ra«|) of the' total mat« rials basic chemical, and fertilizer» textiles . melai number of est., I.lishni«-nts o ,ting m th<- f.»ur indus ami engineer.iig The studies relate to lia.p lordili, )w ti lai sectors falls withm the category of large establish kiiwait. I.ebatM.ti and S> ria t.md m certain ca»es to '•"•UN lempb.M.ig KKI or ,„,,„- ,»r,„M \rM>ther SIIMIì \rabia ami Neinein, non« of WIIKTI have been cliaractrvistic . ,t the regMm ,s the high «k-gree of covered by «*her regional svinposta. They treat uf the r<>ij{ress from simjik prore-ssnijr to nttn made to provale stieb facilities as will accelerate transformittMHi. In Jordan, rodustrv hartHv existed the pr.M.ss ,,t mdiisirial .level.-Hm-nt. iiH-lwlin« ini- piH>r to l(*4M and even handicrafts were on a verv small pmvenietu ol I«.,K facilities, «levek^i^nt m r?ÜTt»ul scale In Kuwait and Sawli Arabia, modern imkis •IM.I motor n« ds. establishment of ^,eciali,*i| l*nk trialuatM» is still in its ¿nfano. while iiwlwstrtal activity t S measures cai« -dated to prov„|e pr.^titin ar*l nicen- m Vemeii, even tn the form of handKrafts. ha» been tive». an« a.lni.mstrHtive ami tí,cal ^JWie» to enc.mriure insigni tirant However, the mdustrialiiatioii procès» in industrialization ^ !-ebano«, S »ria and Iraq seems to IM at a higher level as (-imi|i!ired with that of their neiyhlM>urs * O.NSTBI « HON \l KtlJIM s | M« STtlKS llw ctrtitributK.n if di. manufacturing industry to Ho,,,« den .an« I represents an overwhehmnglv hkrh gross domestic prodint m the countries concerne«! l>H.,H,rt.o„ o, total ,l«-man«l „teach c.iintr». It'«mie, remains relatively small \t the same time, industrial mainly tr«M„ trriKati«Hi project, roa.ls. bridges, inibir priKlmtioii in tire region is concentrated in a few «»rk* an.l othe-r large ciMi,trwti.m projects The rentr.s a feature that has th. advantage «>f reducing f MH>rt demand ,s either small or tvm-existeiit. the cost <>f supplying public services while- creating an appropriate environment for the develojrtnent of general There is a l.ijfl, tk-gree of «MicentralM« tn tlie cotm try HKlusiry di>trmution of estahlish.m-nts Kvaikihk- ' I'aper píeseme«I In tlh •\fro-\SMMI Oigani/ation f « i Kojiwntir Ls>-oecratM(n data slM.w that aU.ut

ant arr engaged in il«- manufacture of brkks ami ng aim in intra regional trade, joint inquiries should In* 12 JUT cent in tl*e manufacture of ceramics made into problems of its production and marketing. The majority <»f establishments are private concern*. rinally, the region is a net imjmrter of construction (hih a little over 2 jwr rent of the total number are materials, although intra-regional trade is still very public undertaking^ Although sole j>roj>rietorshij>s and limited and o mid he expanded through regional partnerships predominate ,.nd are Usually associated co ojieratiou with small concerns, the iccent jjr» »\» 111 of joint-stuck niinpaiiies rejuiseuts a trend towards a more advanced MASK I IIKMK AIS AND KKKTILIZEBS torni of entrepreneurial Organization in tliis industry Jeuis. alkalis and utile hour estahlisliments m the llu- location pattern is generally satisfactory The region fall within this subgroup, one State owned n nu nt indu»ti> tends to IK- supply-oriented, being plant in Kuwait, engaged mainly m the production of located near tin* principili raw material supplies, while hydrochloric acid, chlorine, caustic soda and salt, two the glas*, ceramics and brick industries are largely joint-stock companies in Lebanon producing sulj>hurk market-oriented, being mainly located near the major acid, and one having a mixed ownership in Ionian iitie*. producing [M.tash salts. Production has lieen very (imeni 'I In* l'umiline.I output i»i Iraq. Jordan, limited and is largclv oriented towards the domestic I challón and Syria is approximately .5 million tons, or market. ilxmt 0 7 J*T cent oí total world production, although Regarding future development pia,is, the Kuwait between l'»5X and ]'HA renient production in those ( heiiikal Fertilizer Company is contemplating certain culliti «s has almost uhleil. In regard to production projects for the production of ammonia, ammonium n-ihiiMjues, it is noted that rotary kilns remain the sulphate and sulphuric acid; in Syria, the Ministry of princijiid equipment and the l-ulk of tlie cement Industry has lkensed projects costing LS 12 mijlioi. produced in tlie region consists of the Portland type. during the period IXß-VHA; and Iraq intends to invest \s to manpower, the data available for t9rxl snow tliat II) 9.45 million in sul|)hur extraction during (lie rive the number of persons engaged was about 12 per cent >ear Plan 19f-5-1969. of the total number of jiersons engaged in »H the Dye stuffs, colour lakes and tuners. There are thirty- construction materials industries. four such establishments in the region, of which three Kriek-making. This is uixk-ctbtedly an important are in Iraq, two in Jordan, eighteen in Lebanon and economic activity in most countries of the region. In eleven in Syria. Iraq, there are many brick making concerns that are in l%3, the total outjiut of the Iraqi companies was ihle to withstand comfielition only because they relv estimated at M)7 tons of dyes and that of the eighteen '"i cheap, unskilled labour In Kuwait prior to 195»), Lebanese conmanies at 2,197 tons of paints cl;i> lirtcks were imported from lra<|, tu P'57. home production liegau with the establishment of the sand ¡'lastics and resins. Two of the thirty establishments lime brick plant with an output in l'*>4 of nearly engaged in the production of jilastics iti the region are il niillkm bricks. State-owned I located in Syria). I he four Iraqi firms are joint-stock companies. In Libanon, rive establish- Cero mir s. In Iraq, seventy two large establishments ments are joint-stock companies and seventeen are soie einjjoving 1,4fi0 iierscms were engaged in the manu- ( proprietorships. In Jordan, there are only two establish- facture of tiles and related products in 1 >62. In Kuwait. ments, one a partnership ami thr other a sole pro tliirtv establishments pro\ided emjiloymeni for over prit torship. 1 ,(¥X> persons In [.«barton, ceramics are manufactured Production is mainly intended for linai consumption. by three large establishments employing some ISO workers The outjnit of the Iraqi comj-anies in PX-2 was 176,5% metres of plastic pipes and 70,31'' pieces of other plastk Iran a»d steel. Although an iron an pairs of plastk- shoes in 1963, while the other the "ación to produce metal products for building and nineteen produced 21,751,579 mitres of various plastic i 'on.'-truction. articles. The Syrian industry produces handbags, bags, In Kuwait, tli** existing plants are deemed adequate house utensils, pipes, buttons, etc. In general, production to meet the potential demand for construction materials does not satisfy domestic demand for plastic products m tin foreseealile future. However, it would lie useful Elastomers and rubber. Iraq has one joint stock to establish cement plants and a glass industry, in Iraq, company, whkh jmxluced in 1962 some 16,600 pieces. the I'.ve year plan 1965/1969 provides for the establish- Two joint stock companies and thirty six sole pro- ment of three large projects in ceramics, glass, and iron prietorships are recorded in Lebanon, j>roducing for the n7 per cent of the estuai ted aggregate cost of ali comprises one partnership and fifty three sole pro- planned manufacturing projects In Jordan, total invest- jtrieiorshii's. The Syrian industry is carried out by one ments in ceramics ami glass »beet projects during the State-owned comjiany, forty joint stock companies, and seven-year plan I9M/1970 is estimated at 8.1 per cent tnf ten sole proprietorshij», producing mainly rubber shoes " affogate sum to be allocated to all manu (about 2 million jiairs) and rubber soles and heels. lu hiring industries Many jrrojects are contemj-l ated for the near future, There is little doubt that rlemand will continue at a in Iraq, the five-year plan l'*>5-1969 has allocated $1.3 high level. Since m many areas production is still million to I* invested in projects at a cost of $5.6 nirried on by primitive means, there is wide scope for million for tlu- jiroductiou of rubber tubes and tyres. model nutation, which will be facilitated by organized Jordan j>lans to invest J I) 500,000 during 1964-1970, technical co-operation for mutual assistance. As cement while Syria has allocated about LS 3.9 million during is the most likely product to acquire growing signi- 1960-1964. '**wt'i*' w»ih»wst m ta* Art* —atrio Other basic ck, mie als Attempts are being made to service ami repair units, and individual craftsmen. An penetrate the field of man-made fibres. Current project* integrated analytical comparison at the sectoral level is m Syr» aim at producing nylon». Iraq intends to impossible because of the variation m definition, in allocate $5.1 million for the production of synthetic compatability of data from different countries even fibres in its m-xt five-year plan In the same plan, when available, and in the nature ami character of $26 5 million is allocated to explosives and fireworks. services rendered In Lebanon, fi reworks lia ve long been produced Cur- According to available data for l'*>3. the number of rent output is sufficient to meet domestic needs, with a establishments engaged in these industrie» »n Iraq was siz.,lile export surplus that goes to Middle Lastern countries, ( ihana and Nigeria. 5.324, employing 22.192 persons, or about 19 per cent of the total luhour force. Total wages and salaries paid ( henical fertiHrrrs Jordan possesses rich phosphate amounted to ID 3 7 million R sta hi i sh menta are con mines in Kuseifa producing 40T) tons daily The output centrateci in and around Baghdad An important trans- is shipped from Aqabi and Beirut to many Kuropean formation has recently taken place from handicraft to countries, Japan and India. Lebanon has one joint workshop or factory production A plant for the manu- stock company producing organic and chemical facture and ass4-inWy of water heaters ia already in fertilizers operation, while other projects are under study or As regards nitrogenous fertilizer,. the Kuwait construction. I hemical Fertilizer lonijmny has c infracted for the In Jordan, the last available returns, for 1959, showed construction of a synthetic ammonia unit, a urea unit. concentration mainly in the large cities nini the number an ammonium sulphate unit and a sulphuric acid unit of establishments as 'td, employing 3,331 persons. The Both Jordan and Syria have planned new projects industr) consisted largely of workshop«. Total valve costing |l) «M million and I.S 'H million respectively added amounted to Jl) 6Ì6.000, or 10 per cent of value THE TEXTILE INDUSTRY added by all manufacturing industries. The average value added per worker was JD 185. compared to the The relative imjmrtance of this industry differs from general average of JD 191 Up to l'KS.1, alt establish country to country It contributes about 0.5 per cent of ments were sole proprietorships the gross domestic product of Iraq and 6.5 per cent of In Kuwait, the number of establishment» is 94J the value added by all manufacturing industries, ex- enjoying 10,134 persons, or about one half of the cluding |ietroleum refining The number of employees industrial labour force. The majority of the establish- m l<*>3 «as X,'*!*, or about 7 7 |>er cent of employees ments are concentrated in the city of Kuwait and Ms in all riianni icturing industries. In |ordan, the value suburbs. Imports of metal and engineering products added amounted to Jl) 307,(100 and the number of amounted, according to the latest figures, to KD Jg employees to I,¿lo In Lebanon, employment amounted million. to 5.,116 persons or M 4 per cent of total industrial employment In Syria, although comparable figures are The latest oftkial data availaWe for I^ebanon cover not available, the 'extile industry is considered to lie 1 »55 The number of establishments was 397 (em- one of the most important in the country. ploying 3,057 person*), of which 337 were sole pro- prietorship» and 60 joint-stork companies. Since 1955. t ousiderahle differences exist in level of technology, tlie industry has undergone significant changes. Ili capacity of equipment and, consequently, productivity some cases, production is high enough to meet kral of worker, hi Iraq, where tlie industry is based mainly demand and leave a sizable portion for export. on large modern plants, the average number of employees per establishment is eighty-five; in libano«, In 19t>0, the number of establishments in Syria was thirty lour; in Jordan, twenty-two ar/H in Syria, five. 5.488, employing 13,267 persons. Soie oroprietorships were predommant, employing 4,560 persons, or 67 per With regard to the value added per worker, it was cent of the total number empbyed m that indtMtry ID 399 in Iraq or 16 per cent lower than the average 1 artnership« numbered 362, employing 1 ,M4« person» for all manufacturing industries, whereas the average companies and government undertakings numbered annual wage was II) 253, or about 32 per cent higher eighteen, employing 325 person. The inckiatry it con than the general average for all induttriet. In Jordan centrateci m Damascus and Aleppo, with about 90 per the value added was JD 253, or 28 per cent lower than cent of the volume of employment. the general average for all manufacturing industries at the same time, the average wage of JD 115 was only i 7^ "^i" Probkm ,acmI »he industry is scarcity of 10 per cent lower than the over-all average. skilled labour, ¡mürating the need for vocational ÎÏÏÏ'ÎX c?*rM In Ir*l- the current five-year pian As far as raw material supplies are concerned, it is 1965/66-1969/70. ha. allocated about ID 7.4 msUwTw apparent that the region can be made self sufficient in t.lWIK,u*try' wnMe m J0"*-"» allocation» duriti»? 1964 cotton. Iraq grows its requirements of raw cotton with 970 amount to JD òfJl.OOO. In Syria, the Ministry rf a small margin for export. Jordan, however, hat to Industry licensed projects costing LS 202 measen depend mainly on imports of raw cotton and cotton during 1960-1964. * ^^ yarn, while Syria and Lebanon, taken together, arc net exporters of cotton. The region is a net exporter of raw wool and other animal hair, although in some casca Gr.NEKAL ENVIIONMICNTAL PSOILIMS woollen yarn is imported—a feature that calls for con- This section deals with some of the interrelated sidering the re-allocation of investment between spinning general problem» which condition industrial develop- and weaving. With regard to man made fibres, the ment. The »uggestion is made for the adoption of a region remains dependent on imports. policy of balanced growth to stimulate simultaneous

METAL AND ENGINEERING INDUSTXIES expansion in a group of »elected mdustriaJ »ectors in order to set a general cycle in motion. The distinguishing feature of the metal and en- gineering industries is the preponderance of workshops, Deficiency in the mechanism of financing is often due to lack of institutional facilities for collecting savings IW*«-tapotent •# key isé—trtm

and channelling them info industrial enterprises. Serions activity is still in its initial stage However considerable attempts are being made to remedy this deficiency, aü possil>iIities for rapid economic progress exist Y here. i\iilfiicc(| hy the Kuwait Savings nnrt Credit Bank, the is a general reawakening in the Arab world The Kuwait Fund fur Arab Kconomic fVvrlnpment. and region enjoys considerable geographic advantages and flu \rah Investment Company (in formation) an ample manpower supply, but lacks certain tvpes of Regarding the distribution of capital investment ^kill, training and exjieiience Human resources have, '.et ween the piirnarv and industrial sectors this «ill therefore, to lie adjusted through training to develop :ii-i t'-,-,it.ife fundamental structural changes ment requirements Also, there i> the danger of over Manning has lietonie an accepte«I procedure (tener specialization or of a too narrow approat h to practical llv »peaking, only the national [dans still reflect efforts a*(>ects of development I here is an uigetit need to tor development Planning on a regional scale is yet encourage the rise of a das., of tei hno-ei onomists !•> come Public investment tends to outpace private The shortage of small entrepreneurs i«, conditioned investment. Regarding industrial development planning, by the relationship of the public and private sectors. tun criteria seem to lie employed redressing the hfdance An active policy of encouragement should be pursued of payments and improving the revenue and/or and practical measures adopted to help the ri«*- of IH-W maximizing social utility enterprises. The question of co orchnating the industrial sector Industrialization will inevitably give rise to the highly d'ould be carefully studied within the framework of complex problem of urbanization \ttenijit- at resolving »•encrai economic development A ostein of sectoral this problem at II» national or regional level must collaboration may prove to f»e the prelude to more involve an adequate degree of planning, preferably m comprehensive industrial integration. This system a regional context, in on 1er to avoid duplnation ami require-, close technical co-operation at the level of the |»romote greater sjiecializ, tion the establishment m industry within the region, both private and State- Kuwait of a rew Cntted Nations Institute of Planning owned augurs well for a successful promotion of regional plan ntng. Some experience has already been gamed in (•KNKtU. fOMri.t'SIONS AND »UOCFSTtONS co-operation at governmental level under the auspices of the League of Arab States. A similar influence is I lie overwhelming need for further industrial studies also exercised through the (ietterai I nion of the Arab has been clearly esta Wished. Yet some bask' improve- I hambers of Commerce, Industry and Agi teniture ments are necessary in order to permit more detailed What has not l-cen attempted vet is en-operation at Huillines First, tliere is need for substantial improve- the sectoral level, based oil the direct promotion of the ment in the collection of relevant data and information mutual interests and reciprocal benefits of those who \o urate and adequate data should be co ordina ted collaborate in any cooperative undertaking. AFRASKC between the different countries of the region, ft wMI has acquired considerable expérience in the successful • •Iso prove useful to solicit the advice and guidance of launching of sectoral ni operation at the Afro Asian regional and international organizations level. It is hoped that this Conference may provide the There i» an urgent need for a concentrated drive occasion to examine ami make appropriate recom toward, accelerated industrialization It is still true to (Herniations concerning this vei y effective type of sav that, with a few notable excellons, industrial co opération

W M * k« Ike Aral»

This paper investigates the possibility of establishing the Arab countries will need to take action with a view an iron and steel industry in the Arab countries. to establishing an iron and steel industry In the devekiped countries, the average per capito With the exception of tlie oil producing countries, con urriptkm of steel it of the order of 500 kg per year, Arab ('mutrie* suffer from a lack of sufHcient financial while m the developing countries the average is of the resources Moreover, exports do not provide the neces- 1 rder of JO kg (see table 1) In order to fill the gap, sary foreign exchange which vs a prerequisite for the H l'alar prf «entert |>y the linón of \rat» Fu execution of development projects

Arab Mwtri—

Mslm-ut. ä Total H«MJ e—xumfUoH r r capita consumption • HítHmftum (thousmné kms) PvpmioHoH IK*) lUS i tktmsané G»MN#r> IMI l**i 1*4 J m; ltt>¿ Averaut lumi

Alavria 402 213 207 11.7 32 21 20 26 305 Meracce 152 171 171 132 13 14 14 14 188 Tunisia 79 % 91 46 1') 11 JO 20 92 Units« Arab liftilk 373 474 439 29.5 14 13 16 14 415 Iraa 365 27(4 160 12 3» 40 25 34 245 Ltb&mm 192 lèi 211 17 113 95 120 1U9 185 AMMH ArMHI 123 109 115 7.5 » 17 18 18 126 Syria 101 1S1 105 5.5 20 30 20 25 13* l»*i»trMi étvlnaawiil M la* Ara* «MMMrtn

A number oí Arab countries have establish«! iron The plant will be located in Jeddah, adjacent to and steel industries on the bast» oí available raw the port. material» and labour force. The induatrie» have ex- panded according to the requirement! oí local market«. Iraq A brief summary of the position in the different Arab countries is given below A contract lias lieen concluded for tlie establishment of an iron ami steel plant which will depend on metting I'nitt'd Arab Republic scrap iron. The expected annual productive capacity is The iron and steel industry in the United Arab some 200.000 tons of light, medium ami heavy re inforced steel bars Republic has passed through several stages First, after the Second World War large quantities / NM (Ml oí scrap were accumulated in the western desert. This scrap constituted the basic raw material for the estab- An agreement was recently made to establish an lishment of an iron and steel industry. Three plants integrated iron and steel plant in the Nfanzil Bourkiba were set up during 1948 1949 for the production of city for tlie production of 150,000 torts of light and reinforced steel The productive capacitv of the three medium section reinforced ste« I bars |*-r year. The plants was rfl.OOO tons in 1952; by l964it had reached construction of tlie plant is in progress 200.000 tons. After the revolution, a study was made of the fensi Airier HI l>ility of establishing an iron and steel plant in Aswan, I lie Algerian (iovernment owns an iron and steel where large quantities of iron ore had been discovered plant under tlie name of Aciéries et Laminoirs d'Oran A plant with a capacity of 230,000 tons per year was (ACTLOK), which depends on scrap melting, with a estahlislied loafer the plant was ex par* led by the addi- productive capacity of 2H.000 tons per year. tion of several units Recently an agreement was con- cluded for the purpose of raising the productive capacity In 1964, plans were drawn up for the establishment of the plant »o 13 million tons per year of an integrated iron and steel plant, to be executed in Another plant will he established in Aswan for the three stages : production of 300,000 ton« of reinforced steel bars per In the first stage, a number of units to be established year; this pl;\nt will make use of the electricity gen- for the preparation of iron ore, and the production of erated from the High I>ani. as well as the trun-ore pi>j iron ; reserves of Aswan In tlie second stage, a unit to lie added for tlie flans have been made for the establishment of an production of steel blocks; iron arni steel plant m Alexandria with a productive capacity of 2.3 million tous of steel blocks per year In the third stage, i unit to Ite added for the produc- tion of rolled wire. In the first stage, the plant wiB produce steel sheets of 2,300 mm width, which wiH be used in the construction Tlw plant was sclieduled to begin operation in 1965, of ships and boats Provision has been made for the upon securing the necessary water supply and electric addition of a unit for rolling wire, which will be con- power. Annual production is estimated to be about structed during the third plan period 2.7 million tons.

Morocco Tlie plant will meet all the requirements of the construction sector, especially for ttrl«n dwellings A study has been undertaken to assews tlie economic Requirements for rural dwellings. Itowever. will not be and technical feasibility of establishing an iron and steel substantial. A need will thus arise for export outlets industry m Morocco to meet the domestic market during tlte coming five vears, since the domestic con- requirements for iron and steel product» A plan was sumption will absorb only a minor portion of the total drawn up calling for the establishment of such an out | Hit. industry within a period o< three years, 1%3-1967. The Provision has been made to expand the productive plan, however, has not yet been implemented. capacitv to 2 null ion ton« of Meet Mock« ami 2 millkiw ton» of wire annually

Tliere are tv\<> iron and steel plants in Lebanon, the Libya production of which depends on »crap melting. Both Libya has large deposits of iron ore with 44 per cent plants have a productive capacity of 60,000 tons a year iron content. In 1964, a »mall plant was established in of reinforced steel bar». An expansion programme i« Tripoli for the production of reinforced steel bars. bemgdrawn up to increase the productive capacity to 120,000 tons per year in the first stage and 130,000 tens Syria a year m the second stage. The launching of this programme, however, depends on the availability of A government project for the establishment of an scran in the country and on the future policy of the iron and »teel industry is under study. In the first State in regard to an increase in customs duty on stage, the plant win have an annual capacity of 65,000 imported reinforced steel bars ton» of reinforced steel bars, with plans to increase capacity to 120,000 tons at the end of the second stage. Saudi Arabia Sanili Arabia has recently contracted with a foreign Jordan finn for tlie establishment of a »teel plant to produce A project has been drawn up by a local commercial 30.000 tons a year of round and light reinforced steel company in Amman for the erection of an iron and bars. Production will be based on melting «crap iron. steel plant based on scrap melting with an IWfM^VIKT M wÊ&f ^H^^Bi^vvWti

(•¡•parity ranging httween .10.000 and 40.000 toni oí Annual production i« estimated at «mie 40.01)0 tons of reinforced steel bars licht reinforced bars.

k wail I'tOSI'M TS KfW IHK CH-ATION OF AN IRON \ Ml STKH. I Mil STRY IN THK A«AR COrVTlIFS \ project l<>r the establishment oí ;i steel [>IH I it is under study This project mill fie executed by a private 1 able 2 lielow shows the source« ,m

Ta*#a 1 ¡Saareea ami remrvM •# tra« art in the Ara* cawirtriea (mUtioH metric tuns)

/~.« e ItmfOHvnt ' 1 irtm m tk, < - .. _ . To fi M.ady •w *Yn4y ln<- trarrà Kfrrtlvr for F. *,;-!,. < OUt tl\ r,- "-'••"••' ikifimt'il or, àUcovt*--é 7..I.I-

I • i 4 i è J *t7 Xtftria 14« 75 § 718 75* L- aiwa Araa KtpuMic 25 250 Iflfl Hlf» WOO 110 A Mer oree ¿5 4- 120 I.H .'.'I v-.<> 56.2 92 1 T aiiitia IS 1 20 a«) ().(> IOS HO 215 *wto* J.i - J.í 215 — 215 215

Scrap iron is accumulated mostly fro** the di »pria* I The iron and steel industry requires technicians and i if the mechanical and engineering indostrie». Assuming managerial skills, as welt as specialists in production tint the annuii! />< r cafitm »crap disposal m the Aran methods. It also requires training programmes at countries is 4 kg, the total quantity of scrap accumulated various levels. Step» should lie taken to provide the each year will be about 400,000 tona. necessary trammg. Fuel is used in various forms liquid, solid or gaseous. Fable .1 shows the production and reserves of natural The establishment of an iron and steel complex £-.i» in the A rah countries requires considerable capital outlay At the same time, tlie long time span required to bring the project to TaMe S. rraahMthtM and ranervea a# aaa aa IMI (1JM miftU* tub** faet at «* rattrennatt anal DUI completion discourages private investors from sup aer aaaare aaek aeaaa«e«) portmg industrial ventures of this type

1 ""•' ProéiH-lton Ww ( httlays in both domestic and foreign currencies wiM be necessary, the requirements for domestic currency \l(i<-na 50 M.M§ Ul| 25* 22,.*» representing 40-45 per cent of ttie t

7.

The Arab countries bordering tlie oceans and seas Some considerations which arise m connexion with from the Atlantic Orean to the Gulf have Kttle or no the exploitation of the fishing industry in Arab coun- rainfall, and suffer from shortage of Und under tries are stated below cultivation and pasture for cattle breeding -the main The fishing grounds are located at some distance -mirre of protein food As a result, moat of these coun- from ports To exploit them, adequate equipment is tries, including F.gypt. are compelled to import large required, namely, motor boats, modern fishing nets ami quantities of meat. Although the coasts surrounding facilities for tlie maintenance of such equipment. these countries are well stocked with fish, the produc- tion and consumption of fish is small Fishing ports are generally located at some distance In our present study, we shall confine ourselves to from the marketing and distribution centre«. Hence, the problems of sea 6shing. In the case of river and adequate transportation and preservation facilities are lake fishing, each Arab country has its own special required. features, and it would consequent!v be difficult to There is a shortage of men trained in modern ñshing generalize in that area. methods. ' Paper presented by the L'nion oí Arab Engineer*. There is a lack of factories for the treatment of iah

50 Industrial development in the Arab countries in excess of consumption, that is, for preservation by refrigeration, drying, salting, canning or smoking. Formation of co-operative associations for fishermen for the extension of loans for the financing of fishing The majority of people in the Arab countries have boats and othei similar services ; a dislike for fish as a food source. Organization of wholesale fish markets ; Scientific research on fishing wealth is required and should be developed on a modern, scientific basis. Establishment of schools, training centres and colleges for the training of persons engaged in fishing and various allied industries. Co-OH-RATIVE ASSOCIATIONS Although a number of Arab countries have instituted In most parts of the world, Governments have taken all or some of these auxilian facilities, they are dis- steps to regulate the fishing industry and have en- tributed among the various government administrations couraged the formation of co-operatives to protect and and ministries. This renders co-operation among de- assist fishermen. A further purpose of co-operative partments difficult and hinders efforts towards the associations is to provide fishermen with loans and development of sea wealth. It would lie preferable to fishing tackle at the lowest possible prices. In return for have these departments grouped under one ministry those services, fishermen undertake to market their preferably the Ministry of Agriculture, which is the catch through co-operative associations which arranee most directly concerned. to sell it at the best possible price. Out of the sale The building of large fleets for deep-sea fishing is a proceeds, co-operative associations recover the loans costly operation. However, fishing fleets operate in extended to fishermen. areas abounding with fish; consequently, the return on Governments of those countiies grant co-operative the investment is usually more than sufficient to cover associations loans at low rates of interest as a measure costs provided the fleets are efficiently operated. of encouragement and a stimulus to the formation of the associations. Nevertheless, it is recommended that the Arab coun- tries avoid embarking on projects of deep-sea fishing The purpose of co-operatives may be stated as before exhausting the fishing possibilities and resources follows: assistance in the acquisition by fishermen of along their coasts which, as previously stated, are boats and fishing-tackle; provision of loans to applicants great and remain imexploited. to permit purchase and repair of fishing boats and To study the economic aspects of fisheries in the equipment; organization of the marketing of fish- Arab countries it is necessary lo secure from each construction of refrigerated warehouses for the pre- country the following data : servation of fish, and ice-factories to supplv fishermen with their requirement of ice; transportation and export A topographical map of the sea-bottom along the coast : of fishing products; development of facilities for saltine Type of fish living along those coasts, and the amount or preserving fish; raising the social standards of fished annually ; fishermen, instituting a provident fund, insurance Meat and fish consumption, and the quantity imported against sea risks, labour accidents and unemployment annually; ' provision of pensions in case of incapacitation from Average price of ice and diesel fuel ; work, and payment of benefits to families in case of death. Availability of refrigeration space throughout the coun- try, and fish storage fees ;

KNCOURAGKMF.NT OK THE FISHING INDUSTRY Availability of railroad refrigeration facilities and cold- storage trucks ; To enable Arab countries to develop fishing opera- Laws relating to the fishing industry, co-operative tions along their coasts and to encourag* the exploit- associations the individual labourer and the immig- ation of their maritime wealth, it is recommended that ration of fishing boats and crews ; a department or organization be established to exploit Laws relating to profits realized on the investment and sea wealth. The purpose of such a body would be the repatriation of foreign capital ; promotion of all activities related to the development of those resources, increasing production and initiating Laws and regulations governing fish markets ; new industries for the treatment of fish through different Data relative to weather prevailing on the local coasts; methods of preservation. System of wireless communication with ships at sea- The department or organization would supervise and Pricing policy for fish, especially with a view to encourage the auxiliary bodies concerned with the reducing costs and encouraging daily consumption by a following activities: large proportion of the population. y Establishment of hydrobiological research institutes, and the study of all aspects of sea life and its pro- Co-OPKRATION AND INDUSTRIALIZATION IN RESPECT OF creation ; * THE FISHING INDUSTRY Issuance of laws for the preservation of sea wealth and The exploitation of fishing possibilities alone the determination of fishing seasons ; Arab coasts, the discovery of fishing grounds, research and preliminary studies, construction of fisngXí. Preservation of fish by different methods, such as raining o men and crew, construction of fishiíg S refrigeration, canning, salting, smoking, drying, etc. ; and facilities organization of fish markets to meet Construction of fishing ports and dry docks for repair sanitary standards and the creation of a network for work and provision of ice-factories, fuel tanks he haulage o fish by cold-storage trucks are opTratioî. drinking water supplies, refrigerating stores and requiring facilities and financial resources that nay no! warehouses for the preservation of fish ; be within the means of a single Arab country^This the rea f r the de,a in Construction of fishing ships and fleets and requisiteM ÖïïhTlv ,r ? y »»* «Snation equipment ; 8 Wealtl1 t,mt aboUnds a,on coast e *e Arab Development of key industries 51 It is believed that co-operation among Arab countries for topographical research of the sea bottom and for in the field of fishing and the industrialization of this the drawing of the respective maps. trade is a necessity in their common interest. Biological research committee. This committee would The principal advantages of such co-operation are : be concerned with the study of fish assembly, move- Economies of scale in the search for fishing grounds, ment and migration, including a study of the various which can be achieved by collective action ; routes followed during migration, and the breeding Economies in the establishment of schools, institutes, habits of the different kinds of fish, shells, sponges and and training centres, which could not always be jelly fish. justified on economic grounds in individual countries ; Committee for the improvement of fishing tackle. Economies in the building of fishing fleets in collectively This committee would study fishing equipment and its owned shipyards built in accordance with a unified improvement, as well as methods of modern fishing, design ; including fishing with the aid of electric light, with Organization of fish marketing operations among trawl-nets in medium-depth water, deep-sea fishing, etc. different Arab fish markets ; Committee for ships and motors. An engineering Establishment of a joint wireless network to contact committee would be responsible for the elaboration of fishing boats and ships at sea and to extend assistance standards ; its duty would be to unify the specifications to them in case of emergency. of boats in accordance with standard specifications within the narrowest possible limits, and to study the SCIENTIFIC RESEARCH possibility of building such craft and engines in Arab countries on a large scale and at a lower cost. It is suggested that the Arab League, in conjunction Committee for the study of fishing ports and fish with the Food and Agriculture Organization of the tnarkcts. A specialized engineering committee would United Nations, be entrusted with the formation of a undertake studies and draw up plans for the construc- research council dealing with sea wealth. The council tion of fishing ports along the coast of Arab countries; should include scientists and research workers from all its duties would comprise the selection of convenient the Arab countries and should be responsible for locations, measurement of sea depth, and elaboration of undertaking the necessary scientific and practical long-term plans for the construction of fish markets, studies along the fishing coasts of the Arab countries. as well as the study of protective means against fish However, this does not exclude the possibility of slaughter on the coasts of the Arab countries, in the individual Arab countries gathering data locally or straits, lakes, salines and lagoons. making appropriate studies in their local areas. The adoption of this proposal will enable the Arab countries Fish technology research committee. This committee to realize considerable economies and at the same time would conduct research and studies aimed at the pre- to take important steps towards the achievement of servation of fish by refrigeration, cold storage, drying, unity in scientific research on fishing wealth. salting or canning, etc. A fishing research council should be formed com- Research committee on wastes. This committee would prising the necessary committees for planning and study waste products discharged by factories, run-off research ; it would be responsible for co-ordinating the from agricultural land containing a high percentage of work of the committees. poisonous insecticides, and discharge from factories and merchant ships. In Egypt it was found that fish The proposed council could be divided into seven previously abundant in rivers had disappeared as a principal committees: result of the increased use of insecticides in recent Research committee for sea-bottom topography and years, particularly in areas adjacent to industrial plants preparation of coastal maps. The duty of this committee erected along the sea coasts and wherever there was would be to study the demands of the member States constant contamination by noxious waste matter.

8. The Arab potash project'

During the period 1835-1930, a number of European In 1953, the Israel authorities established the Israeli and American companies carried out studies on the Potash Company, which rebuilt those installations and possibilities of exploiting the Dead Sea minerals. In expanded the pans on the southern end, thereby raising 1930, the Palestine Potash Company was established annual production to 180,000 tons by 1963. At present, on the northern coast of the sea to produce potassium the company is building pans in the sea with the pur- and other minerals such as bromine, magnesium and pose of raising annual production to 600,000 in 1965 their derivatives. Production of the company reached and 1 million tons by 1970. $50,000 tons per year. Jordan regards the Dead Sea minerals as an impor- However, owing to lack of suitable land at that tant national asset and a vital factor in the development location for the construction of additional pans to and economic prosperity of the country. With a view increase the productive capacity of the project, the to exploiting that asset, the Jordan Government, in Palestine Potash Company built pans on the southern co-operation with the United States operations mission, end of the sea, and production rose in early 1948 to retained the American Chemical Construction Cor- 120,000 tens of potassium per year. poration to ccrry out a technical and economic feasibility Later, as a result of the Arab-Israeli conflict in 1948, study for establishing a potash plant at the northern the company's installations on the northern end of the end of the Dead Sea at the site of the Palestine Potash Read Sea were demolished and operations at the Company's project. southern end were suspended. In 1954, the company submitted its report, recom- s Paper presented by Jordan. mending the establishment of a project for the produc- 52 Industrial development in the Arab countrie» tioii of 70,000 tons of potash per year. It also recom- the supervision of construction ami operation of the mended the establishment of a pilot project to review project. available data left by the Palestine Potash Company to ( determine the most appropriate method of potash In May 1 X>2, Western Knapp Engineering submitted extraction and processing and to collect information a report on (he economic and technical feasibility of the required for the design of the plant. project, in which it recommended establishment of a project in the southern part of the concession area rit On the basis of those recommendations, the Jordan Ghor Safi. with a capacity of 250,000 tons per annum Government, together with some of the memlier States to be increased to 500.000 tons (as compared with a of the Aral) League, established the Arab Potash Com- capacity of 70,000 tons envisaged in 1956, when the pany in accordance with articles of association dated Arab Potasi, Company was founded) in order to enable 21 June 1956, with an authorized capital of ID the company to market its output at competitive prices 4,501,000 divided into 900,200 shares valued at ID 5 I he total estimated cost of the project was armroxi- per share. Jordan, the United Arab Republic, Iraq mately JI) 10 million. " Saudi Arabia, Syria, Lebanon and the Arab Bank pur- chased a total of 200.200 shares, valued at TD 1.100 July 1963, it was found unsuitable on the basis of engineering and construction companies, and experts High cost and non-compliance with the conditions working for the Arab Potash Company, were to be guarantees and technical studies. A. G. McKee was then exempted from income and social affairs taxes, as well requested to revise its offer to lower its cost, and submit as from the profit tax on their income from the Arab adequate guarantees, whereby it would assume full Potash Company. responsibility for all parts of the project. The Arab Potash Company built the pans and the On 18 October 1963, A. G. McKee submitted a pilot project in 1959-1960 in accordance with the modified offer including detailed designs and speci- recommendations of the American Chemical Construc- fications (or the plant. The proposal was found incom- tion Company and conducted studies and experiments plete, as A. G. McKee excluded a section relating to the •on two methods of processine potash under the super- pans As a result, the Arab Potash Company decided to vision of German and American experts, namely, the ?je^ • S?er and to reslrict the ^I* of work of hydrocyclon and floatation methods. \. G McKee to technical consultation services, as It was established as a result of the experiments made stipulated in the contract. In addition, the Arab Potash on the hydrocyclon and floatation processes that the Company instructed A. G. McKee to expedite the com- hydrocyclon process was not suitable for the separation pletion of designs and specifications for the pans. of potash from sodium chloride owing to the similarity In view of the continuous recession of the Dead Sea of the size of the crystals. The hydrocyclon process is waters and the increase in the proportion of waste based on the separation of crystals of different sizes. resulting from returning the excess waters from the After the completion of experimental work, the Arab Israeli pans into the sea. the Arab Potash Company, Potash Company selected the Western Knapp En- for a period of five years, will have to bring the Water gineering Company of the United States, on the basis from the Lisan area to the pans. This calls for the of international tenders, and signed a contract with the construction of a canal at a cost of $6 million. Experts company on 10 September 1961. The contract covered from the International Bank for Reconstruction and an economic and technical feasibility study of the pro- Development (IBRD) advised that it would be neces- ject, preparation of fina! designs and specifications for sary to add the cost of the canal to the preliminary cost of the oro.ect and then re-examine the project's eco- issue of tenders for the construction of the pans, and nomic feasibility. ' ' 1 Development of key industriell 53 Accordingly, the consulting firm revised the designs non-subscribing Arab League member States, urging ;itid specifications and proposed transfer of part of the them to participate in this economically vital project. pans to {lie Dead Sea to offset tlic need for the greater As the response was not favourable, the Arab Potash part of the proposed canal. The revision of designs Company was compelled to seek contracting firms to required further soil investigations and surveys of the construct and finance the project on a credit basis, new site. As a result of the floods which occurred in whereby the principal would be repaid in annual instal- the winter of 1%3. th<* consulting firm was also ments, starting after the commencement of production. instructed to consider necessary measures to protect the However, the short-term nature of commercial loans pans against similar future floods. On 30 March 1964, and the conditions associated with such loans rendered the consulting engineers submitted designs, speci- this approach to financing the project impracticable. fications and tender documents for the construction of In view of the importance of the project to the Jordan the pans. However, it was again found that the designs economy, the Jordanian Government t'.ien approached and specifications did not cover all necessary technical IBRD and USAID with a request for assistance in details Furthermore, the consulting firm placed respon- financing the project, emphasizing that the economic sibility for certain works assigned to it on the con feasibility of the project had been established by recent tractors. The conditions and terms of the tender docu- studies conducted by Jacobs Engineering. These insti- ments were unsatisfactory and resulted in raising the tutions expressed their willingness, in principle, to cost of the project, thereby discouraging contracting contribute to financing the project in accordance with firms from participating. Consequently, the Arab a financial plan to be drawn up after tl completion of Potash Company instructed the consulting firm to design and technical specifications. IBRD deemed it review the technical studies it had made and to reduce advisable, in the interest of the project, that an indus- the cost of the project. trial consumer of jictash with adequate experience in In early 1965, the Arab Potash Company signed a technical, managerial, and marketing aspects in this contract with the American consulting company, Jacobs field participate in the project. Accordingly, a number Engineering, to review the studies and specifications of qualified firms were requested to submit offers to prepared by Western Knapp Engineering. Jacobs participate in the project. Negotiations are now in Engineering submitted a report in which it recom- progress with the IMC company. mended raising the productive capacity of the plant In the past, the potash-exporting countries of western from 250,000 to 500.000 tons per year. It estimated Europe have been able to control the marketing of the total cost of the project at $70 million—$55 million |K)tasli throughout the world (excluding the USSR, for the plant, pans, and dykes : $5 million for the town eastern Europe and mainland China). However, more site; and $10 million for the construction of the Safi- recently, North American countries have entered the Aqaba road. The preliminary report submitted by- export market as a result of the establishment of a Jacobs Engineering proving the economic feasibility of number of potash companies overseas. In the future, the project was reviewed and studied by the Arab the Middle East countries are expected to establish a Potash Company and the Jordan dovernntent together position among the potash-exporting countries, par- with representatives of IBRD and the United States ticularly in the area east of the Suez Canal. Agency for International Development (USAID). It The Arab Potash Company has come to the conclu- was decided to entrust Jacobs Engineering with the sion, as a result of extensive marketing studies, that it task of preparing detailed designs and technical speci- could sell its product in many markets. Jordan enjoys fications tor the project. The project is expected to be a favourable geographical location in view of its proxi- completed by early 1966. mity to the ijotash-consuming centres in the Near and The articles of association of the company and its Middle East, the Ear East, and South-East Asia. These internal regulations stipulate that the 700,000 out- areas constitute natural outlets for Arab potasli. standing shares at a nomimi value of JD 3.5 million should be issued for public subscription in Arab mar- While studies have not l)ecn made on commercial kets. Any unpurchased shares would lie bought by the conditions in African countries, it is believed that a Arab organization if it is established: otherwise the market could IK: developed in those countries under Arab Governments will underwrite these shares in normal competitive condition:-. proportion to their contribution to the Arab league As regards the marketing of Arab potash in western budget. Europe and the United Kingdom, which fall within the In 1962, the Arab Potash Company launched an sphere of influence of the European potash cartel, the extensive publicity campaign in the Arab countries to Arab Potash Company will undoubtedly encounter attract public subscription and, as a result, the value of difficulty in marketing significant quantities in those stock held by the public reached ID 2.25 million, markets unless r.n agreement is concluded with the including the amounts of JD 125,000 and JD 50,000, cartel, as was done in the case of the potash company in the occupied part of Palestine. subscribed by the Governments of Kuwait and Qatar respectively. This brought the value of .hares sold, The price of one ton of Arab potash 60 per cent including founders' shares, to JD 3.25 million. pure K20 fob Aqaba is estimated at $32. Cost of Consequent upon the increase in the cost of the production and transportation to Aqaba is estimated at $17 per ton. On this basis annual profits to the Arab project to over JD 10 million from the estimated cost of JD 4.5 million, and as the share issue was not com- Potash Company on a production of 500,000 tons would pletely taken up, the Arab Potash Company endeavoured lie about $7.5 million, in addition to the advantages of to secure the necessary financing from Arab and foreign creating employment opportunities and securing :i main Governments and from national and international finan- source of foreign exchange. cial institutions. Loan applications were submitted to The Jordan Government considers the Arab potash USAID. IBRD and the Kuwaiti Fund for Arab Eco- project one of the most important development projects nomic Development. Memoranda were addressed to in the kingdom and therefore gives it high priority in 54 Induatrial development in the Arab countries the »even-year development plan. The project will sectors of the Jordan economy. increase national exports considerably. Potash exports will constitute 20 per cent of Jordan's commodity For these reasons, the Government is sparing no exports in 1970. In addition, the project will contribute effort to secure the necessary financing to implement to national output and employment and will have, this vital project. It is expected that production will directly and indirectly, favourable effects on other start by l%8/69, and reach 500,000 tons by 1970.

9. The food industry in Syria0 rasai•rJ.hf„Vc1U•l0fp srü-a?[^UCtÌon^^P^ tssr-üssincil>alfo<^indus- durîn*,,tmm& th *4 years - -* of ,odrought *- from• - 21957 M °" to 1959

Tabic 1. Index of production of food industries 1SM-1M4 (19S6 = 100)

Year 1956 itsr ItSI 1959 I960 Í96I 1962 196S ¡964 Index 100 95 115 79 138 150 157 173 190

Tab!« 1 Production of principal industri« MM 964 (Volume is in metric tons, except for beer which is in hectolitres)

Type of tniiutry J>jp ¡ Q 96 1961 196! 1963 1964

Sugar 61,064 69,631 71,720 76,876 83,454 78,341 Cottonseed oil 14,148 15,148 15,648 16,022 20,833 26,852 Canned foods . . 2,682 2,982 3,000 3.308 3,703 3,746 Chocolate 777 800 820 840 925 579 Macaroni 2,139 2,139 2,139 1,868 2,373 2,462 Biscuits 821 821 821 869 1,415 913 Beer 14,510 18,290 19,630 24,500 26,240 26,640 Olive oil io,100 18,621 20,447 15,093 25,512

The principal food industries in Syria are set forth Mow. per cent annual increase in the rate of consumption. As a result of the study, it was decided to retain the Flour. This industry lias not received adequate atten- ten most efficient flour mills, to modernize and expand tion m the past, even though it is one of the most im- them and to discontinue the operation of the remaining portant food industries in the country. Originally Syria fourteen mills. It was also decided to establish five new flour mills in various parts of the country, with a total depended on small flour mills run by hydraulic power. daily capacity of 600 tons of flour. Kore recently, mechanical flour mills have been estab- lished by private individuals in various parts of the Bread. With a view to improving the quality of country, especially in Aleppo, Horns and Damascus. bread the Ministry of Supply imposed specifications Following the issue of decree No. 29 of 25 November and health conditions relating to both the equipment 1962, under which mechanized flour mills were attached and the technique of making bread. However, bread- to the Cereal Office, the authorities undertook a study making has not yet reached the desired standard. Con- of those mills with the help of local and foreign experts. sequently it was decided to establish several modern The purpose of the study was to obtain information bakeries in various ».¡ties. Offers for four bakeries have regarding assets, technological conditions, production been received and are being studied. process, capacity and quality of the product of these Cottonseed oil. The great expansion in the cultivation mills. The purpose of the study was to permit the of cotton in recent years has resulted in the develop- necessary measures to be taken to improve and increase ment of a vegetable oil industry which at present is production in accordance with the requirements of the confined to the extraction of oil from cottonseed and country. refining it to make it edible. This industry provides an important source of income and its expected to continue The study showed that the total productive capacity to expand with the continued expansion in cotton of the mills was barely sufficient to meet locafcon- cultivation and the increased consumption of cotton- suinption. In addition, the Cereals Office made estimates seed oil. of Syria s needs for flour ou the assumption of a 10 Table 3 shows that the local consumption of cotton- » Paper presented by Syria. seed oil has almost doubled in the past five year», while production and exports have also increased con»i»tently Development of key industries 55

Table S. Production, consumption and exporta of cottonseed and cottonseed oil. 1960-1963 (In metric Ions)

Crop Production of ColtOHICfi Cottonseed Oil Oil Local year rottcmsred cu exported processed produced exported conSHtnptiva 1960 156,000 34,900 121,100 15,148 3,230 11,918 1961 168,000 37,700 130,300 15,648 2,775 12,873 1962 198,000 57,200 140,800 16,022 434 15,578 1963 230,000 58,200 171,800 20,833 2,471 18,362 1964 233,000 28,070 204,930 26,852 4,086 22,766 1965 252,000 18,760 233.240 31,000 12,804 18,196

The fall in the export of oil in 1962 was due to two the difficulties encountered in extracting sugar from reasons: the rise in the export of cottonseed and the sugar beet. rise in the local consumption of oil. In 1965, however, At the request of the authorities concerned, a com- a large quantity of oil was exported as a result of the mittee was formed under the chairmanship of the increased production of olive oil, which was partly secretary-general of the Ministry of Agriculture to study substituted for cottonseed oil. the following matters relating to the planting and pro- It is expected that local production of cottonseed will cessing of sugar l>ect : Delivery of sugar beet to the increase by about 10 per cent annually. Accordingly, sugar plants ; protection of the sugar-beet crop ; relation- the value of production of cottonseed in 1970 is ship in developed countries between sugar-beet pro- estimated at about LS 100 million. In view of the ducers and sugar-refining companies and adaptation of importance of this industry to the national economy, the information obtained to local conditions ; extension the Government lias found it necessary to nationalize it programmes needed to improve yield and sugar content At present, there are seven factories in Syria for the of Syrian sugar beet ; status of research studies on sugar production of vegetable oils which concentrate on beet and desirable new research for development of pressing cottonseed in addition to a small quantity of sugar-beet cultivation ; these research projects to be copra. These factories differ greatly with respect to partly financed by the sugar refining companies ; deter- capacity and technical efficiency. Three factories in mination of optimum time for initiation of the process Aleppo provide about 80 per cent of productive capacity, of sugar extraction from sugar heel while the four factories in Damascus, Horns, llama and One of the important reasons for the high cost of Latakia contribute 20 per cent. production of sugar beet has been the low yield. Con- The Syrian cottonseed oil industry faces a number of sequently, the authorities concerned are offering the problems : low productive capacity of certain factories ; necessary extension services to farmers to assist them absolescence of a large part of the machinery; inade- to raise yield. Farmers have also been assisted with quacy of some equipment and great differences between seeds and insecticides. the capacities of the various productive units within a The increase in the price of raw sugar in 1963 to single factory. about four times its normal price led the authorities A study of cottonseed oil plants was undertaken by to raise plant capacity for extracting sugar from sugar a technical committee at the request of the General beet. In 1%4, a contract was entered into with the Organization for the Public Sector. The committee Techno-export company of Czechoslovakia for the reported that considerable losses were incurred from construction of a plant in the Ghab district for the the use of obsolete presses and the defective preparation extraction of sugar from sugar l)eet, with a capacity of of cottonseed. 2,000 tons of sugar beet daily. It is expected that this plant, which is now under construction, will start On the basis of this study, the authorities concerned operation next year. decided to implement the following measures to improve and expand the industry: discontinue production in The addition of a third plant, together with the two of the small plants, using one of them for refining studies and experiments undertaken to lengthen the only; improve and expand the three plants in Aleppo beet season, will enable at least one-half the require- by supplying missing equipment and replacing old ments of the country to be satisfied. (See Table 4 presses, and establish a modern plant with a daily below). This is in addition to the c ther economic bene- capacity of 500 tons of cottonseed. fits derived from the industry such as saving on foreign exchange, improvement of crop rotation, and employ- There are also in operation two plants for the ment of large numbers of farmers and labourers. There shortening of cottonseed oil for edible use with a are also secondary benefits derived from the by-products capacity of 8,000 tons of vegetable oil per year. of sugar production. Sugar. The first plant for the extraction and refining of sugar was established in Horns in 1946, and began Table 1. Sugar production in Syria, 1959-1965 operation in 1949. The extractive capacity of the plant 'Quantity in tons) was later expanded to 22,500 tons annually. A second Total sugar Refined from Extracted plant was established in Damascus and began operation Year production raw sutler from btet in 1959. The annual capacity of both plants is 112,500 1959 61,064 tons of refined sugar. 1960 69,637 58,672 10,939 Refined sugar is obtained both from imported raw 1961 71,720 62,244 9,476 sugar and from local sugar beet. The importation of 1062 76,876 68,973 7,903 1963 83,454 74,093 9,361 refined sugar has been prohibited in order to protect 1964 78,341 59,315 19,026 local industry. The rise in sugar consumption has been 1965 94,350 74,837 19,513 met mainly by refining imported raw sugar, in view of 56 Industrial development in the Arab countries lìcer. Syria imported beer until 1953 when a small Table 5 {.continuée) plant was built in the vicinity of Damascus. A second, larger plant was built in Aleppo in 1957 to meet the Total Total Local increased demand for beer. Local beer was thus sub- production imports consumption stituted for a major portion of imported beer. (See 1959 14,510 1,800 16,310 Table 5 l>elo\v.) 1960 18.790 2,490 21,280 1961 19,760 1,370 21,130 Table .">. Heer production, imports and contuimption, 1962 24,500 1W5-1964 21,130 1963 26,240 736 26,976 (Quantity in hectolitres) 1964 26,640 426 27,066

Total Total The total productive capacity of the two existing Year production imports consumption plants is 30,000 hectolitres, which approximates the 1955 440 present level of consumption. It may be necessary in 1956 550 6.780 7,330 the near future to increase productive capacity either 1957 N.760 2,880 10,640 by building an additional plant or by raising the pro- 1958 15,040 910 15,950 ductive capacity of the two existing plants.

10. The spinning and weaving industry in Syria 10

Syria has long l>een known for the products of its those establishments. The consumption of ginned cotton spinning and weaving industry, particularly for fabrics rose freni 8,156 tons in 1956 to 19,563 tons in 1964, of the Aghbani and Brokar types which have been in an increase of 140 per cent. The production of cotton great demand in both domestic and foreign markets. yarn rose from 7,558 tons in 1956 to 17,631 tons in The industry maintained a steady growth until the 1964. early part of this century, when Syrian textiles began Most of the cotton yarn produced by Syrian factories to meet strong competition from a highly developed and is thick. In 1964, only 3 per cent of total production mechnnized industry abroad. This competition adversely consisted of thin cotton yarn, a quantity insufficient to affected the textile industry in Syria and resulted in a meet local demand. Consequently, importation of thin large reduction of the work force in the industry. The cotton yarn is necessary. situation became more acute during the First World War, as a result of blockades, military operations, and Tt should be noted that a large portion of cotton yarn a shortage of raw materials, markets and manpower. produced by Syrian spinning factories is used in the During the period between the two world wars, the same factories to manufacture cotton textiles and other industry was able to develop some of its potentials. A cotton products, the remainder being exported. During spinning and weaving factory (the Syrian Spinning and 1963 and 1964, 66 per cent of cotton yarn produced in Weaving Company) was established in Aleppo in 1933. Syria was consumed by the domestic weaving indus- A second factory (the Spinners and Weavers Company) tries, with some 30 jjer cent exported. Local consump- tion and ex])orts of cotton varn over the 1%0-1964 was built in 1937, but was not put into operation owing period were as follows : to the outbreak of the Second World War. However, the well established traditions of the weaving industry in Syria were carried forward after consumption Exports the Second World War in a modernization programme (ton s ) (tons) for the weaving industry, consisting in the introduction 1960 8,521 1061 1,101 of modern equipment in existing factories and the 9,812 727 1962 construction of additional facilities. As a result of the 10.547 344 1963 10,868 modernization of facilities and the large increase in 1964 651 production capacity. Syria was in a position to meet 11,354 484 its domestic requirements and develop a large export market. Exports of textiles in 1963 amounted to LS 421 Total Syrian exports of cotton yam and various million, or 38 per cent of total Syrian exports of LS 721 cotton products amounted to 3,501 tons in 1963, and million. to 4,345 tons in 1964. The markets absorbing those Syria hoiws that its well-established spinning and exports are world-wide, and constitute traditional out- weaving industry will be able to satisfy the demand of lets for Syrian textiles. They include most of the Arab the Arab countries on an expanding scale within an countries in Asia and Africa, the Soviet Union, Arab common mnrkct. Koniania the Inderal Republic of Germany, Italy, the •Netherlands, Belgium. Switzerland and Nigeria The Industrial and commercial activity in cotton spinning principal importers of Syrian cotton textiles are Jordan, in Syria is confined at present to eight large factories Saudi Arabia and Iraq. During the last five years, these with a total of 154.000 spindles. Three of these factories three Arab countries purchased 7i per cent of total are situated in Damascus, four in Aleppo and one in Horns. Syrian exports of cotton products, with the remaining -7 per cent distributed among twenty-four Arab and The eight factories consumed about 20 thousand tons non-Arab markets. Jordan, Saudi Arabia and Iraq of ginned cotton in 1964. The total consumption of accounted for about 87 per cent of cotton fabrics and ginned cotton has increased remarkably in recent years textiles exported by Syria in 1964. owing to the expansion of the productive capacity of The particular geographic location which has made "' Paper presented by the Cotton Textiles livlnstries Promo- tion I-muí oí Syria Syria a meeting point for three continents and a trans- port and commercial route between the industrial and Development of k •>• induit! riet* 57 trading centres of cast and west ¡s a favourable factor The woollen textile industry is concentrated in nine in introducing Syrian industrial products to the markets factories containing about 1?,000 spindles producing of the world. pure or mixed woollen yarn, and 170 looms, of which However, the prestige which Syria enjoys today as 95 are new. The import of wool and woollen products :i source of a large volume of good quality cotton points remains at a constant level, in contrast to cotton pro- to the necessity of further pursuing the development ducts which have licen diminishing gradually. This ni the cotton industry, particularly the processing of indicates the need for an expansion of the woollen raw cotton with a view to improving the quantity and industry in Syria. Over the j>eriod 1957-1964, the quality of cotton yarn. annual average level of Syrian ini|K>rts of raw wool and The aim in developing the cotton yarn industry woollen products amounted to 2,012 tons. should not be confined to the satisfaction of domestic The average annual capacity of woollen yarn pro- requirements; it should also be to convert the largest duction in Syria is 4,216 tons at the present time. The possible amount of raw cotton into processed or manu- average annual capacity of the looms producing woollen factured cotton products for export. This is most desir- textiles (on the basis of 300 working flays per annum able in view of the fact that the ratio of manufactured and 24 working hours per day) is 1,345 tons. It should cotton products to the quantity of raw cotton produced I« noted that looms previously engaged in the manu- in Syria is low compared with similar ratios in other facture of silk or cotton textiles, and which are now countries. In India, for example, the ratio is 80 per producing woollen textiles, have not l>een included in cent, whereas in Syria it is only 11 per cent. this computation owing to lack of accurate information. Syria should expand the capacity of cotton spindles The actual production of woollen textile looms in and assign an increasing portion of cotton yarn for Syria varied latween 52 and 167 tons annually over the export. The centralization of industrial activity aimed period 1957-1962. However, production must have at in the new industrial regulations may influence risen after 1962 (no statistics are yet available), since maximum utilization of labour, managerial, and produc- the largest woollen textile establishment (the Modern tive capacities in the Syrian cotton spinning industry. Industries Coqxiration) started production after 1962. Another prerequisite for the promotion of the industry Imports of woollen yarn and products will continue, is the preparation of a comprehensive programme although the productive capacity of existing factories aimed at the reorganization of the industrial and opera- can meet local requirements and even permit export tional sectors of the industry. There is a basic need for of a part of the locally produced woollen textiles, for the classification of various kinds of Syrian cotton so the following reasons: that spinning factories may have access to the most suitable type of raw cotton. Equally important is the More than 50 per cent of the spindles are employed in the production of fibres, although they were originally need to study the demand of domestic factories for intended for the production of woollen yarn ; long-staple cotton and determine ways and means to satisfy this demand either through increased local The adoption of single shift operation by most factories cultivation or through imports. It may also be useful to (working hours are now limited to one eight-hour review the manufacturing standards and techniques of shift instead of "round-the-clock" operations) ; various cotton establishments and factories. Deficiencies in the methods of cleaning and preparing Owing to the relatively low capacity at which the raw wool ; Syrian cotton industry operates (59 per cent of total Insufficient protection for the woollen textile industry, capacity compared with 95 per cent in the industrial in contrast to the protection afforded the cotton and countries), attention should be directed to the following fibre industries ; this has led some factories to divert points : a large portion of productive capacity from the pro- Study and application of production techniques used duction of woollen products to the manufacture of by the developed countries; artificial fabrics and fibres. Study of various measures applied in spinning and The woollen textile industry in Syria suffers from a weaving operations with a view to raising productivity lack of sufficient study and research to supplement the levels ; measures so far undertaken for the promotion of the Preparation of co-ordinated programmes for vocational industry. An assessment is required of the desirable training in the fields of spinning and weaving; capacity of the industry to meet future demand. recourse may also be had to bilateral and multilateral assistance offered in this connexion; It should also be noted that conversion of part of the capacity of the woollen industry to the production of Adoption of quality control methods in all phases of synthetic products (whether mixed with wool or not) production. has greatly reduced interest in pure woollen products. The realization of this programme will require close At present, imported synthetic fibres account for about co-operation among the various elements connected with one-third of the value of Syrian imports of textiles; production, such as trade unions, management and they have thus Income the single most important item official organizations responsible for economic planning. in Syrian textile imports. It will also require the financial contribution of inter- national organizations and foreign technical knowledge Consequently it is most necessary to reorganize the which may become available to Syria through the con- existing woollen textile and synthetic fibre industries in clusion of economic and technical agreements. It would Syria in the light of those trends. Such reorganization also be useful to form a joint commission of Syrian and should be based upon a comprehensive programme foreign experts well versed in industrial management similar to tliat used for the promotion of the cotton and marketing in the spinning and weaving industry. textile industry and should include a study of raw The purpose of this commission would be to study the materials, management, productivity, industrial legis- industry and suggest ways and means for its im- lation, execution of work programmes and the various provement. phases and activities involved in the woollen industry. M Industrial development in the Arab countrle« 11. Small-seale industrie« in Iraq1

Small-scale industries include groups of industrial Primitive industries are a feature of human progress projects varying in size and degree of development and the evolution of every society has licen accompanied such as traditional handicrafts, industries in which by the development in such industries. Each industry- some mechanization has been introduced, and power is a reflection of the environment in which it is estab- operated projects using advanced productive methods. lished and the raw materials it uses. Small-scale industries play an important role in the economies of many countries, especially in the devel- The pattern of industrial development in Iraq has emerged through the same process as in other de- oping countries, where technology has not readied the level attained by the advanced countries. veloping countries. Groups of handicrafts and trades sprang up where population concentration occurred and Most definitions of a "small-scale industry" include raw materials were available. At the time of the domestic enterprises such as workshops and small- or founding of the State, Iraqi industry took the form of medium-sized factories. This classification takes into individual trades and handicrafts practised in small consideration, among other things, the number of shops or houses. In the course of time, modern indus- workers in each enterprise, the amount of capital trial methods replaced primitive forms of industry, invested, the value of output, the use of electric power although mechanization was not generally applicable to and the nature of existing management. the traditional industries based on the skill of the Research authorities in this field have concluded that human hand. industriai projects may 1* classified as small-scale In Iraq, when an industrial project (regardless of industries if they satisfy part or all of the following its size) starts using energy in a principal machine and requirements : converting raw or semi-manufactured materials into Total or partial absence of an industrial management fully manufactured products, it becomes qualified to in the sense that authority and responsibility is dele- enjoy government assistance. However, the following gated among officers specialized in production or discussion is concerned only with non-mechanized and marketing techniques; the manager of the project consequently non-State-aided industrial units in urban (often the owner) is responsible for all matters of and rural areas. production, purchase, marketing, financing, manage- The Government did not play a direct role in the ment, etc. ; development of small-scale industries until 1950-1955, Existence of close contact between manager and when discussions took place with UNESCO and the workers, customers, suppliers and creditors; International Labour Organisation (ILO) on the possi- Reliance on sources other than the capital market for bility of developing small-scale industry. In 1952, the finance; small-scale industry often experiences diffi- Government invited an ILO expert to make a study culty in obtaining loans, especiallv of a short-term and recommend solutions. The study was confined to nature ; the department for the development and utilization of Existence of a comparatively strong connexion with Aniiri (State-owned) land, the department responsible the local community because of ownership, locai pur- for a group of rural agricultural communities at that chase of materials, and local marketing of products. time. The aim was to create industrial opportunities in those communities in order to eliminate unemployment, It has not been possible so far to produce a clear-cut, especially seasonal unemployment, and to train rural comprehensive definition of small-scale industry. Classi- children in industries which would enable them to fications differ according to the environment and condi- tions of each country. increase their income. At the same time, such a pro- gramme would serve as a nucleus for the development In 1952, when Iraq developed an interest in small- of an agricultural-industrial co-operative movement. scale industry in the rural areas, the following defini- tions were established: The following funds were allocated by the Develop ment Hoard for these purposes, especially for the estab- Handicraft industries: domestic or small industries lishment of industrial training units with related services whose products have an artistic component and require in Dujaileh, the el-Kout district, the Luteifiyeh project skilled workmanship. and in the Baghdad district • Domestic or cottage industries: industries which are Amount carried out, totally or in large part, by the co-operation allocated I'.or of family members as a permanent or temporary trade ; UD) Purpose some of these industries may require technical skill. 1952 25,000 Kstablishtnent of training centres Small-scale industries: those which are mainly carried and industrial units for weaving. out by hired workers not exceeding a certain number ; 1955 . mm Continuation of the above projects the more general the use of electric power (and con- and establishment of simple car- sequently the more mechanized the plant), the lower pentry and blacksmith units. would be the limit in the number of persons engaged 1956 39,000 Continuation of the above projects in what would be described as small-scale industry. and establishment of simple car- pentry and blacksmith units. Small-scale industry in Iraq is housed in small 1957 103.000 Establishment of wool and cotton workshops or in conventional factory buildings in towns weaving centres in the Suleima- and villages. niyeh district, and continuation In 1959, United Nations experts classified industrial of the above projects. groups in Iraq into two groups, namely, handicrafts and small-scale industries. These statistics relate only to one aspect of small- 11 scale industry, namely, assistance offered by one govern- Paper presented by the Ministry of Industry oí Iraq. ment department within a specific period (1952-1958) Development of key industrie« 59 In the mid fifties, some 10 per cent of Iraqi industry In principle, the success of this method depends on the was small-scale in nature. Some of the problems extent to which owners of small industrial projects, experienced are described below. rural craftsmen and artisans understand their respective Financing. Although the financial needs of small- obligations and benefits, and on the sincerity of the scale industries are not substantial and do not involve efforts made by the parties concerned. great risk, great difficulty is experienced in obtaining Co-ojierative methods were introduced in Iran more the cash or credit necessary for the purchase of raw than ten years ago in certain areas without any • igible materials and supplies and the payment of wages. This results being achieved. The failure of these efforts is a basic problem in small-scale Iraqi industry, and cannot of course be attributed to the co-operative as long as borrowing facilities are restricted or avail- method itself, but rather to the circumstances sur- able only on unreasonable terms, industrial proprietors rounding its application. One of the essential conditions will resort to usurers and middlemen who charge for the success of co-operative methods is the co- excessively high interest. Even with access to govern- operation of the people concerned with the relevant ment banking institutions making loans at the com- government authority; another condition is that the paratively low interest of 4 per cent—the rate charged Government take steps to provide the necessary qual- by the Industrial Bank of Iraq—owners face the ified personnel. difficulty of having to provide guarantees and securities. The problem of financing is basic to the successful Co-operatives can I* organized tn assist small-scale development of Iraqi small-scale industry. Without industries in rural areas for the following purposes: financial resources, the entrepreneur cannot obtain the supply of raw materials; production; marketing and land, buildings, equipment, raw materials and labour distribution of output ; extension of credit. which he requires. It is not necessary to establish co-operatives for each Raw material supply. Raw material requirements for of these purposes in every village or community. The each typ¿ of industry differ. Some industries need scarce experience of other countries has shown that one or costly raw materials, which can lead to inflated industrial co-operative suffices for the various activities. suppliers' prices, especially if purchases are on an instal- It is possible to seek the assistance and learn from the ment basis. experience of other countries in the application of this Marketing of output. The quality of products and method. the size of demand in local markets is relevant in this The Industrial Hank of Iraq is the main source of context. Large markets are a favourable factor. How- financing available to local industries, whether for ever, producers are often subject to middlemen, since long-term, medium-term or short-term loans. Eligible lack of capital for re-location or even for the introduc- industrial projects are those which transform raw tion oí a depot prevents them from establishing direct materials into fully manufactured products, assembly relations with their consumers in places situated far industries and industrial services institutions. To lie from the factory. Communication and transport costs eligible for assistance under the industrial development are also obstacles in the way of small-scale industries. law, one of the principal conditions to be satisfied is Production and management methods. The employ- that the capital invested in machinery should be not ment of primitive methods and the resistance of crafts- less than ID 3,000 over and altove the value of the men to change are common characteristics. However, power-generating plants whose installation is a basic progress will take place as consumers become more prerequisite. fastidious as a result of increasing incomes and with The provision of guarantors and security is a con- the need to develop, improve and diversify the quality dition for obtaining a loan in order to minimize the and methods of production. bank's risks. Small-scale industries cannot expect to An advantage to small-scale industry in Iraq in rural receive such assistance unless they can produce the areas is that local labour is available at low wages, an necessary security, and this frequently presents diffi- advantage not always shared by the medium-sized and culties. The risks could perhaps be mitigated if loans large mechanized industries in urban areas. A dis- were secured against the industry's output, especially advantage of small-scale industry is its inability to if this is of an artistic or traditional type for which provide those services and conditions for workers which there is a constant demand. Loans could also be granted the larger industries in urban centres can provide. This against raw materials. As sums advanced for these may be an obstacle in obtaining skilled labour. Another purposes are comparatively small, it should be possible disadvantage is that personnel in small-scale industry to dispense with guarantors and accept securities; tend to lack administrative experience and commercial however, the implementation of this proposal would skill. At the same time, the encouragement of small- require the amendment of laws and regulations at scale industry is of assistance in resolving unemploy- present in force. ment problems. The introduction of hire-purchase, which is used Role of the co-operative association. The solution in a number of countries as an encouragement to «f the principal problems of small-scale industries industrialization, would be of assistance. depends on the effective use of available facilities and When it becomes possible to apply the co-o|ierative institutions. One method is to offer direct advice and method and form co-oj)erative societies for the develop- technical guidance on such questions as production and ment of small industries in Iraq, measures should be finance. Although this method is acceptable and useful introduced to enable the Industrial Bank, the Co- to small-scale industry in urban areas, it may not be operative Bank, and other institutions to provide some as useful to small-scale industry in rural areas. of the facilities needed to help those industries. An The co-operative method has succeeded in alleviating alternative approach would lie to reach agreement on the difficulties of small industries and trades in many the establishment of a special fund io finance industrial countries and may be an effective instrument in Iraq. co-operatives, which in turn would give loans to their IndUMlriul development in the Arab countries

members in accordance with established procedures. development of small-scale industry in Iraq will be Until financing arrangements can be improved, tbe at a disadvantage.

12. <*mall«eale inducir ir« in Kuwait and their impart on the national economy

In recent years the de\eloping countries have devoted Because uf the recent origin oí industries in Kuwait, considerable effort to the encouragement of the indus- the Department of Statistics has not established a trial sector of the national economy. A weakness of system for the classification of industries. However, the economies of the developing countries in the past taking into consideration the definitions which have has been the inadequate contribution from this sector. been adopted by certain developing countries, the A desirable objective is to increase the contribution economic structure of Kuwait, the size of its industrial of the industrial sector to the extent necessary to sector, its population, the size of its internal market ensure a proper balance lietween all sectors of the and existing industrial legislation, it is possible to define economy. The achievement of such a balance provides small-scale industries as those using machinery and not oidy a sound national economy but at the same eniploying fewer than 100 workers. In the light of this time, an economy more resistant to unfavourable in- definition, most industries in Kuwait may be classified fluences, whether originating from abroad or internally as small-scale industries. .Medium-scale industries may as a result of jiolitical developments or fluctuations iii 1« defined as those employing fewer than 200 workers the business cycle. and large-scale industries as those employing more At the same time, a balanced relationship must l>e than ¿00 workers. Kxcluded from this study is the achieved within the framework of the industrial sector petroleum industry including exploration, extraction itself. To this end, industries are classified as heavy, and refilling; public utilities stich as electricity and intermediate, light and handicrafts on the basis of water desalination ; and handicraft industries which do certain characteristics. Such classifications may be used not utilize machinery and which employ only a small for purposes of studying or licensing an industry, or number of workers. This studv of small-scale industries to determine its needs for assistance or its technical, covers the following joints : economic and social obligations. The legal status of small-scale industries; ^ Although this classification is not clearly defined in The place of small-scale industries in the industrial Kuwait, an endeavour is made to establish the frame- sector; work for each group of industries in order to study small-scale industries within this framework, to analyse A description and analysis of small-scale industries; Tlie technological position of small-scale industries; the conditions and problems of the industry, and to The labour situation : suggest possible solutions. Management ; The present study is divided into two parts: the first Technical specifications and their application; contains a definition and an analysis of small-scale Industrial financing. industries in Kuwait; the second deals with the pro- blems of small-scale industries and their solution. The legal status of small-scale industries. Since the Both develo]>ed and developing countries have class- enactment of industrial ¡aw No, 6 of 4 March 1965, ified industries into heavy, intermediate, and small-scale industrial establishments in Kuwait have required legal industries with a view to determining the impact of personalily, subject to certain rules governing their licensing, registration, protection, supervision and each on the national economy, and for 'the purpose assistance. of strengthening their contribution to economic and social development in an integrated and co-ordinated Without exception, small-scale industries are subject manner. The need to achieve this aim has necessitated to the provisions of industrial law Xo. 6. The legal a carefully planned programme for developing these status of tlie industrial establishment was defined in groups of industries, especially the small-scale in- article 2 of that law. However, the distinction between dustries, in order to remove factors hindering the large, medium, and small-scale industries, on the one co-ordinated growth and prosperity of the industrial hand, and handicrafts on the other, was not specified. sector. Hence, we base our classification of industries on two Although the aims of developing and developed criteria: the use of machines, and the number of countries with respect to the industrial sector are the workers. In the light of the definition of the industrial same, the criteria by which industries are classified establishment as stated in article 2 of industrial law vary with the economic structure of a country and the No. 6, and using the criteria mentioned above, small- size of the industrial sector. The most important criteria scale industries are defined as establishments which are number of workers, capital invested, volume of employ fewer than 100 workers and whose bask sales, and consumption capacity. operations include transformation, assembly, mixing canning, bottling, or packaging undertaken with the In Kuwait, the industrial sector is of relatively recent help of machinery. origin. It grew with the expansion of investment in oil, with tlie influx of workers from abroad, and with The place of small-scale industries in the industrial the increase in purchasing power resulting from higher sector. Small-scale industries in Kuwait occupy an oil revenues. In consequence, various industries were important place in the industrial sector, whether from established both to meet tlie demand created by economic the point of view of capital invested, number of workers and social evolution, and to satisfy the need for diver- emptoyed, diversity of products, or their impact on sification. the local market. 12 Paper presented by the Ministry of Commerce and Indus- Description and analysis of small-scale industries. try of Kuwait. Small-scale industries in Kuwait are manufacturing Development of key industrie* 61 industries estnblislied to satisfy loc«il demand. These Small-scale industries face a number of problems industries produce goods which cannot be im|X)rted at which hinder their growth, and which in turn affect a competitive price because of high transport costs or their co-ordinated development. Some of these problems other reasons. may be resolved at the country level, while others The technological position of small-scale industries. can be resolved only at the Arab regional level or at The majority of small-scale industries in Kuwait are the level of the United Nations and its specialized equipped with modern machinery, and are operated by agencies. Arab and foreign experts. However, productivity in The most important problems facing small-scale these industries is not sufficiently high. Detailed studies industries at the local level may to summarized as are at present in progress with a view to correcting follows: vocational an ! .eclmical training; management; production deficiencies. technical sjiecifications and measurements; industrial estates, and industrial financing. The labour situation. Latour employed in small-scale Vocational training. Vocational training is essential industries is of Arab origin, although the proportion of in order to raise productivity levels and the quality Kuwaitis employed is very small. The majority of of products. It has already been shown that labour is workers have acquired their skills on the job. Because not adequately trained in these industries, a fact which labour is well paid in relation to the prevailing level has caused productivity levels to fall and costs of of wages in the neighbouring Arab countries, labour production to rise. turnover and mobility has been reduced to a minimum. Despite high wages, productivity per worker remains Training costs are prohibitive for small-scale in- low in relation to that in Europe or the United States. dustries, especially in a small market where industries This may lie attributed to the absence of basic voca- tend to to small in size. The Government of Kuwait tional and technical training. has given much attention to the subject of technical training, and is planning to establish a high level Management and supervision. Management is a key committee to study the position of technical training factor in the smooth funtioning and co-ordination of in the industrial sector, and to prepare the necessary industrial enterprises. Management responsibilities in- legislation for establishing an agency, attached directly clude studies of marketing potentialities, consumer to the cabinet, to provide the vocational and socialized demand, the creation of cordial latour-management training required to meet the needs of the country's relationships and the supervision of productivity levels. economic development plan. Technical specifications. The application of technical Technical and vocational training is an economic s|«cifications to products has tocóme an economic process which has to to studied from the cost-tonefit necessity dictated by the need to market products on (joint of view. Vocational training may Ite achieved a competitive basis. It is generally assumed that con- through co-o|>eration between the training centres to sumers rationalize their purchases of a product on the to established by the Government and small-scale Ittsis of quality and conformity to modern technical industries. These centres can provide training for specifications. The open market policy of Kuwait widely practised trades such as those of mechanics, provides consumers with a variety of such products electricians and welders. Specialized trades, which are and acquaints them with modern technological achieve- sparsely practised tocause of the limited number of ments from which Kuwaiti consumers are lxnind to industrial establishments requiring such skills, do not profit. If. therefore, local production is not techno- call for sjK'cial centres. In such cases, it is |>ossihle to logically competitive, its ability to sell will be weakened provide in-service training, es|>eciallv arranged by the even if such industries are selling in a protected market. Department of Industrial Affairs. It is noteworthy that the application and supervision Management. The heavy res|>onsihilitics assumed by of technical specifications necessitate the establishment management require the selection of managers with a of an experimental laboratory. While it is not econo- strong background in administration, economics and mically feasible to establish a laboratory for each small- technology to ensure the pro|>er functioning of plant scale industry, it should be possible to establish a operations. Since it is essential tor industries to central laboratory to service small-scale industries as maintain a cost accounting system, and since this is a whole. beyond the means of small-scale industries, it is suggested that unified accounting forms should to Industrial financing. Small-scale industries frequently prepared and used by industries. It is also desirable require short- or long-term loans for plant expansion, to organize training for management in public relations. or to meet seasonal requirements for raw materials. Good labour management relations are undoubtedly To determine the amounts of loans required and the important for achieving the desired co-operation of all conditions of repayment, it has toen the practice to concerned. study the economic and fu.uncial status of industrial Technical specifications and stardards. Confidence enterprises. Because the absence of proper accounting in the national product is an imjiortant factor in the procedures prevents small-scale industries from bene- promotion and progress of industry. In order to ensure fiting from the services of the Credit and Savings consumers' confidence, efforts must to made to convince Hank, such industries have usually resorted to com- consumers of the high quality of national products. mercial banks for industrial loans at high interest rates, This may be done by the adoption of technical s|>eci- a factor which has contributed to the raising of pro- fications and standards. duction costs and prices of products. For these reasons, small-scale industries have not been able to benefit These general principles ate particularly important from the facilities of the Credit and Savings Bank and for the success of small-scale industries in Kuwait. the bank has thus failed to fulfil the objectives for The Department of Industrial Affairs has provided which it was established with respect to small-scale funds to promote the wider application of technical industries. specifications and standards, and has contracted with 62 Industri«! ë»veto»wnl in tht Arab cmtatrtai the Industrial Institute in Lebanon for the necessary of the Credit and Savings Bank. The creation of a studies. The Government of Kuwait is now giving bank for the promotion of industry is now under study. serious attention to this question with a view to There are other problems which should be treated strengthening and promoting industries. at the regional level, the most important of which are: Industrial estates. The best way to encourage small- vocational training for certain important industries; scale industries is to provide them with services and management, and collective industrial estates. facilities which reduce production costs. The concept It was pointed out earlier that certain types of of industrial estates was developed as a means of vocational training could not be undertaken in Kuwait providing such assistance. An industrial estate has been because of the limited demand for such skills. It would defined as "an area of land, selected because of its be possible to resolve this problem by the establishment geographic position and economic advantages, reserved of regional vocational training centres. by the State for the establishment of industries in The establishment of a regional centre for advanced accordance with an industrial programme aimed at management would lie beneficial to Kuwait and to other benefiting those industries through the services and Arab countries. The unification of programmes, the facilities erected by the State". Such services and exchange of experiences and the personal contacts that facilities are offered for fees much lower than those are likely to be made by managers from the region which their establishment would otherwise have en- would enable participants to obtain theoretical and tailed. It is clear, therefore, that the industrial estate practical insights into their own establishments. is of assistance in raising productivity and lowering costs. If housing is also provided for labour, including The establishment of collective industrial estates necessary health and social facilities, productivity per among neighbouring Arab countries will be of worker would be even greater ; moreover, labour would assistance to these countries. In certain cases it is acquire a sense of security. impractical for a country to confine its activities to its own national area. The establishment of a collective Convinced of the advantages of industrial estates, industrial estate might, therefore, improve the chances the Government of Kuwait has established three such for other surrounding areas. It would also provide an estates. The Government is also planning to create a opportunity for establishing common industries, com- committee to study each estate and prepare blueprints mon vocational training centres and managerial training. for facilities such as roads, water, electricity and butane gas, and to organize the distribution of industries in a Certain problems confronting small-scale industry in manner conducive to the promotion of integration. Kuwait can be resolved only through international action. The most important of these relate to the Industrial financing. The two sources of industrial provision of instructors, productivity and technical finance are loans granted directly by the Government, specifications. or through the Credit and Savings Bank. The latter represent private loans of individuals, private companies Vocational training in Kuwait, whether at training and commercial banks. centres or in-service, requires the services of competent instructors in various fields. Since it is difficult to For small-scale industries, the main source of finance train local instructors to undertake this work, the help is the commercial bank. Because small-scale industries of the United Nations and its specialized agencies will are unable to meet the credit conditions stipulated in have a great impact on the training programme. the laws of the Credit and Savings Bank, they have no choice but to resort to commercial banks and borrow The study of factors affecting productivity and their at higher interest rates, a fact which contributes to treatment requires the services of experts in the fields increase of production costs. of economics, industry and accounting. The United Nations can undertake the necessary studies and on Kuwait does not at present have a bank which caters the basis of the resulting findings make recommendations solely to the development of industry. The provision to improve the prevailing low levels of productivity of industrial loans is one of the many responsibilities in Kuwait. Part III. THE INDUSTRIAL SITUATION IN THE ARAB COUNTRIES

1. The industrial situation in Iraq

The decision taken by the Government of Kuwait, took pia« between 1880 and 1913. The expansion in the United Nations and the Arab league to invite the the country's exports stimulated the development of Arab countries which are not members of the Economic such simple industries as wool, dates and grains. These Commission for Asia and the Far East (ECAFE) or were the first large-scale mechanized industries in Iraq. the Economic Commission for Africa (ECA) to participate in a regional conference to be held in the Shortly after the occupation of Baghdad in I'M7, capital of Kuwait is welcomed by the Government of modern Iraq emerged as an indej)endent political entity. Iraq, which wishes the conference every success. The The British mandate continued until 1932, when Iraq Government of Iraq hopes that this conference will joined the League of Nations. Under the Mandate, provide an opportunity for investigating the industrial Iraq achieved partial development in certain fields. situation in the participant countries, and assist them Railroads were established, electricity was introduced in several cities and oil exploration was started in in exchanging their points of view and in taking positive some areas. Nevertheless, by the end of the period of steps towards the realization of Arab aspirations. It also hopes that this conference will help the Arab the mandate, the industrial sector was still very small, countries in their efforts to guide their economies on although more active. The number of industrial estab- sound scientific and technical lines. lishments governed by the industrial encouragement law of 1929, had increased from eight in 1929 to ninetv-six Our present study includes a historical review of the in 1945. Accordingly, it appears that Iraqi industry development of Iraqi industry, with a summary of the had actually registered some progress, although at an industrial situation in the early sixties, and a detailed extremely slow pace. description of industries in the public, mixed and In the meantime, several industries had devclo|>ed, private sectors respectively. Tt also includes details of namely, textiles, cotton ginning, cigarette and construc- the measures taken by Iraq to encourage the develop- tion materials manufacture. Furthermore, in 1936 the ment of national industry, in particular, the financing Government established the Agricultural Industrial aspect, protection, direct or indirect support through Bank, which contributed, during the period 1*»36-1940, exemptions, and finally the role of the Federation of to the development of local industries. At the same Industries. time, certain industries shifted from manual to mecha- In addition, the study gives a summary of the new nical production, and before the end of the Second socialist policy and shows the importance of this policy World War additional expansion had taken place in in guiding industry, especially as far as the organization certain industries, especially in the rayon and cotton (if the public sector is concerned. textiles, soap and cigarette industries, which constituted the nucleus of the mechanized industrial sector in Iraq. The last part of the study is devoted to the problems facing Iraqi industry. Immediately after the Second World War, the Iraqi people showed a growing interest in industry. This HISTORICAL BACKGROUND was partly due to the windfall profits that had l>een realized during the war period, and partly to the presence of encouraging factors such as the development Iraq's economic development was slowed down by of the Industrial Bank and the financial support a series of political regimes which isolated the country extended by the Government by virtue of the industrial from development activities taking place in other parts encouragement law. This period was also characterized of the world by effective government participation in industry Up to the end of the First World War, Iraq was through the Industrial Bank, a factor which speeded a part of the Ottoman Empire, whose power extended up the process of industrialization. over a period of four centuries. The Ottoman rule left the country in poverty, ignorance and disease. The THE SITUATION IN THE NINETEEN-FIFTIES post-war period brought some improvements, although these were not sufficiently significant. Then came the The 1954 industrial census presents a true picture Second World War and another post-war period, but of the level of industrialization of that ¡«riod. That it is only since the 1950's that real achievements have census included establishments of all sizes and types, been made. large as well as small, oil industry and handicrafts. Iraq came into contact with international economic It differentiated l>etween establishments of various sizes forces during the second part of the nineteenth century employing fewer or more than twenty persons. The as a result of the growth of its foreign trade, which number of industrial establishments amounted in 1954 might be attributed to the development of river trans- to 22,460 (excluding those engaged in oil), of which l>ortation in the country. During the twenty-year period 22,166 employed fewer than twenty persons. Only 294 starting in 1865, the value of its exports increased establishments employed over twenty persons. The sevenfold. An additional threefold increase in exports average number of persons employed in all establish- M Induit rial development in the Arab countriei ments was 2.3, while the average for large establish- Table 1. Development of State revenue! from oil ments was 131.6. There were also 10,157 establishments employing one person only, 5,651 two persons and 2,805 three persons. The total number of persons Year Amount Amnunl (in 11) D00Ì Year employed in the industrial sector was 90,291, excluding (in ID 000) the oil industry, which alone employed 15.249 persons. 1949 3,199 1957 More than 20 per cent of the industrial establishments, 48,920 1950 6,674 1958 79,876 or 4,573, were located in Baghdad and employed 1951 15,113 1959 86,649 33,594 persons, or approximately 37 per cent of the 1952 32,635 1960 95,092 total number of persons employed in industry. 1953 51,343 1961 94,828 1954 68,370 1962 95,124 The capital invested in machinery and equipment 1955 73,742 1963 110,045 was estimated at 15.5 million Iraqi dinars (ID) and 1956 . 68,858 1964 126,074 the total wages paid amounted to ID 5.75 million. Sales amounted to ID 39.2 million, the value of raw materials to ID 15.0 million and the value of buildings The above table shows the extent to which revenues to ID 6.02 million. The power used amounted to derived from oil were scarce prior to 1950 and the 195,821 hp and was valued at ID 1.05 million. The substantial increases which took place in the early total value added and the value added per person nineteen-fifties. amounted to ID 23.117 million and ID 255, respecti- vely. Thus, taking as a criterion the relative size of In order to invest these new resources efficiently, the industrial sector, the number of persons engaged law No. 23 was enacted in 1950, establishing a in it and the size of industrial establishments, the Development Hoard, whose function was to investigate industrial sector in Iraq appeared to be of minor the country's potentialities, its productive capacity and importance. Nevertheless, the industrial census depicted its natural resources. In the light of the board's studies, possible expansion in the cigarette, spinning and a general programme for developing the country's weaving, soap, chemical and construction industries. resources was to be drawn up, aimed at increasing the level of national income and raising the living standard The industrial sector was characterized by the pre- of the population. Projects in the fields of mining and dominance of industries using agricultural products. electricity were to be included in the programme. As indicated above, the total receipts from industrial activity amounted to ID 39.2 million in 1954, dis- In 1951, the board submitted its six-year programme tributed as follows: construction industry, ID 8.6 (1951-1956), based mainly on the IBRD (International million; water and electricity, ID 2.5 million; grain Bank for Reconstruction and Development) mission's milling, ID 1.0 million; tanning, ID 0.8 million; others, report, which stressed the need for assigning priority ID 25.3 million. During the same year, imports of to agricultural development. Accordingly, 34 per cent consumer goods amounted to ID 3.70 million, of which of the total investment under that programme was ID 13.7 million were spent on food and soft drinks, allocated to water-control projects, 8 per cent to other ID 12.8 million on textiles, ID 4 million on durable agricultural projects and 20 per cent to mining, industry consumer goods and ID 6.4 million on other consumer and electricity. goods. Later, when the State's revenues from oil had been Studies have indicated that, during the nineteen- substantially raised, the Development Board submitted fifties, industrial expansion was limited-by economic a second five-year programme, 1955-1959, under which and technical factors. In some cases raw materials were the amounts allocated were twice as high as those not readily available, while in others the level of under the first. Allocation for water control and com- domestic demand was not such as to permit the estab- munications were also twice as high, while those for lishment of economically viable industries. In certain public buildings were even higher. As a result, alloca- other cases, demand existed only for products of tions for industry and agricultural projects were lower superior quality which could not be produced locally in the second programme than in the first. owing to lack of technical know-how. In essence and form, the 1955-1959 programme was We have already observed that the process of similar to its predecessor. However, again in conse- economic development in Iraq remained very slow until quence of the increasing receipts from oil, the com- the beginning of the nineteen-fifties, a fact which pletion of certain studies and the publication of Lord limited the size of the market and therefore the Salter's report on Iraq, the second programme was replaced in 1956 by a third programme covering the growth of industries. Iraqi industry did not develop K independently of other sectors, and was itself an out- period 1955-1960. come of the development of the economy as a whole, Lord Salter's proposals were clearly reflected in the which, although limited in intensity, nevertheless latest programme. His rejxirt stressed the necessity created new scope for industrial development and expansion. of giving priority to short-term projects directly and rapidly affecting the level of income. Accordingly, Early in the nineteen-fifties, following the signing allocations for housing and agricultural projects were of a new agreement with the oil companies, State increased. The programme for industry reflected, to revenues from oil increased substantially, thus securing a large extent, the Little Co. report. for Iraq an important source of revenue for the develop- The following table, which shows the allocations ment of its industry, and solving, at the same time, contained in the three programmes of the Development one of the country's most important problems, that Board, clearly indicates the priority given to the of financial resources and foreign exchange. development of agriculture. Industrial situation in the Arab count rie* 65

Table 2. Allocations under the three programmes of the Development Board

First Second Third programme proa ramme Programm» 19511956 191 1959 19551960 ID million IP inillion ID million Item (percentage) 1 perce ntaije ) {percentage)

1. Expenses for administra- tion, research and organ- ization 3.2 2.0 5.5 1.8 7.4 1.4 2 Irrigation and flood con- trol 53.4 34.5 107.9 35.9 153.8 30.7 3. Development of animal and vegetable wealth 12.7 8.1 6.5 2.1 14.3 2.8 4. Industry, mining and energy 31.1 20.0 43.6 14.3 67.1 13.4 5. Communications 29.0 18.7 74.2 24.3 124.4 24.9 6. Housing 1.7 1.1 6.0 1.9 24.1 4.9 7. Main public buildings 10,2 12.4 22.6 7.6 39.8 8.0 8. Secondary public buildings — — 32.3 10.6 59.4 12.0 9. Miscellaneous 5.4 3.5 5.9 1.9 9.9 2.0 TOTAL 155.4 100.0 304.3 100.0 500.0 100.0

Iraq's industria! policy during the nineteen-fifties Consequently, it is not possible to trace the development tended to IK- conservative. Furthermore, only a part of industry in Iraq in detail. The Central Department of the amount allocated was actually spent. of Statistics took this into consideration when, in 1960, This conservative policy was not confined to the it began to collect monthly statistics on the industrial public sector. It reflected a concern with maintaining sector. The results of the 1960, 1961 and 1962 monthly an equilibrium in the Iraqi economy, in the sense of industrial censuses have already l«en published. From price stability. Accordingly, the adoption of an open- the information obtained from those censuses, a more door trade policy was advocated ; few went as far as adequate picture of the industrial sector in Iraq can to criticize the industrial encouragement law. 1« formed, especially if we take into consideration the Following the revolution of 14 July 1958, a struc- further development that took place in industry in tural change in the Government's economic policy took 1963, 1964 and the early part of 1965. place, the effects of which were felt in the years that The 1960 and 1961 censuses contained information followed. jiertaining only to establishments that were actually nriefly, the economic activities of the State and the operating and that employed ten or more persons. large expenditures on development projects directly With such statistics, it was difficult to undertake any affected the size of the Iraqi market and the growth accurate comparison between the industrial situation of industry. While the annual growth in national in the two periods, i.e. the nineteen-fifties and the income, at constant prices, in the ten-year period nineteen-sixties. The Central Department of Statistics starting 1953, was of the order of 6.4 per cent, the realized that deficiency, and in 1962 started collecting, annual rate of growth in the industrial sector during twice a year, data on industrial establishments em- the same period was 11.5 per cent. In spite of this ploying fewer than ten persons. As a result, the increase, the industrial sector continued to constitute industrial census of 1962 now gives a more comprehen- only a small part of the national income, amounting sive picture of the industrial sector in Iraq. to 7.6 per cent in 1953 and 9.4 per cent in 1958 (at In 1962, the number of large establishments was constant prices). 1,182, while the number of small establishments was 20,191, totalling 21,373 establishments, in all. Table S. National Income and income originating in the industrial sector prior to INI The following table reflects the evolution of the industrial sector in Iraq during the years I960, 1961 National and 1962. The information given pertains only to large income at establishments employing ten or mere persons (ex- temtant Industrial 19S6 prices lector cluding oil establishments). Yi-ar (in ID million) (in ID million) Table 4. Development of the industrial sector, IMI, IMI I 1953 262.8 18.7 and IMS I 1954 322.6 21.2 1 1955,956 298.9 24.5 Item I960 1961 1962 1 m 334.7 28.9 1 ' 348.4 29.8 Number of establith- 1 ,9S91958 3631 31.7 970 1,162 1,182 368.6 384 Number of persons 1 employed 67,221 73,253 77,666 Annusi wages (ID) 15,360,491 17,370,741 18,991,806 THE SITUATION IN THE EARLY NINETEEN-SIXTIES Cost of materials used in production (ID) 40,393,223 47,530,185 47 598,298 Apart from the information presented in the 1954 industrial census, no serious attempt was made to collect ceipts (ID) 85,054,996 97,354,337 104,689,688 data on the industrial sector in Iraq prior to 1960. 66 Industrial derelopmrnt in the Arab countries

Table 5. Large and small establishments, 1961 to 6.4 per cent during the period 1954-1963, the Large Small industrial sector's average rate of growth exceeded Details establishments establishments Total 11.5 per cent; this was higher than that of any other Number of establish- sector in the economy. The rate of industrial growth ments 1,182 20,191 21,372 increased from 9.4 per cent in 1958 to 11.7 per cent Number of persons in 1961 and 12.3 j>er cent in 1962. employed 77,666« 43,121b 120,787 Annual wages (ID) 18,992,802 2.973,402 21,966,204 Table 6. National income and income originating in the Cost of materials used industrial sector In the early nineteen-sixtiee in production (ID) 47.598,298 19,448,688 07,046.786 Total annual re- National income ceipts (ID) 104,689,688 32,625,036 137,314,724 at constant Industrial 195* price i sector l'ear {in ID million) {in ¡D million) h• Including 850 unpaid persons. Including 24,963 unpaid persons. I960 414.6 47.5 1961 468.8 51.2 The value added, at current prices, in the industrial 1962 503.3 57.0 sector (manufacturing, water and electricity) was ID 1963 489.4 55.3 62,050.000 in 1962, and the number of establishments was 21.373. as compared with 22,460 in 1954. This would indicate that larger establishments with mech- THE SITUATION IN THE PRIVATE, MIXKD AND PUBLIC anized equipment had been replacing small establish- SECTORS ments. The number of jwrsons engaged in industry The State began to take an active role in the increased from 90,291 in 1954 to 120.787 in 1962. development activities of the country in the early Total annual wages increased from 5,756,000 dinars in nineteen-fifties, when the financial resources needed 1954 to 21,966,208 dinars in 1962 and receipts from became available. The State's contribution to the sales jumped from II) 3° million in 1954 to more than national income amounted to 15 per cent in 1960. The ID 137 million in 1962. The value of materials used normal trend towards an increase in the State's con- in production also increased from ID 15 million in tribution to the country's national income was further 1954 to more than ID 67 million in 1%2. The value strengthened by the socialistic decisions of July 1964. added per person, which amounted to ID 255 dinars Government investments considerably exceeded those in 1954, rose to more than ID 490 dinars in 1962. of the private sector. Consequently, the increased The alxne figures indicate unprecedented progress investment activities of the State were bound to affect in Iraqi industry during the period 1954-1962. Despite the government contribution to national income. its persistami}- small contribution to the national The following table shows the change in the relative income, the industrial sector has taken the lead in the importance of the private and public sectors and the development process. Whereas the average rate of contribution of each to the value added in the industrial growth in national income, at constant prices, amounted sector. Table 7. Contributions oí the privato and public eector* in the value added of the industrial sector (In ID million)

19!! 19S6 1960 Item /'rirait! Public Total Private Publie Total Private Public Tola! Oil refining 1.73 1.73 2.61 2.61 Manufacturing industries 5.17 5.17 16.32 0.43 16.75 25.56 0.76 26.32 41.02 2.59 Water and electricity 43.61 0.50 0.70 1.20 2.07 2.07 2.66 2.66 TOTAL 16.82 286 1*68 25.56 5.44 31.00 41.02 10.41 51.44

The proportions shown in the foregoing table will gistered with the federation are those whose invested doubtless increase further as a result of nationalization capital in machinery and equipment, excluding power measures and the larger government investments in machinery, is less than ID 3,000.) These figures also the industrial sector. include projects in the public sector, which amounted The private sector to fourteen prior to nationalization and forty-two The amount of capital invested in 107 new projects following nationalization (for more details see annexes licensed under article 4 of the development law was VI and VII). ID 8,813,000 in the year preceding nationalization. Two years later, or one year after nationalization, the Table 8. Number of project! asáltate* or registered with amount of licensed investments had fallen to ID the Federation of Industries 2,800,000. but the number of projects had risen to 157, representing an increase of 33 per cent over the Projects 1961/1962 ¡962/1963 1961/1964 1964/I96S previous vear. The following table presents a clearer Affiliated 490 766 922 974 picture of prospects in the private sector, as given by Registered 196 3*4 765 the Federation of Industries, classified according to their affiliation or registration with the federation. The mixed sector (Projects affiliated with the federation must have a The most important projects in the mixed sector minimum of ID 3,000 invested in machinery and are those in whose capital the Industrial Bank has equipment, excluding power machinery. Projects re- participated. Shortly after its establishment, the In- Industrial situation in the Arab countries «7 dustrial Bank took the initiative of participating in The public sector the establishment of several industrial joint-stock com- Because of the inconsistencies in coverage between panies, namely, a jute manufacturing company, a date one census and the other, the annual industrial censuses producing company, a construction industries company, are of limited value in tracing the development of the a woollen textiles company (which was later converted public industrial sector; for example, the information into a government enterprise), the Iraqi gypsum com- presented in the I960 census did not include construc- pany and the national insurance company. By the latter tion, while the 1961 census desenlies the government part of 1955, the Industrial Bank was participating in sector in a general way. fourteen companies. Following the revolution of 14 July 1958, the bank intensified its activities in the The following table gives some indication of the field of industry. It took part in the establishment of scope of the government industrial sector a light industries company, whose production included television and radio sets, heaters, stoves, etc. The bank Table 10. Government manufacturing establishment« in also initiated the establishment of the Al-Iniara in- 1962 dustries company, the national chemical industries Average ' ' '" 'v . t'alue of sales company of Baghdad, and the Iraqi insurance company. number of Xumber of furnished establish- of persons On 13 July 1964, the Industrial Bank was partici- Industry menls employed Un ¡D 000) pating in seventeen joint-stock companies in the mixed Sugar 1 235 1,503 sector. Cotton ginning 1 6 20 TV nationalization laws which followed brought Pencils 1 41 6 under State control the first nine companies shown Cigarettes 1 497 2,120 Medical cotton 1 211 108 in the following table. The Industrial Bank continued Ice 1 4 1 its participation in the remaining companies, except Cement 2 489 501 for the Baghdad bakery company, which was attached Concrete products 1 465 to the General Directorate of Supplies, and the woollen Shoes 1 16 textiles company, which was converted into a public Silk textiles 1 43 17 enterprise. Furthermore, the bank has been studying Tobacco trimming 1 63 the possibility of establishing two new projects, one Date pressing 1 196 351 for the production of compressed wood fibres, using Dairy products 2 391 675 Carpentry 4 156 90 tinte palms as a raw material, with a capital of ID Printing and publishing 6 692 717 750,000; the other for the production of bicycles, with Woollen textiles 1 1,090 885 a capital of ID 250,000. The formalities are now in Cotton textiles 1 1,571 1,755 their final stages, and it is hoped to complete the Bakeries 5 462 398 establishment of these companies with the coming two Sewing 4 417 365 years. Slaughter houses 6 167 96« Refineries 5 2,334 13,586 TaMc •• Joint-stock companies in which the Indurirla! Brak participated in 1M4 TOTAI 47 9,666 23,098 + 96« • Receipts. Nominal Initial Paid-up participation capital capitai »f tank Percen- The table indicates that the government industrial Same of company (m ID OH) (in ID 000) (in ID P00) tage sector in 1962 constituted a small part of the whole industrial sector (20 per cent). Nevertheless, the 1. Iraqi Cement Co. 2,625 2,625 509 19.4 government sector covered a wide variety of industrial 2. Vegetable Oils Extraction Co 2,000 2,000 411 20.5 activities. 3. National Leather The socialist measures of July 1958 affected the Industries Co. 500 500 179 42.5 distribution of industries as between private and public 4. Iraqi Gram Trading sectors. But the main factor which is expected to and Milling Co. 250 232 66 26.4 increase the relative importance of the public sector 5. Iraqi Jute Indus- in the field of industry will be its large investments 760 127 15.0 tries Co. 850 in the coming years. Ät this stage, it may be worth 6. Iraqi Spinning and Weaving Co 1,200 1,200 425 35.4 while to investigate the industrial investment pro- 7. Real Estate Manufac- gramme included in the five-year plan for 1956-1969. tures Co 500 418 100 20.0 The five-year plan, 1965-1969 8. National Insurance Co 1,000 330 150 15.0 This plan is expected to achieve two important 9. Iraqi Re-insurance economic objectives: a substantial increase in the Co 5,000 1,250 400 8.0 volume of production and the standard of living by 10. Iraqi Date Indus- the acceleration of the rate of economic growth within tries Co. 100 61 20 20.0 a framework of economic stability; and a balance in 11. Light Industries Co. 1,000 413 125 12.5 the economic structure of Iraq by an increase in 12. Construction Industries Co. 100 75 46 49.0 the production and export of agricultural and industrial 13. National Chemical products, in order to diversify the national product and Industries Ca ISO 75 34 22.9 diminish the country's relative dependence on oil 14. Iraqi Gypsum Co. .. 150 150 30 20.0 revenues as a source of foreign exchange. 15. River Dredging Ca 250 61 16 6.3 In order to realize these objectives, the plan aims 16. Iraqi Marble Co. . 200 50 40 20.0 at increasing national income at a minimum average 17. Baghdad Bakery Ca 130 130 32 25.0 compound rate of 8 per cent per annum during the 68 Industrial development in the Arab count liei coming five years. In fixing this target, the saving and improve industrial enterprises ; to purchase and import investment potentials of the Iraqi economy, as well as equipment, machinery and raw materials; to assist in the size and development of available resources, were exporting industrial products and to carry out any taken into consideration. Sectoral rates of growth were step which is deemed to promote industry in accordance set up on the basis of past performance. Thus, the with the provisions of the bank's regulations; annual rate of growth was fixed at 12 per cent in the (b) Participate as founder and/or shareholder in industrial sector and at 20 per cent in the electricity industrial enterprises undertaken by joint-stock com- sector. As a result, the value added in industry is panies ; exacted to increase from ID 70 million in 1964 to ID 120 million in 1969, and from ID 6 million to ID (c) Mediate in the import of machinery, equipment 65 million in the electriciiy sector during the same and raw materials for industrial purposes; and in the period. This will require the investment of ID 159 export of industrial products for the account of its million in industry and ID 45 million in electricity. clients in accordance with instructions to be issued by Total planned investments in these two fields by the the board of directors in this respect ; central Government is fixed at ID 168 million, while (d) Store machinery, equipment, raw materials and the private sector's contribution is not expected to products belonging to industrial enterprises in its own exceed ID 5 million. Other investments, amounting warehouses or in other stores to be selected by it ; to ID 35 million, will be undertaken by the Kconomic (c) Deal in foreign exchange and issue guarantees, Organization and other government agencies. provided that business of such nature is confined to It is worth mentioning that most government-owned matters connected with industrial enterprises, in accord- industrial projects employ modern labour-saving tech- ance with the provisions of the banking control law niques and have relatively large capital funds. Up to and the foreign exchange control law ; 18,840 persons are needed per year over the plan (/) Offer technical assistance, advice and informa- period to undertake construction works in government- tion on economic, engineering, administrative and owned industrial and electricity projects. In the target accounting matters to owners of industrial enterprises ; year. 21,952 persons will be required to run the newly (g) Carry out studies and research necessary for established industries. Furthermore, industrial and the establishment and promotion of industrial enter- electricity projects require relatively larger amounts prises or for their expansion or for changing their of foreign exchange than other types of projects purpose directly or in co-operation with companies, included in the plan. Foreign exchange requirements individuals, official establishments or services, etc.; constitute 7l ner cent of total investments in industry, (h) Provide administrative, vocational or other 80 per cent in electricity, 30 per cent in agriculture, services to industrial enterprises by seeking the assist- 25 per cent in construction and housing and 40 per ance of the technical staff at the Ministry of Industry, cent in transport and communications. and also assist the client in laying down suitable plans In contrast with the private sector, which is expected for establishing the enterprises connected with the to develop at a relatively slow rate, the public in- required loan; at the request of the client, the bank dustrial sector is expected to develop rapidly in the also carries out such studies against fees to be agreed coming years. upon. Annex II shows the industrial projects envisaged by The bank's nominal capital, as a non-interest-bearing the public sector in the five-Year plan. ;nd annex III loan from the Ministry of Finance, was originally set shows the value added in the different types of at ID 500,000. The sum was considered large in industries for a number of years. relation to the bank's activities at the time. In fact, total yearly loans extended by the bank did not exceed MEASIRKS TO KNCOURAGE INDUSTRY ID 100,000. With the expansion that has been taking The main source of industrial financing in Iraq is place in the bank's financial activities, its capital has domestic, the role of foreign capital being rather of a been raised on several occasions in order to handle new complementary nature. Very little use has been made developments in the industrial field. It was raised to in the past of foreign borrowing and equity partici- ID 1 million in 1950-1951, to ID 3 million in 1954- pation. However, the expansion of domestic industries 1955 and then to ID 8 million in 1955. The last of or the establishment of new ones may require the such increments took place in 1961-1962, when the participation of foreign capital in the future. This fact bank's nominal capital was raised to ID 10 million. has already been taken into account in the present However, the paid-up capital has not, so far, exceeded five-year plan. ID 475 million. The gradual increase in the bank's activities has made it necessary to look for new sources A description of the role of the Industrial Bank in of finance. Recently, the bank contracted a 3 per cent financing both the mixed and the private sectors follows. interest-bearing loan from the Central Hank of Iraq The Industrial Rank amounting to ID 0.5 million. As a result of developments in the field of national The bank was established to promote industry and industry and in the bank's capital, total loans extended encourage the investment of capital in industrial enter- by the bank increased from ID 100,000 in the first prises. Its role as a source of finance was emphasized year of operation to over ID 1 million in some of the because of the reluctance of Iraqi private capital to subsequent years. These loans covered all Iraq and invest in industry, preferring to invest in commercial were extended to large as well as small projects in and real estate projects which are characterized by the private and mixed sectors. quick returns. Following the nationalization measures, loans ex- In accordance with the law which established it, the tended by the bank expanded in line with the new bank is to achieve its aims by the following means: policy aimed at meeting the financial needs of the (o) Lend money to establish, operate, expand and private sector. Accordingly, loan applications increased Industrial situation in the Arab countries W markedly. However, most applications were for work- its participation in the companies in which it was ing capital, while those for medium-ami long-term already a shareholder, in particular the Light In- capital diminished. dustries Co., the Date Industries Co. and the National Loans extended hy the bank during the second half Chemical Industries Co. ; of 1964 (i.e. after nationalization) represented a 30 (/') Providing sup]x>rt to the existing private sector per cent increase above the level during the first half and participating whenever necessary in its projects : of that year. Similarly, loans extended during the first the bank has already participated in the AMI ila! quarter of 1965 represented a 51 per cent increase Industrial Co. and the Northern Wood Co., and is above their level during the corresponding period of studying the jxisition of other industrial enterprises ; the previous year. All in all, ID 1,040,000 worth of (c) F.stablishment of the following new industrial loans were extended after nationalization, indicating projects : an expansion in the bank's credit operations. (i) In collaboration with the private sector, a Annex IV shows the industries which have received project for the production of compressed wood fibres loans from the bank. from date palms ; the bank and the authorities con- At the very beginning, the bank's functions were cerned are looking for the most appropriate location confined to the extension of loans and equity participa- for the plant ; in the meantime, studies and tests tion. However, before 1958, the bank for a time are near completion ; this project will have an annual provided industrialists with certain banking services, capacity of 12.000 tons and will cost about ID such as the opening of credits. Later, it was found 750,000; a company to take charge of this project necessary to introduce a variety of banking services as is lieing established ; a part of the hank's functions. Accordingly, such (ii) Also in collai »oration with the private sector, services were provided for in the bank's regulations, a project to produce 30,000 bicycles at a cost of and in 1962 it began to perform them, although on a ID 250,000: a company is also being established very limited scale. Following the nationalization mea- to this end : sures of 14 July 1964, the bank expanded its o|>erations (rf) The following projects are under study: bicycle in that field. Prior to nationalization, credit opening tyres and tul>es ; starch from millet : citric acid ; sewing operations totalled ID 656,208, current debtor account machines. facilities granted totalled ID 39,100 and bills discounted Tax exemptions ID 10,500. The corresponding amounts for the period following the nationalization measures were ID Tax exemptions have Iveen among the measures taken 1,597,215, ID 73,450 and ID 46,050. Furthermore, the by different Iraqi governments to encourage national bank pursued a flexible policy regarding the deposit industry. In general, exemptions have been instituted of guarantees against the opening of credit. through customs tariffs or the promulgation of special Facilities and services rendered by the bank were laws such as the law for the encouragement of industrial not confined to the private and mixed sectors, but were undertakings and the industrial development law. also extended to projects belonging to the public sector. In 1927, the customs tariff law was amended to As soon as storage facilities in the bank's warehouses exempt the imjwrt of machinery and equipment. Fol- are organized, its operations are expected to expand lowing that, law No. 14 of 1929 for the encouragement even further. of industrial projects introduced a major change in As stated earlier, a number of industrial companies the field of industrial encouragement. Hesides main- were attached to the bank following its separation from taining the import tax exemptions of 1927, the new the agricultural-industrial bank. In 1948. two years law exempted industrial projects from the income tax after the bank started operations, the relevant depart- for a jieriod of ten years and from the excise tax on ments in the bank undertook studies on a number of all transactions. Furthermore, the law authorized the important industrial projects such as sugar, glass, use of unexploited government land for the establish- paper, steel, jute and woollen textiles. ment of industrial projects, provided that : The final product differed from the raw materials used ; Table II. Companies in which the buk remai«««! a share- The operations within the establishment were per- holier after nationalisetiea formed by machinery; The number of non-Iraqi workers and employees, Bank's VtrttnttQi Nomine! PaUnt faiiuf of B< excluding technicians, did not exceed 10 per cent e*tifl cëfiUl partin firtip- Ctmfanf («• ID 000) Un ID 000) frtion Ml.„.. of the total staff engaged ; The minimum capital of the establishment amounted Light Industries Co 1,000 750 126 16.8 to ID 2,750. National Chemical Indus- trie* Co 150 75 30 40.0 The 1931 amendment to the 1929 law reduced the Date Industries Co. 170 75 IS 20.0 minimum capital requirement to ID 1,500, enabling a larger numlier of establishments to enjoy the facilities Construction Industries 100 100 49 49.0 granted under the law. In 1933, a new customs tariff law was introduced The bank's industrial programme took shape in the aimed at providing protection for local industry. Tariff last part of 1964, when it prepared its investment plan rates were differentiated in accordance with the relative within the framework of the general industrial plan. importance of the industry in the national economy and The programme included: its stage of development. For example, customs duties (a) Strengthening and expanding the mixed sector imposed on imported cigarettes were intended to create because of its importance in the development of a price differential which would favour the consump- industry ; in line with this objective, the bank increased tion of local cigarettes. 70 Industrial development in the Arab countries In the year following the promulgation of the 1929 produced by protected industry were to be subject to law, only eight projects were granted facilities in control. accordance with its provisions; the number gradually (c) The following facilities were extended to projects increased and reached ninety-six in 1945. meeting the conditions stipulated in the law: Another important development in the field of indus- (i) Exemption from income tax of annual profits trial encouragement was the promulgation, in 1950, of not exceeding 10 per cent of the paid-up capital for law No. 43 for the encouragement of industrial under- a period of five years; takings. The provisions of the new law were much the same as those of its predecessor, the 1929 law. The (ii) Exemption from income tax of annual profits 1950 law, however, introduced the following main new not exceeding 5 per cent of the paid-up capital during provisions : the next five years ; (a) Exemption of the enterprise from the income (iii) Exemption from income tax of reserves tax in respect of additional profits which do not exceed allocated for development and expansion purposes, 10 per cent of the total annual profits, for a period of provided that such funds did not exceed 25 per cent four years ; of total annual profits and were re-invested during (b) Exemption from the property tax for a period the subsequent five years ; of ten years ; (iv) Exemption from property tax for a period (c) Exemption of raw materials and machinery of ten years; from different types of fees; (v) Exemption from stamp duties ; (d) Provision, free of charge, of government land up to 25,000 nr for a certain period of time. (vi) Exemption from import duty of the following materials which could not be obtained locally: Eligibility for these exemptions and preferences was machinery and equipment; tools and spare parts; made subject to the following conditions: use of local raw materials; packing materials; raw materials or production of a commodity that could replace imports; value of machinery and equipment (vii) leasing of government land for the purpose should not be less than ID 5.000; at least 55 per cent of establishing industrial projects against reasonable of the capital must he Iraqi ; the numlier of non-Iraqis fees for a period of ten years ; employed, excluding technicians, should not exceed (een issued by the High Supply less than ID 5,000. Committee, which had the power to prohibit the With respect to the granting of assistance, the new importation of any merchandise whenever a local coun- law maintains the same principles as the old one, at terpart was available. Protective measures had also the same time adding the clarifications listed below. been adopted through the directives of a temporary (a) Profits not exceeding 10 per cent of the project's committee composed of members of the Ministry of paid-up capital shall be exempted from income tax for Economy and other departments concerned. The com- a period of fiv< years, effective from the year in which mittee had the power to prohibit totally or partial'v the profits are first realized; in the subsequent five years, importation of certain goods. However, because of the profits not exceeding S per cent of paid-up capital shall increasing demand for protection on the part of national also l>e exempted. Any profits in excess of these rates industries, it was fount! necessary to create a permanent shall be made subject to income tax. The year, of technical Iwdy to look into the matter. Accordingly, a exemption enjoyed by the project in accordance with committee was organized under the supervision of the the provisions of previous laws shall be counted if the Ministry of Economy, composed of representatives of previous exemption period had not ended at the time the official departments directly concerned with the when industrial promotion law No. 31 for 1961 was protection of industry, to submit proposals for the con- promulgated. sideration of the responsible authorities. (h) TK project shall be exempted from income tax Protective measures in Iraq were not confined to on that part of its profits allocated to reserves, provided Erohibiting the importation of competing foreign goods, that such amounts do not exceed 25 per cent of total ut were extended to the fixing of the prices of pro- annual profits. If those reserves are not utilized within tected goods in order to keep them at the same level, five years from the date of their allocation, or if they or at a lower level than that of similar imported goods. are added to capital or distributed in any form, they The federation of Industries shall be added to the profits of the year following the expiration of the five-year period, and made liable to The development of industry in Iracj has made it the payment of income tax. necessary to establish a number of agencies to promote (e) The law retains the provisions relating to the such development. exemption of projects from the payment of property and One such agency is the Federation of Industries, stamp duties. It also retains the exemptions from the which brings together the owners of industrial estab- payment of customs duties on all machinery, equip- lishments in a congenial atmosphere to study their ment and raw and packing materials, as well as the mutual problems and propose solutions to promote their regulations concerning the leasing of State lands. interests. The federation enjoys an independent legal (d) The new law cancels the temporary exemption status by virtue of law No. 52 (1956). The law entered into force on 18 August 1956 and was later revised certificate stipulated in the previous law; instead, it entitles the licensed project to enjoy all the privileges and replaced by law No. 31 (1962). referred to in paragraphs 3, 4, 5 and 6 of its article 10. The main objective of the federation is to represent (e) The project owner may upon its completion industrial interests before government authorities and other institutions, and promote the development of apply for a full exemption certificate. industry. Its policy reflects tha views of industrialists (f) The law provides also for suspending exemp- either directly or through their representatives on the tions and for measures to deal with any contraventions board of directors. Thus it does not represent the of its provisions in order to ensure its proper enforce- opinion of individual industrialists, but rather the point ment and utilization. of view of Iraqi industry as a whole. The policy aims at Protection developing industry, assisting it, promoting its products, In recent years, Iraqi industry has enjoyed an un- protecting it against foreign competition and introducing precedented degree of encouragement and support. The its output to the Iraqi public. To ensure the attainment main aspect of this support has been the protection of of these objectives, the federation studies thoroughly local industry against foreign competition. The degree the problems of Iraqi industry and recommends means of protection provided has varied, depending on the for its promotion. In these studies, the federation treats ability of local production to satisfy domestic needs with Iraqi industry as a unit, regardless whether it belongs respect to quantity and quality and at reasonable prices. to the public, private or mixed sectors. Protection is mainly dictated by the desire to give Through its advisory functions, the federation has domestically produced goods a chance to find their way l>een instrumental in developing the industrial sector, to the consumer, who is already accustomed to using especially the private sector, as well as in encouring imported goods, both out of price and quality con- investors to venture into the industrial field. 72 Industrial derriopment in the Arab countries

Annexes VI and VII show the number of projects government industrial administrations; these were affiliated with the federation, distributed by type of later attached to the Kconomic Organization; industry and geographical location respectively. The General Trade Organization, covering all national- Nationalization ized commercial establishments; provisions were made for government commercial agencies to be The Economic Organization came into being as a attached to it in the future; result of the socialist laws promulgated on 14 July 1958. The General Insurance Organization, covering all These laws aimed at implementing the principles of nationalized as well as government insurance and re- Arab socialism, defining the scope of the public sector insurance companies. and its role in the economic development of the country and organizing the activities of the private sector The purpose of the organization, as defined by the within the framework of the general economic develop- law, was to participate in developing the national eco- ment plan. Furthermore, they outlined the main aspects nomy through economic activity in the public sector. of the Government's socialist policy and its aims as The law also defined the ways and means of such follows : participation. (a) To implement the social revolution, aimed at The main functions of the Economic Organization creating an economic and social regime which would may be summarized as follows : determining the indem- result in an increase in production, and a fair dis- nity values for the nationalized companies and com- tribution of income; pensating shareholders; administering government in- dustrial establishments; setting up specific industries; (b) To define the field of economic activities per- amalgamating some of the nationalized companies in taining to the public sector to ensure the implementation order to achieve economies of scale. of socialist principles in planning: in line with this objective, all banks and insurance companies fell into The year following nationalization could be con- the hands of the State; this measure was intended to sidered as a transitional period. However, the na- make available to the Government the main sources of tionalized industries, as well as the different govern- finance and investments, thereby enabling it to formulate ment administrations, achieved a higher volume of its development policy; furthermore, the cement and production and sales during that year than in the period asbestos industries were reserved to the State because preceding nationalization (see annex VIII). During of their importance in the development of the country ; the year ending July 1965, and before prices were in the case of other industrial activities, such as spin- reduced, the value of production amounted to ID 43.7 ning, weaving, tanning, or the production of foodstuffs, million, as against ID 39 million before nationalization soap, shoes and bricks, the door was left open to (i.e., an increase of 12 per cent). With the reduction general participation; in prices, the value of production stood at ID 42 million (representing an increase of 10 per cent only). Sales (r) To define the role of the private sector and its amounted to ID 43.3 million, as against ID 73.8 million activities, making it compatible with the previsions of during the year before nationalization (i.e. an increase the temporary constitution and the aim» of Arab of 15 per cent). After the reduction in prices, the value socialism. of sales amounted to ID 41.7 million, or an 11 per cent Regarding the organization of certain companies, increase over the preceding period. The construction law No. 103 of 1964, and its amendments, stipulated industries registered the highest rate of growth in that every limited liability company whose paid-up production and sales, amounting to 18 and 24 per cent capital was ID 70,000 or more should, at the time of respectively ; the spinning and weaving industry regist- the implementation of the law, assume the character of ered a 17 per cent increase in production and a 22 per a joint-stock company; any company to be established cent increase in the value of sales; while the leather thereafter, with a paid-up capital of ID 70,000 or more, and shoes and foodstuffs industries registered 8 and 4 must assume the character of a joint-stock company; j>er cent increases in production, and 2 and 7 per cent every industrial project which, at the time of the imple- increases in sales respectively. The lowest increase was mentation of the law, did not have the character of a registered in the cigarette industry, amounting to 1 joint-stock or limited-liability company, and whose net and 3 per cent in sales. assets amounted to ID 70,000 or more, must assume From the first week of its operation, the organization the character of such a company ; a maximum limit to lowered the prices of several of the items produced in individual ownerships in joint-stock companies founded the companies under its management (see annex IX). for periods exceeding fi-e years; the value of shares with apaid-up nominal vJue should not exceed Despite the price reductions, the nationalized com- ID 10,000; companies, projects and institutions covered panies achieved higher profit margins in relation to the by the law must adapt their conditions to its provisions pre-nationalization period. The figures shown in within a maximum period of one year ; (however, due annex X are the result of auditing the accounts of to the prevailing economic situation, this provision was thirty nationalized establishments (industrial and com- amended and the period extended to two years). mercial) for the eight and one-half months that fol- lowed nationalization, i.e., from 14 July 1964 to 31 The Economic Organization March 1965. These figures indicate that combined Law No. 98 of 1964 established an agency attached profits, before payment of income tax, of all the na- to the Prime Minister known as the Kconomic Organi- tionalized companies amounted to ID 2.6 million, or zation. The law gave the agency legal status and made 24 per cent higher than in the corresponding period it financially and administratively independent. The preceding nationalization. Of the thirty companies organization consisted of the following : involved, only four incurred losses for other reasons while the other twenty-six achieved high profit« as The General Industrial Organization, covering all compared with the corresponding period preceding nationalized industrial establishments as well as nationalization. Thus, the Bata Co. realized a profit of Industrial situation in the Arab countries 73 II) 143,000 as compared to ID 57,000 (an increase of provement of the Iraqi Spinning and Weaving Co., 148 per cent; the Iraqi Asbestos Co. realized a profit Fattah-Pasha Co., the Real Estate Industries Co., the of ID 152,000 as compared to ID 66,000 (an increase Construction Materials Co. and other companies. of 130 per cent) ; the Cotton Seeds Co. realized a profit Expansion works have already been started on the of ID 334,000 as against 11) 165,000 (an increase of Government Sugar Administration and on the Mosul 102 per cent); the profits of the Iraqi Insurance Co. Spinning and Weaving Administration as prescril)ed amounted to ID 330,000 as against ID 222,000 (an in the economic plan. Furthermore, the organization increase of 48 per cent) ; the profits realized by the has agreed to establish a poultry company with an Vegetable Oils Co. amounted to ID 330,000 as against annual capacity of 30 million eggs and 5 million hens; ID 297,000, in spite of the reduction in the prices of the company will also produce fodder. soap and oils; the Rafidain Trading and Milling Co. The total cost of the project is estimated at ID 3.5 realized a profit of ID 118,000 as against a loss of million. Output is expected to reach the market in ID 25,000; profits realized by the Northern Milling Co. mid-summer of next year, which will help to reduce tin- amounted to ID 94,000 as compared to ID 41,000 (an prices of eggs and meat. increase of 128 per cent). The National Leather Co., the Iraqi Jute Co. and the Rafidain Cement Co. The organization is not faced with any financial realized increases in profits of 27, 18 and 30 per cent problems in implementing its projects. llcsidcs its own respectively. The highest increase took place in the financial resources, the organization resorts to the I'nited Match Co., whose profits amounted after na- nationalized banks to meet the financial needs of the tionalization to ID 55,000 as against ID 13.000 (an establishments attached to it. increase of 330 per cent). PROBLEMS OF IRAQI JNIHSTRY The profits as well as the other tangible results realized by the nationalized companies changed the The main problems and difficulties which have con- general attitude as to the efficiency and ability of the fronted Iraqi industry are summarized below. public sector to run industrial or commercial enterprises Industrial relations, within the economic development and make profits. The Economic Organization experi- process, were among the important problems faced by ment demonstrated that what really mattered was not Iraqi industry. The principles and values determining who administered a project, but rather the management these relations were regarded from two points of view. of projects on the Imsis of well-defined principals and The first was that the experience of the industrialized objective criteria. As soon as such objective criteria countries should be taken as the principal norm for were established, the organization was able to run the Iraq, without regard to the basic values and charac- nationalized companies, as efficiently as, if not more teristics of the country. The second aimed at reconciling efficiently than the private sector. these basic values with current needs, and took into Net profits realized by the nationalized companies consideration both the historical evolution of the coun- and public administrations, excluding five companies try and such principles and concepts of the West as and administrations attached to the Economic Organi- could be adapted to the needs of Iraq. zation, amounted to ID 5.3 million as of 31 March However, despite the adoption of the second |K)int 1965. Profits during the corresponding period before of view, relations between employers and employees nationalization amounted to ID 4.6 million. There had were much influenced by the conditions that had pre- thus been an increase of 16 per cent. vailed before the recognition of lalxmr unions. The Profits realized by the establishments attached to the employers, Ixnng at the same time owners of establish- organization will l>e distributed as follows : ments, believed in their right to impose the kind of relations most suited to their interests, while the labour Income tax ID 2.3 million force, realizing its importance in the production process, Share of workers in profits (of which ID 0.27 was demanding more rights and privileges. The legis- in currency (see annex XI)) ID 0.68 million lation which was subsequently enacted to organize and Provision of housing and social services for guide industrial relations was influenced by these employees and workers ID 0.14 million factors. On the one hand, there was the employers' Provision oi° central social services for persons fear of the attitude of the workers, so that they denied employed in the Economic Organization . .. ID 0.27 million them any right to express their opinion. On the other hand, legislation in this field was influenced by the Enlargement of existing plant and undertaking uj new extremist position of the workers. As a result of this investments tension between employers and employees, many strikes To meet the increasing foreign demand for Iraqi took place. The State and employers liad either to cement, the organization decided to expand the prod- resort to drastic measures or to intervene through the uctive capacity of the cement industry. It authorized departments concerned to restore order. Such dis- the doubling of the capacity of the United Cement Co. turbances had an adverse effect on the productivity of from 200,000 tons to 400,000 tons per year, at a cost workers and on their attitude towards work, with un- of ID 1.5 million. The company has already started the favourable consequences in the rate of industrial growth. expansion programme. Furthermore, the organization To remedy this situation, official and non-official authorized a project for removing dust from furnaces circles undertook the establishment of organizations and and the cement insulator project of the Iraqi Cement the enactment of laws defining and regulating industrial Co., as well as the expansion of the Al-Furat cement relations ; one such organization was the Federation of plant. Industries, which has had a positive effect in guiding The organization also authorized the expansion of these relations. Furthermore, the enactment of the several other projects; for instance, expansion of the labour code and its amendments, as well as the develop- productive capacity of the Dairy Administration (ex- ment of labour unions, have also been of great help in pansion has already begun), and expansion and im- supporting the workers' claims. These measures had a 74 Industrial development in the Arab countrie« favourable effect on the growth of industry, which has expansion of production and therefore to the lowering proceeded in recent years at an average of 12 per cent of costs and prices. As a result, foreign goods continue |>er annum. It must be pointed out that the improve- to enjoy a relatively good position. Furthermore, the ment in human relations in government industrial estab- narrowness of the market has in many instances pre- lishments has also affected the promotion of such rela- vented the establishment of new industrial projects or tions in the private sector, especially after the introduc- branches of existing ones. tion of the profit-sharing principle. The small size of the Iraqi market might be attributed Yet with all the development that has taken place in to the following factors: low purchasing power of the the field of industrial relations, much still remains to majority of the population which, in turn, is due to the be done. low level of income; the tastes of consumers; preference The mentality of the Iraqi industrialist is influenced for imported goods based on psychological and economic by a predominantly commercial and agricultural out- reasons; small size of the population. look. The industrial mentality differs from the com- There are many opportunities for exporting some of mercial and/or agricultural in that it presupposes a Iraq's industrial products to neighbouring countries. certain degree of administrative and technical aware- I lowever, such ex]x>rt has taken place to a very limited ness and a different approach to organization. extent owing to the existence of tariff barriers in those Weakness in industrial discernment is exemplified bv countries and Iraqi producers' ignorance of the methods the industrialist who decides to establish a project of international trade. merely because other similar projects exist, and without The dej'iendence of industrial projects on imported taking into consideration the absorptive capacity of the raw materials involves many risks connected with the market. Such action will result in excess capacity, and scarcity and fluctuation in the prices of these materials; in a waste of economic resources which will prevent these, in turn, are reflected in the level of costs and existing plants from reaching their optimum level of prices. production. Another problem is the high cost of transportation The Government has tried to remedy the situation and storage of imported raw materials. River transport by applying a policy of industrial guidance in accordance was the first means to be used in Iraq. Although slow, with the provisions of the fourth article of the industrial it is considered cheaper than other means of trans- development law ; these efforts, however, have not been portion. Its advantages, however, are limited to the successful. regions situated along the river basin ; moreover, goods Another example of the same phenomenon is the have to be loaded and unloaded several times before trial-and-error process through which the industrialist reaching their linai destination. passes when he tries to establish a project. The Railroads were considered a relatively rapid means Ministry of Industry dealt with the problem by creating, of transportation during the first three decades fol- in 1961, a centre for promoting industrial management ; lowing independence. Here too, however, the advantages the centre started ojwrating in 1962. Its functions arc were confined to the cities situated along the railroad to organize training seminars on different subjects network. Furthermore, the two-gauge system con- pertaining to industrial management in the fields of tributed to increase the cost of railroad transport. As production, marketing, sales, accountancy, costing and for road transport, which is considered the most suit- maintenance. The seminars are offered to all persons able means, the rates charged are relatively high. engaged in industrial management. Other seminars are offered to directors and deputy directors of industrial The transportation problem accounts for the difficulty establishments in the public, private and mixed sectors. in ensuring a more even geographical distribution of industrial projects and for their concentration near the The scarcity of skilled labour is a salient feature of main roads. The higli transportation costs have adversely Iraqi industry. It has acted as a deterrent to the estab- affected the cost structure of Iraqi industry and, lishment of new projects and the attainment of a larger consequently, the prices of industrial products. output and better quality, especially in the private The high storage costs are mainly attributable to lack sector. In the public sector, the problem is about to be of rapid means of transportation, especially in the solved, especially since the creation of the manpower private sector, and inadequate warehouse facilities. service by the Government. The service aims at providing the newly established government industries The high unit cost of electric power in Iraq as with skilled labour. The programme involves the compared with similar rates charged in industrialized training of Iraqis abroad and the organization of local countries has further contributed to raising production seminars in the different vocational training centres. costs and slowing down the rate of industrial growth. It is worth noting that the shortage of foremen heads Political stability is a prerequisite for economic and the list. The private and mixed sectors try to solve this industrial development. A review of Iraq's history problem by importing foreign technicians, by sending indicates that the country has been, on many occasions, some of their employees for training abroad, or even e n SC'ne of P°Imcal disturbances and instability, by attracting, through higher salaries, the skilled labour hollowing the mandate, vested interests played an employed in the public sector. The Government has important role in impeding the implementation of an resorted to similar measures in an attempt to remedy adequate economic policy. In addition, the unstable the situation. political situation that prevailed in Iraq at that time limited the usefulness of legislation enacted to promote The narrowness of the market is another problem industrial development. Altogether, the period preceding confronting Iraqi industry. It has prevented the estab- independence did not witness any significant economic lishment of many projects, since it sets a limit to the progress. Indnatrlal •Ituatton in tat Arab countries 75

ANNEX I Industrial MtaMtahnent employing ten or »er« persona, 1M2

Avitaiie Annual Average Average number of average Salti of number 0/ number loia! partons wapet per finxskii establish of penami t»'d(7i i i mployed />• > perso» gaois Typt of iniuitry menu empmyté au) establishment {Uh (ID)

Slaughter houses 6 168 32.795 28 195.2 97,022 Wool wishing and pressing 6 256 33,838 42.7 132.2 935,914 Cotton ginning 7 271 56,860 38.7 209.8 2,138,482 Oil extraction 1 224 86.804 225 385.8 100,119 Dairies 7 457 118,432 65.2 259.7 794,546 25 4,533 545.314 181.1 120.3 4,017,107 85 1,879 457,390 22.1 243.4 11,409,526 13 571 127.495 43 223.3 603,334 Macaroni and spaghetti 5 72 10,961 14 152.1 66,485 1 355 891,025 355.3 402.4 1.502,585 Biscuits and confectioneries M 867 152,409 25.1 175.7 Vegetable oils 4 1,425 531,697 356.5 372.9 7,707,152 Spirits, liquors and beer fi 420 167.105 70 397.4 2,010,318 15 2,000 500,443 133.5 250.4 4,047,331 Other food industries 5 84 18,330 16.4 218.1 93,294 Cigarettes 4 2,489 825.231 622.1 331.1 9,047,789 1 63 8,026 89 128.8 170,320 Cigarette paper, cutting and rolling 62 2,457 136,869 39.3 55.2 400,568 Cigarette paper for hand rolling .1 242 53,340 80.7 220.4 507,583 Cotton textiles 5 3,976 1,024,238 795 257.2 3,777.894 Woollen textiles 6 2,078 507,456 346.2 244 1,882,100 38 16,010 363,042 42.5 226 1.263,157 Slwe laces, ribbons and green laces 4.3 92 16,425 21.5 178.5 88,936 Vests and stockings, knitted 10 339 59.091 33.9 174.1 437247 Woollen clothes, knitted 3 151 31,503 30.2 208.6 269,131 Shoes .. 32 1,737 511,437 54.9 294.8 2,528,584 Shirts and pyjamas 27.2 629 141.848 23.1 225.5 1.262.438 Men's and women's garments 33 937 222.563 28.4 2.Í7.5 1.236,494 Metal furniture 15 473 107,215 J1.8 226.3 721,971 Carpentry .. 59 961 233,865 16.1 243.2 707,449 Cartons and paper products 8 197 45,934 24.5 333.3 675,155 Printing and publishing 45 1,438 462,704 Ì2 321.8 1,681,420 Tanning 9 558 167,733 62 300.3 1,224,909 Hides and skins salting 5 101 30,292 20.1 299.9 334,282 Luggage 2.3 36 6,179 16.3 173 29,507 Cosmetics 2 35 4,277 17.2 124 83,150 Matches 2.3 394 128,951 170.6 328.5 661,780 Oxygen 4 56 28,931 13.8 522.2 76*51 Soap 5.4 123 28,516 22.7 231.6 350,325 Drugs . . 17 22 3,638 13.2 165.4 17,903 Refined oil and lubricants 4 2,334 1,228,489 583 526.8 13,585,845 Tiles ... 72 1,481 192,154 20.4 197.7 Bricks ... 134 12,842 2,021.305 95.1 157.5 3,615,415 ... 7 81 19,252 11.6 237.7 35,448 6 2,212 669,866 368.7 302.8 5,330,574 Gypsum ... 32 »1 89,434 15.2 178.3 314,563 Glass . 2.3 44 7,289 18.9 167.5 13,152 Asbestos ... 1 153 44,921 152.4 294.7 379,871 Concrete products ... 11 1,404 326,627 127.1 232.9 786J75 Stone crushing ... 2 31 4,656 155 150.2 28,495 Dyes ... 2 30 10.949 15 365 85,574 Miscellaneous construction materials 3 74 20,259 24.7 273.8 259,8» Foundries ... 10 183 29.918 18.3 163.5 127,992 Plastic and children toys ... 4 52 8,015 13 154.1 94,787 Utensils ... 7 316 64,080 45.1 202.8 580,133 Smithing ... 4Î 143« 298,458 25.3 262.3 1,260,863 Razor blades, nails and scales 5 83 22,777 16.6 274.4 139435 Jute and ropas ... 2 285 52,077 142.5 182.7 377,313 Cotton waste ... 3 102 18,581 34 182.2 86,153 Medical cotton ... 1 212 48,175 221.1 228.2 108,167 Machinery repairs ... 24 1J37 457,558 51.5 389.9 10,313 Ship repairs and tmiklmg ... 7 994 305,654 142 307.5 53,432 Motor cars repairs ... 50 2,525 653,581 50.5 2588 315,614 Telephone repairs and installation ... 15 1,419 241,137 94.6 169.9 36,083 Railroad workshop! ... 16 3,431 937,457 214.4 2732 Assembling of motor vehicles, radiatoti and bmHti ... 5 U4 70, SM 448 301J 84,914 76 Industrial develoament in the Arab emmtriaa

ANNEX I (continued)

Average Annual Average Average number of overate Sales of number of number Total establish- persons wages per finished Type of industry of persons wages employed per Person gooes ments employed ah establishment (ID) (ID) Kepair of electrical instruments 3 50 17,219 16.2 354.3 Salt extraction 2 8,812 85 18,867 42.5 222 167,939 Other industries S 171 66,467 34.2 Water and electricity 07 388.7 315,528 9,216 2,815,096 95 305.5 7,780,067 SOUKCE: Central Department of Statistics, Industrial Census of 1962.

ANNEX II Total allocations in th« Irey.ar M.«, IMS-IM», for the main industrial project, in the »uUk aectar (In ID 000)

Name of project Executing authority Total cost Allocations Chemical industriel projects 1. Artificial silk resins Ministry of Industry 1,500 2. Artificial silk plant 100 Ministry of Industry 13,000 11,700 3. Paper plant at Basra Ministry of Industry 16,500 4. Sulphur extraction plant 11,250 Ministry of Industry 9,450 5. Gemicai fertilizer plant 9,450 Ministry of Industry 11,000 6. Rubber tyres and tubes plant 11,000 Ministry of Industry 2,000 450 Pharma cutical projects 7. Drugs manufacturing project Ministry of Industry 6,850 3,300 Food industries projects 8. New sugar plant Ministry of Industry 3,000 1,000 9. Expansion of existing sugar plant Ministry of Industry 2,500 10. Bakeries projects 2,100 Directorate General of Supply 900 11. Dates and fodder projects 900 Dates Administration 1,500 1,500 Construction industries 12. Ceramic plant Ministry of Industry 2,500 13. Glass plant 2,400 Ministry of Industry 5,500 4,500 Electrical industries 14. Electrical instruments and apparatus plant . Ministry of Industry 2,300 15. Light bulbs plant 500 Ministry of Industry 1,300 1,000 Mineral industries projects 16. Iron and steel plant Ministry of Industry 26,000 17. Agricultural machinery plant at Alexandria 7,200 Ministry of Industry 10,300 5,800 18. Geological instruments repair plant Ministry of Industry 165 70 Spinning and weaving industries projects 19. Cotton textiles plant at Kut Ministry of Industry 9,850 4,500 20. Woollen textile plant at Nasserieh Ministry of Industry 21. Silk textile plant at al-Hallah 4,000 3,800 Ministry of Industry 9,100 3,800 22. Stockings and knitting at Kut Ministry of Industry 2,550 23. Expansion of Al Mosul textile plant Ministry of Industry too 3,500 3,000 Oil and gas projects 24. Basra refinery Ministry of Petroleum 12,000 10,000 25. Mosul refinery Ministry of Petroleum 26. Natural gas pipes 12,000 10,000 Ministry of Petroleum 11,000 27. Geological surveys ISO Ministry of Industry 800 too Transmission and generation of electric power 28. Connecting northern transmission network with southern Ministry of Industry 29. Enlargement of Baghdad's southern power 1,500 9» plant Ministry of Industry 8¿00 30. Al Dora power plant and expansion Ministry of Industry 4,000 31. Expansion of power plant at Basra 17,000 13,000 Ministry of Industry 850 32. Samerra dam power plant Ministry of Industry «SO 33. Dokan dam power plant 7,000 7,000 Ministry of Industry 8,500 34. Darabandi-Khan dam power plant Ministry of Industry 7S 35. Transmission of additional power to north- 5,500 75 ern area Ministry of Industry 36. Transmission of additional power in middle 950 900 area Ministry of Industry 37. Transmission and enlargement of power 6,350 2,700 generating facilities in southern area Ministry of Industry 13,000 10,000 Iiiduiitrial «ituation in th« Arab countries ANNEX II (continued)

Name of project ExiCHting authority Total cost Allocations Atomic energy projects 38. Atomic reactor . . . Atomic Energy Committee 3,400 1,000 39. Cobalt unit Atomic Energy Committee 600 350 40. Centres for atomic studies Atomic Energy Committee ¿50 200 l'Mattonai training projects 41. Industrial training centres Ministry of Industry 2,350 2,250 42. Industrial management centre Industrial Management Centre 80 80 43. Vocational training centre Ministry of Labour and Social Afì'air» 200 200 44 Settlement of projects accounts and com- plementary works Ministry of Industry 1,000 1,000 45. Small power projects Ministry of Rural Affairs 10,000 6,750 Induit rial projects 46. Including: FAO salterns, notlhern woollen textiles plant, tractors and vehicles as- sembling, compressed wood, starch, lab- oratories, standards and specifications authority, industrial surveys and other industrial projects . Ministry of Industry 14.000 4,750 47. Industrial housing projects Ministry of Public Works and Housing 13,500 400

ANNEX III Value added in the industrial sector at current prices (In ID 000)

industry 1960 1961 ¡962 196S Koodstuffs 3,383.4 5,197.2 4,386.4 4,362.4 Grain milling 1,493.0 1,803.0 2,172.0 2,385.0 Beverages 2,564.0 2,857.4 3,779.0 3.613.5 Cigarettes 1,329.1 1,933.4 2,770.4 2,813.1 Cotton ginning 129.0 98.0 268.0 50.0 Textiles 3,256.0 3,023.0 3,536.0 328.0 Textiles sewing 269.0 225.0 379.0 490.0 Jute, ropes and other textiles made thereof 145.3 106.0 173.0 250.6 Shoes 2,302.0 2,727.9 3,313.4 2,876.5 Clothing 3,166.7 3,428.7 3,742.6 3,199.2 Paper, printing and publishing 800.6 692.4 782.5 644.1 Leather and leather products 501.2 383.2 448.8 497.3 Chemicals and rubber 571.3 620.9 615.6 491.4 Soap and oils 2,390.0 2,039.0 1.677.0 3,487.0 Petroleum products 7,623.8 9,107.8 8,281.5 8,006.9 Non-mineral products 7,424.9 8,127.3 8,221.2 7,821.6 Basic mineral industries 225.8 476.5 435.8 439.7 Mineral products 1,120.2 1,229.2 1,580.8 1,011.7 Carpentry 3,152.4 2,656.0 2,746.0 2,096.8 Repair» 3,556.0 4,191.0 4,145.0 4,456.0 Miscellaneous industries 44.9 47.5 53.9 59.3

TOTAL 45,448.6 50,971.4 53,507.9 52,332.1

ANNEX IV A. Loaaa extended by the Industrial Bank during the period 194MM0 to 1M7-1M8 (In ID 000)

¡»duttry ¡949 ¡950 19501951 19H19S2 1952 ¡953 19331954 19541935 ¡9551956 19561952 I9J7-IS5« Flour 28,450 27,900 19,800 70,700 157,850 276,162 190,485 127.285 133,390 Construction materiali 46,140 33,000 3,000 27,724 106,650 213,300 150,169 329,722 414,908 Spinning, weaving, sewing, tailoring, ginning, etc. ... 10,770 5,650 176,750 247,100 293,800 560,100 70,619 26,944 557,445 Printing and paper industries 5,300 7,402 4,300 29,685 19,100 43,100 49,212 65,495 40,372 Smithing and mechanical works 900 6,390 32,500 26,566 7,200 36,000 66,393 25,209 75,970 Carpentry and furniture .... 500 650 100 3,100 15,150 35,150 8,295 27,250 35,480 Food industries, beverages and soft drinks 11,500 4,810 4,800 4^90 18,550 60,550 109,554 95,750 20,545 Miscellaneous industries .. 28,550 45,148 36,975 247,185 115,740 143,240 80,314 47,775 209,432

TOTAL 132,110 130,950 278,225 656,950 734,040 1,367,602 725.041 745,430 1,487,542 78 Industrial development in the Arab count rira ANNEX IV (cwitfniMtf) B. LUDI «tended by the Industrial Buk during the period lMS-lNt to 1 inly 1*5 (In ID 000)

Lut nine 14 July 1963 14 July 1964 month! of to to Industry Í95Í19S9 19» I960 1961 1962 1963 1964 li July 1964 1 July 196-

Flour 95,860 68,345 111,510 168,570 348,120 189,900 227,690 132,900 366,480 Construction materials 224,115 91,490 50,700 139,350 160,883 51,910 79.696 46,811 111,165 Spinning, weaving, sewing, tailoring, ginning, etc 53,275 131,720 54,690 164,080 190,411 71,570 119,210 154,150 107,723 Printing and paper industries 28,920 71,437 53,970 86,628 68,740 104,645 21,920 88,015 37,755 Smithing and mechanical works 32,170 19,555 105,740 108,780 104,860 34,955 79,257 52,575 118,147 Carpentry and furniture 23,560 22,050 42,827 38,982 21,872 6,730 19,300 12,010 21,570 Food industries, beverages and soft drinks 19,640 44,436 76,300 84,550 101,660 43,90(1 52,520 31,200 170,200 Miscellaneous in- dustries 91,905 165,170 91,466 178,125 198,179 387,430 293,310 276,740 203,177 TOTAL 569,455 614,153 578,203 968,065 1,294,730 891,040 909,903 804,401 1,036,317

ANNEX V 3. Cement, asbestos, gypsum, chalk and insulating ma- terials: 23 projects Industrie* granted protection by the Permanent Committee Cement plants 6 for the Protection of National Industry Asbestos 1 Gypsum 14 Full protection Partial protection Chalk 1 Insulating materials 1 Medical cotton Footballs 4. Iron and iron products und other metal industries: Medical bandages Television sets 171 projects Pencils Dyes Pins Printed cotton textiles Metallic furniture and smithing 31 Scales Canning products Aluminium products and utensils 14 Chalk Buttons Metal textiles o Plastic toys Rugs Razor blades 2 Chocolates Suitcases Soldering, turning and mechanical repairs 64 Window frameworks White zinc paste Other metal industries 40 Sanitary towels Razor blades Assembling of electrical apparatus 11 Silk textiles Knitted garments 5. Dairies, flour mills, bakeries, pastes and grain silos: Asbestos and cotton fibres Neckties 113 projects Telephone posts Tooth brushes . Dairies j| Rubber shoes Aluminium utensils Flour 92 Asphalted paper Rubber rings Biscuits 9 Green lace Pastes and macaroni 8 Liquid sodium silicate Dates and animal fodder 3 Cartons Polythene pipes 6. Vegetable oils, fats, detergents and soap: 19 projects Vegetable oils and fats 4 Soap 13 Detergents .. 2 ANNEX VI 7. Sugar and confectionery: 48 projects Diatribution of industrial projects amitatod with th« Iraaj Sugar 2 Federation of Induatrica by induatrial groupings, as of Confectionery 46 1 September INS 8. Distillation, beer, soft drinks and non-alcoholic drinks: 82 projects 1. Mining, quarrying, etc.: 9 projects Distillation j Beer , Oil refining Wine \ Oil extraction Carbonated water jo Salt extraction and refining Non-alcoholic drinks Manufacture of pipes 0 Ice 42 2. Bricks, concrete produits, glass and sanitary equip- Soft drinks 10 ment: 101 projects 9. Cigarettes and tobacco: 4 projects for the manufacture of cigarettes Bricks 56 Tiles and mosaic 27 10. Cotton spinning and waving, jute and gmners: Concrete products 13 23 projects Glass 4 Cotton spinning and weaving g Compressed wood 1 Jute 1 Industrial »itnation in the Arab countries 79

ANNEX VI (continuée) Matches 4 Pharmaceuticals Ginning 10 4 Chemical products Fishing nets 4 2 Chemical gas 8 11. Spinning and weaving of wool and silk: SO projects Dyes 6 Wool S Cosmetics and perfumes 7 Silk . 45 17. Rubber and rubber products: 4 projects 12. Trico! slochiniis. ¡larmenls and other .wing pro- 18. Tooth and shaving brushes: 7 pro irci jects: lilt projects 19. Artificial teeth • 1 protect Tricot 32 20. Batteries: I protect Garments, including shirts 69 Miscellaneous 3 ANNEX VII 13. Wooden furniture and carpentry: 28 projects Geographical distribution of industrial projects affiliated Wooden furniture 18 Carpentry 9 with the Iraqi Federation of Industrien, a« of Wood 1 1 September 1965 14 Paper, paper products and printing: 81 projects A'Il IH.' X,,»,b,-r Same Xumbtr Printing 45 of fit "f «t Binding 4 (filtrili projects Paper bags and packages 30 Baghdad 721 Diala 7 Paper painting 2 Basra 72 Diwaniva S 1\ Tanning and leather products: 49 projects Mosul 47 kut S Leather tanning and pressing 12 Kerbela 37 Ramadi 2 Shoes 37 Hilla 24 Arbil ) l'i. Plastic, matches and pharmaceuticals: 58 projects Amara 23 Xasiriya 7 Kirkuk IS Plastic and plastic products 26 Sulaimautya 7 TOTAL 974 Pencils 1

ANNEX VIII Value of production and «alea in estaMiahaaenta attached to the General Industrial Organization during the period 14 July 1M4 to I July 1965 a* compared with the period 14 July 1963 to I July 1984 UD)

14 July 19631 July 196) 14 July 19641 July I96Í l'ereenluìte I 'alue of I 'alue I alue of Value Amur production of sah s production of sol, .< production Iraqi Cement Company 2,490,299 1,952,190 2,577,487 2,268,457 4 + 12 Rafidain Cement Company 1,196,535 1,082,374 1,145,044 1,148.733 4 + 6 Kuphrates Cement Company 1.100,309 978,854 1,434,046 1,223,865 30 + 25 I'niti'd Cement Company 1,022,717 734,048 1,235,603 966,120 21 + 32 Hamam-al-Alil Cement Administration 517,875 452,003 647,291 522,620 25 + 16 Sirganar Cement Administration . .. 256,211 269,757 629,728 628,425 + 146 + 122 I'.state Industries Company 154,989 168,788 233,046 248,306 + 5(1 + 47 Iraqi Construction Materials Company 147,477 110,520 175,716 233,105 + 19 + 111 Asbestos Industries Company 495,922 669,369 531,154 725,261 + 7 + 8 Iraqi Spinning and Weaving Company 1,478,578 1.142,126 1,476,863 1,465,846 + 28 lattah Pasha Company 715,196 803,220 937,295 1,039,726 + 31 + 29 Iraqi Carpets Company 26,210 27,615 79,432 45,695 +203 + 65 Iraqi Jute Industries Company 416,733 479,759 677,331 527,862 + 63 + 10 Spinning and Weaving Administration 1,610,290 1,491,079 1,590,917 1,539,754 - 1 + 3 Medical Cotton Administration 153,624 70,846 168,668 124,579 + 8 + 76 Sewing Administration 96,372 39,770 307.390 199,966 Vegetable Oils Extraction Company 5,351,903 5,475,182 6,507,959 6,542,353 + 22 + 19 Cotton Seeds Products Company 3,315,480 3,212,934 3,443,222 3,410,949 + 4 + 6 Rafidain Detergent Manufacturing Company 1,283,245 1,245,741 1,134,542 1,107,687 - 12 — 11 Kafel Hussein Soap Plant 57,565 107,548 + 87 Dairy Administration 662,301 640,411 787,428 853,674 + » + 33 Sugar Manufacturing Administration 3,203,963 2,891,110 2,752,642 2,706,576 - 14 — 6 Kerbala Canning Administration 75,074 14,164 58,302 34,460 - 22 +143 Northern Milling Company 796,136 817,828 889,019 917,711 + 12 + 12 Iraq Grain Milling and Trading Company 53,545 55,898 91,616 + 8 Damurji Flour Milling Company 64,355 114,789 59,518 132,064 - 7 + 15 Mechanical Mills Company 5,476 9,809 96,100 96,566 Rafidain Milling and Trading Company . 1,251,169 1265,445 968,272 1,100,577 -23 13 Rafidain Tobacco Company 2,483,965 2,517,955 2,674,410 2,698,918 + 7 + 7 Abboud Tobacco Company 2,318,032 2,325,431 2,340,994 2,335,966 + 1 + V* National Tobacco Company 2,174208 2,450,098 1,918,616 2,231,944 - 13 — 10 Cigarette Manufacturing Administration 1,472,386 1,424,026 1,587,364 1,539,390 + 8 + 8 United Match Company 413,411 402,984 470,251 578,855 + 24 + 44 United Iraqi Paper Industries Company . . 405,099 404,127 333,931 431,996 - 18 + 2 national Leather Industries Company 611,820 657,342 686,547 680,640 + 11 + 6 Iraqi Bata Company 1,165,202 1,201,077 1,257,757 1,161,095 + 6 — 3 Popular Shoe Manufacturing Administration 135,428 103,927 147,362 133,572 + 6 + 36 T 81 Industrial development In the Arab countries ANNEX IX Value of production and aalet of specialised authoritiea attached to the General Industrial Organisation before and after reducing their prices (ID)

14 July 19641 July 1965 U July 1964-1 July 196S Percentage change ,,,. ,„,.,,, .„,, Before reducing After reducing Before reducing 14 July 1961-1 July 1964 prices prices After reducing SpectahicJ _ prices prices authority Production Sales Production Sales Production Sales Production Sales Production Sales Construction 7,382,334 6,417,903 8,709,115 7,963,902 8,709,115 7,963,902 +18 +24 Spinning and weaving 4,470,021 4,048,415 5,261,716 4,957,108 5,237,896 4,943,428 + 18 +23 +17 +22 Foodstuffs 16,062,647 15,829,562 18,170,190 18,469,747 16,709,902 17,001,165 + 13 +17 + 4 + 7 Cigarette! 9,267,101 9,524,621 9,350,074 9,796,700 9,350,074 9,796,700 + 1 + 3 Shoei and leather 1,912,450 1,962,328 2,217,436 2,091,407 2,091,666 1,975,307 + 16 ±1 + 8 + 2 TOTAL 39,094,555 37,782,829 43,708,531 43,278,864 42,098,653 41,680,502 +12 +15 +10 +11

KKMARKS 1. Prices of oils, soap and detergents were reduced by 12 per cent and the difference, amounting to ID 1,330.000 in the case of production and ID 1,327,308 in that of sales, was assumed by the Economic Organization . irJ,'7,c^ Hour vv.ere reduced about 7 per cent and the difference, amounting to ID 130,000 in the case of production and ID 141,000 in thatl oi sales,1 was assumed by the Economic Organization. w TO 3. The Economic Organization assumed the difference resulting from a reduction of 40 per cent in the Drices of nl«in carets, which amounted to ID 24,000 in the case of production and about ID 14,000 in that of sales 4 1 he prices of the Bata Company were reduced by 10 per cent and the difference, amounting to ID 12,600 in the case of production and ID 116,000 in that of sales, was assumed by the Economic Organization. 5. The total sum assumed by the Economic Organization as a result of the reduction in prices amounted to ID 1 601000 m the case of production and approximately ID 1,598,000 in the case of sales. '

ANNEX X Profits of nationalised companies and public administrations attached to the Economic Organisation (In ID 000)

Profits Profits realised realtMed during the during the S'/i months V/i months prier to following Percentage Paid-up nationalisa- nationalisa- change ¡fame capital tion tion in profits Iraqi Insurance Co 300 222 330 48 Baghdad Insurance Co 159 35 63 80 Re-insurance Co 1,250 64 66 2 Iraqi Import-Export Co 100 - 6 6 F. A. Kettaneh Co T 500 -65 Iraqi Stores Co 250 40 17 -59 Afro-Iraqi Trading Co 250 19 33 73 General Company for Importi and Distribution of Drugs 250 39 Iraqi Trading and Milling Co 233 19 25 34 Iraqi Cement Co 2,845 551 470 -IS united Cement Co 2,250 198 185 -7 Al-Furat Cement Co. 1,770 98 72 —27 Rafidain Cement Co 1,200 142 IM 30 National Tobacco Co. 300 64 -58 Estate Industries Co. 453 34 35 "4 United Match Co 250 13 55 330 Vegetable Oils Co 2,000 297 330 11 Cotton Seeds Product Co. 1,000 165 334 112 Rafidain Detergent Manufacturing Co. 500 231 149 -36 Asbestos Industries Co 400 66 152 130 Iraqi Construction Materials Co 400 -16 -13 Northern Mills Co 200 41 94 128 Damurji Flour Plant 20 17 42 1SS Mechanical Mills Co 180 -21 Rafidain Trading and Milling Co 351 -18 118 Iraqi Bata Ca 330 57 143 148 Federation of Paper Manufacturing Co. 106 22 67 180 Iraqi Jute Co 762 61 72 18 Iraqi Spinning and Weaving Co. 1,200 25 -86 National Leather Industries Co 500 92 118 27 TOTAL 20,239 «75 "¡4 Industrial iltuatlon in the Arab countries 81 ANNEX X (cMtijwerf)

Profits Profits realised realised aurina tkt during the IK months «% months prior to following Percentage Paid-up nationalisa- nationalism- change Name capital tion turn in profits Government Purchasing Administration . 250 1,583 1,533 Dairy Administration 1,684 - 3 41 Medical Cotton Administration 250 —42 -451 Hammam al-Alil Cement Administration 3,128 - 17 Mosul Sugar Manufacturing Administra- tion 658 4 — 83 Mosul Spinning and Weaving Adminis- 2,663 397 346 -13 tration 3,753 ISO Serganaz Cement Administration 2,872 -147 TOTAL 15,258 2¿¡70 GRAND TOTAL 35,497 IÌ7Ì 16

ANNEX XI Dtttrfbutkm of ml »rotta of nationalised computes and administration attached to the Economic Organisation (ID) A. PRIOR TO NATIONALIZATION

Net profits Net profits before tefore income tas income tar durino Company or administration for rar year Income tax I fi months National Insurance Co 313,162 100,008 221,823 Rafidain Insurance Co. 8,664 2,230 6,137 Baghdad Insurance Co. 49,173 9,100 34,831 Commercial Insurance Co. (for 7 months) Credit Insurance Co 1,469 — 1,040 Dijlah Insurance Co. Iraqi Insurance Co. 38,720 2.855 27,426 Iraqi Re-insurance Co. 90,703 18,600 64,247 Iraqi Import and Distribution Co. —(8,439)-(8,439) F. A. Kettanch Co (91,693) Iraqi Stores Co. 56,159 17,500 39,779 Afro-Iraqi Trading Co. 27,234 7,720 19,290 Iraqi Grain Trading and Milling Co 26*38 19,010 Iraqi Cement Co 777,760 208,325 550,913 United Cement Co. 283,564 9,000 198,494 Euphrates Cement Co 138,541 12,000 98,133 Rafidain Cement Co. 201,099 55,000 142,445 Rafidain Tobacco Co. 113,345 43,569 80,286 Abboud Tobacco Co 29,546 20,928 Al-Ahliya Tobacco Co. 90,122 34,120 63,136 Estate Industries Co 47,327 143 33,523 United Match Co 18,293 4,538 12,957 Vegetable Oil Extraction Co 419,0754,9>9?? 120,000 296,846 Cotton Seeds Products Co. . 233,115 92,000 165,123 Rafidain Detergent Co. 3266326.638*! 138,000 231,368 Asbestos Industries Co 92,975 18¿08 65,857 General Drugs Import and Distribution Co. Iraqi Construction Material Co (22,981) Northern Milling Co 57,988 15,559 41,074 Mechanical Milling Co. Damurji Flour Co. 23,504 6,000 16,648 Rafidain Trading and Milling Ca 25,618 Iraq Bate Co 81,030 45,885 57^96 Federation of Paper Manufacturing Co. 33,797 6,591 23,939 Iraqi Spinning and Weaving Ca 35,972 7,6» 25,480 Fattah Pasha Spinning and Weaving Co. 62,435 35,559 44,234 Iraqi Carpet Ca 5,761 Iraqi Jute Industries Co. 60383 43,090 National Leather Industries Co 130,522 42,460 92,453

TOTAL 3,901,062 1,052,646 2,738,596 Industrial development in the Arab eenntriet ANNEX XI (continued)

Xet profit »fiori beftrt incorni lax r- . ... intorni lux é*rin$ C»»w/»««.y or administration for mi ytav Incorni lax IH months ( iovernnient Purchasing Administration 1.583,000 780,006 Dairy Administration Canning Administration Medical Cotton Administration —(41715) Hammam-al-AIil Cement Administration Popular Shoe Manufacturing Administration . 3,570 Sugar Manufacturing Administration 397,184 Mosul Spinning and Weaving Administration Serganaz Cement Administration Sewing Administration Cigarettes Manufacturing Administration

TOTAL 1,983,754 780,006 GRAND TOTAI 5,884,816 1,832,652 2,738,596

B. AFTKR NATIONALIZATION (14 July 1964 to 31 March 1965)

Workers' than from Xrl Centra! Worhtrt' t April profit lodai than np before ms Share tervices to to Total Provition Nit profil creiilei .. income (IO per Housing II March Company or aamtnulralwn tax IS July workers' "f. t» Utah- ceni) (J per cent) ttti 1965 share expansion establishment Kthment National Insurance Co 330.249 151,432 25,6% 12,848 12,289 13,407 25.696 40,966 92,174 158,837 Rafidain Insurance Co Baghdad Insurance Co 62,701 34,804 2,092 1,046 2,092 2,09.» 6,974 15,691 22,665 Commercial Insurance Co. (for 7 months) Credit Insurance Co. Dij lah Insurance Co Iraqi Insurance Co. Iraqi Re-insurance Co 66,092 52.JOO 1,009 504 1,009 1,009 3,365 7,573 11,948 Iraqi Import and Distribution Co. "i F. A. Kettaneh Co '.'] 5'878 440 220 440 661 1,101 1,969 3,306 5,267 Iraqi Stores Co. 16,646 2,149 2,990 1,495 1,002 1,988 2,990 3,343 7,522 13,856 Afro-Iraqi Trading Co 32,754 14,011 1.406 702 1,406 1,406 4,606 10,543 15,229 Iraqi Grain Trading and Mul- ini Co 25,504 9,420 1,206 603 1,206 1,206 4,021 9,047 Iraqi Cement Co 469,857 14,274 222,478 24,614 12,307 18,553 6.061 24,614 61344 139,150 264,288 United Cement Co 185,049 50,500 9,845 4,922 9,845 9,845 32,818 73,841 Euphrates Cement Co. 71,877 116,505 29,899 5,142 2,563 3,149 1,975 2,124 10,479 23,618 39,240 Rafidain Cement Co. 185,791 87,000 11.679 5,839 7,409 4.270 11,679 24,697 55,570 Rafidain Tobacco Co 91.947 Abboud Tobacco Co. Al-Ahliya Tobacco Co. —(57,826) Estate Industries Co. 35,016 13,943 2,855 1,427 1,580 1.275 2,855 11,853 United Match Co. 55,729 19,977 984 4,105 2.053 4,105 4,105 13,686 .10,794 Vegetable Oil Extraction Ca . 330,340 48,586 147,500 12,902 6,401 12,902 9.130 22,032 43,007 96,767 Cotton Seeds Products Co. 334,441 139,774 157,473 15,206 7,603 13,272 1.934 15,206 44,242 99,544 158,992 Rafidain Detergent Co. 149,043 75,587 5,485 2,742 5,485 215 5,700 18,286 Asbestos Industries Co. 152,035 41,143 59,429 55,321 7,253 3,627 7,253 7.253 24,178 54,401 General Drugs Import and Dis- 85,833 tribution Co. 38,730 17,565 1.587 793 1,587 - 1,587 5,291 Iraqi Construction Material Co. -(12,877) 11.905 17.197 Northern Milling Co. 93,836 34,543 4,447 2,223 4,447 4,447 14,823 33,3n Technical Milling Co. 21,323 52,622 Damurji Flour Co 42,531 20,591 1,645 822 1,645 1,645 Rafidain Trading and Milling 5,495 12.341 19,472 .Co 118,687 8,901 4,450 8,901 8,901 29,671 Iraq Bata Co 142,881 66.761 105495 60,500 6,178 3,089 6,178 1.038 7,216 20,594 Federation of Paper Manufac- 46436 66,930 turing Co. 67.112 27,650 3,819 1,910 2,999 820 Iraqi Spinning and Weaving 3,819 12,732 18,982 35,534 Co. -(85,511) Fattah Pasha Spinning and Weaving Co. Industri«] Situation in the Ara» countries SS

ANNEX XI (MNlímmO

Workers' share from Net Central Werken' 1 April prefts social skart up lièi ¡>h*r<- before service! te te Total Provision iVVf profit ertili income Income (10 per Housing M March IS July workers' for of estai' to estab- Company or administration tax tax cent) (5 per cent) IHS 196i share expansion Nishment lishmenf

Iraqi Carpet Co 72,145 16,391 5,860 2,930 4,110 1,750 5,860 13,700 31,778 55.905 National Leather Industries Ca 118,031 51,300 5,004 2,502 5,004 3,930 8,635 16,682 37,536 54.218 TOTAL 2,611,920 1,333,341 171,366 85,671 137,868 48,454 186,323 462,307 101,528 1,673,860

Government Purchasing Admin- istration 1,533,064 764,732 57,625 28,813 57,625 57,625 137,353 C39.043 446,396 Dairy Administration 40,927 6.758 2,562 594 2,562 2,562 8,541 17,774 26,315 Canning Administration Medical Cotton Administration. —(45,245) Hammam al-Alil Cement Ad- ministration —(170,372) Popular Shoe Manufacturing Administration -(83,967) Sugar Manufacturing Adminis- tration 346,623 15,520 14,350 7.174 14,350 14,350 15.944 35,874 66,169 Mosul Spinning and Weaving Administration 149,589 64,865 6,354 2,977 6,354 6,354 14,120 33,535 47,655 Serganaz Cement Administra- tion -(146,864) Sewing Administration Cigarettes Manufacturing Ad- ministration 375,430 166,493 15,670 7,835 15,670 15,670 52,234 82,704 134,938

TOTAL 2,445,633 1,018,368 96,561 47,392 96,561 96,561 228,192 478,930 721,473

GBAND TOTAL 5,057,553 2,351,709 267,927 133,063 234,429 48,454 282,884 690,499 1,510,458 2,395,333

2. The industrial situation in Jordan

Communication presented by Jordan

BACKGROUND been directed westward to the Mediterranean coast where modern ports, airports, highways, railroads and The Hashemite Kingdom of Jordan is located in the telecommunication facilities existed. The unusual heart of the Arab world; it covers an area of tome 2 pressures which Jordan faced made it necessary to 37,000 square miles (96,500 km ), and is divided compress into a much shorter period of time infra- geographically by the "great rift" in which lies the structural developments which in most countries have Jordan River and the Dead Sea. This rift drops to taken place over a number of generations. 1,292 feet below sea level at the Dead Sea. The climate is of the dry Mediterranean type. While The people of Jordan, through their own efforts and temperatures in the highlands and eastern part of the with assistance from friendly nations, have been able to country are more extreme, winter temperatures rarely overcome many of the apparently insurmountable prob- fall more than a few degrees below freezing, and lems facing the nation in 1948. The data available summer temperatures seldom exceed 32*C; an excep- indicate that the gross national product had increased tion is the Jordan valley, where temperatures tend to from an average of JD 51.1 million in the years 1954 be higher. The rainy season usually starts in late Octo- and 1955 to an average of JD 146.7 million in the two ber and continues through March or April, with the years 1963 and 1964, or an increase of 187 per cent heaviest rains in January, February and March. Jor- in nine years. It should be added that this rapid pro- dan's population in 1964 was 1,935,400, Amman and gress was achieved despite the occurrence of a number Jerusalem being the largest cities, with approximately of droughts. Moreover, a number of projects have 326,000 and 120,000 inhabitants respectively. also been initiated which have not yet borne fruit, but which will, when completed, lead to further large in- The economic setting in which Jordan operates has creases in national output. Meanwhile, the price level Ijeen affected by the vast problems arising out of the has remained remarkably stable during a period in events of 1948. Within a few months, Jordan's popu- which other countries have experienced serious lation increased almost threefold without a correspond- inflation. ing increase in resources. Furthermore, Jordan was faced with the necessity of completely re-routing its For comparison purposes, the following table gives trade and lines of communication. Previously these had data on the economic progress achieved since 1954. Industrial development in the Arab countries Table 1. Industrial origin of gross domestic »rodact area under olive production increased from 44000 (JD million; at current factor cost) hectares in 1952 to 57.000 hectares in 1964. A large proportion of these trees have begun to bear fruit and 1954 ItSt 1963 1964 Jordan has already attained self-sufficiency in these Agriculture and forestry 14.2 12.9 21.7 3J.0 crops and looks forward to exporting sizable amounts Mining, manufacturing and to neighbouring and distant markets. electricity 42 7.6 11.5 13.6 Owing to the expansion of irrigated lands, the Construction 1.2 2.4 5.3 4.7 improvement in production methods and the higher Transport 4.4 9.0 12.8 13.0 efficiency of farmers, vegetable production increased Trade and banking 9.3 14.4 27.3 28.2 from nn average of 120.000 tons during 1952-1954 Ownership of dwellings 2.3 3.3 9.4 9.9 Public administration and to an average of 550,000 tons during the year 1964. defence 9.1 15.6 17.6 19.7 Meat and livestock products have also been in- Services 3.0 3.9 9.7 10.0 creasing, although at a moderate rate. Shortage in meat production of sheep and cattle is partly balanced Gross domestic product: 47.7 69.1 115.3 132.1 through imports and through rapid increases in the production of poultry meat ; it will be further offset, in Jordan is basically an agricultural country; about the near future, bv substantial increases in fish produc- one-third of the economically active population is tion. engaged in agriculture which, on the average, con- INDUSTMAL GROWTH tributes about one-fifth of the gross domestic product. The development of the industrial sector has been However, agriculture is a highly unstable industry in quite impressive. Income originating in mining, Jordan, because a large proportion of the total agricul- manufacturing, and electricity increased from JD 42 tural output is derived from dry farming in areas million in 1954 to JD 13.6 million in 1964. This repre- subject to frequent droughts. Because of the resulting sents an increase of about 224 per cent in ten years. severe fluctuations in agricultural production and in- Meanwhile, gross domestic product registered an in- come, primary emphasis has in recent years been given crease of about 177 per cent, from ID 47.7 million in to irrigation schemes and soil and water conservation 1954 to JD 132.1 million in 1964. Thus the share of programmes. T ¡s involves the utilization of surface industry in the gross domestic product rose from 8.8 as well as underground waters available for the purpose of promoting agricultural development. per cent in 1954 to 10.3 in 1964. This structural shift, slight as it may seem, indicates that industry has be- Jordan has nevertheless achieved considerable pro- come an important element in the Jordanian economy gress in expanding its agricultural output. In the two and it is planned to make it even more important. years 1954 and 1955, the average value of agricultural Since 1954, a large cement factory, a petroleum production was ID 11.5 million, whereas the corre- refinery, a number of foundries, a tannery, marble sponding figure for th* years 1963 and 196* was JD factories and an expanded phosphate mines plant have 31.6 million. During the last two years, the contribution come into operation. Other industrial activities include of agricultural income to gross domestic product has milling, oil processing, textiles, bottling and brewing, averaged about 22 per cent. On the other hand, more tobacco products, footwear, metal products, furniture, than 18,000 hectares have been planted to different detergents, food products, batteries, glass, printing and trees and vines, mainly olives, grapes and citrus. The publishing, among many others.

Tabi« 1 Manufacturing estaatianmeaU «naloylag •>• persona or

y*it of hnmktr »f Ptritui ffoenctitH tiHhliikmenti

Food manufacturing 61 884 912 3,498 2t9J1 Beverages 30 4,289.7 20 353 430 332.5 477.0 Tobacco and tombac 5 4 583 1,123 Textiles 26 1075.0 2,112.6 22 388 665 Clothing and footwear 57 171.7 310.0 125 906 2,018 348.7 1,036.0 Wood, furniture and fixtures . 50 74 767 1,073 290.5 Paper and saper production, 521.0 printing and publishing 22 36 530 881 332.4 Leather and leather production II 482.0 3 71 218 55.1 4004 Rubber products 3 6 20 141 Chemicals 27 41.0 115.0 23 452 313 341.5 450.0 Petroleum refiner? — 1 545 Non-metallic mineral! 37 3,071.0 51 861 1264 9422 1439.0 Bask metal production 31 64 392 719 Electric and non-electric 196.7 462.0 machinery ]g 24 496 «00 Vehicle repair and assembly . 11 240.0 350.0 47 256 170 •4.7 290.0 Miscellaneous 32 28 231 522 662 5254 GUAM» TOTAL 421 1.412 8.198 14,900 7.215.0 16,730.3 Industrial situation in the Arab countries 85 As can be seen from table 2, the number of manufac- at 130 million tons. Of these, 100 million tons are turing establishments employing five persons or more located at Ruseifa, which lies 15 kilometres north of bad increased from 421 in 1954 to 1,412 in 1962. Amman, and 30 million tons in the El-Hasa area, Persons employed in those establishments increased which is about 100 kilometres to the south of Amman. from 8,198 to 14,900 during the same period, while An additional 140 million tons are presumed to be the value of production rose from JD 7.2 million to JD available but these reserves have not l>cen proven yet. 16.7 million, respectively. It will be noted that the The quality of Jordanian phosphate is considered to increase in the value of production was largely due to he among the best in the world. the marked expansion which took place in food manufacturing, tobacco and tombac, clothing and foot- Prior to 1953, a small company was founded to wear, leather and leather products, petroleum, non- extract phosphate from the Ruseifa area only. But in inetallic minerals, and basic metal production. Average that year the Government evaluated the assets of the labour productivity thus rose from JD 880 in 1954 to company and established the Jordan Phosphate Mines JD 1,123 in 1962, representing an increase of 28 per Company with an authorized capital of JD 1.2 million, cent. of which it held 51 per cent. For many years, this company has extracted phosphate from its mines at The industrial survey for 1963 indicates that there Ruseifa and in the last year or so has initiated some were in Jordan 5,258 industrial establishments em- extraction at El-Hasa. ploying 29,591 persons, including proprietors and family workers. The value of production of those Meanwhile, the Government retained a specialized establishments amounted to JD 28.34 million. Average consulting engineering firm to determine the size and labour productivity for those establishments was JD quality, markets, production techniques and transporta- 958 per worker. However, this average rises to JD tion facilities relating to phosphate production from 1.272 per worker for establishments employing ten the El-Hasa area. The technical design and specifica- !>ersons or more, and to JD 2,380 per worker for large tions of this project were issued for international establishments with an output value of JD 50,000 and bidding and tenders were awarded in 1964 and 1965. over. To ensure effective and efficient realization of this Table S. Industrial survey, 1963 project, the Government created an implementation committee to siqwrvise and co-ordinate construction Prod works and also to establish the bases for integrating / 'alue of the Ruseifa and El-Hasa projects under one company. Number of Number of f'«il«ciinn Worker This amalgamation was effected as of 1 January 1966 establishment! wnrkeri (JD 000) i JO) The Jordan Phosphate Mines Company employs All establishments 5,258 29,591 28,340 958 more than 1,500 workers and their wages and salaries Establishments employing amount to approximately JD 300,000. The company's ten persons or more 552 15,421 19,622 1,272 Establishments with an production of rock phosphate exceeded 850,000 tons output value of in 1965 and is expected to surpass the I million ton JD 50,000 and over 43 6,342 15,095 2,380 mark by 1967. Almost the entire production of Jorda- nian phosphate is exported to European and Asian markets, particularly to India, Yugoslavia, Czechoslo- Some general remarks may be made with regard to vakia and Poland. the structure of industry as derived from the findings of the 1963 Survey. Production and exports of phosphate for the period First, the typical industrial unit in Jordan is small ; 1955-1965 were as follows (in 000 tons) : almost 90 per cent of the total number of establishments employ fewer than ten persons, and most of these are 1035 1956 1957 Í95Í 1959 ¡960 1961 19«.' 1963 1964 1965 engaged in food manufacturing, the clothing industry, Production 166 209 262 294 338 392 445 681 615 604 852 shoe-making, furniture manufacture and metal-working. Exports 155 177 255 268 278 301 341 400 369 627 605 Secondly, the bulk of production originates in a relatively small number of establishments, which by The Jordan Cement Factories Ltd. the same token also employ more people and contribute more to value added than would be warranted by their The Jordan Cement Factories Ltd. was established actual numbers. Only 10 per cent of the total number in 1951 with an authorized capital of JD 1 million. Of of establishments are responsible for over one-half of this, the Government held 49.5 per cent and the re- the industrial employment and 70 per cent of the total mainder was issued for public participation. However, value added in industry. the company's capital was doubled in 1959 and again Thirdly, the importance of large establishments is was increased to JD 2.5 million in 1962. The company's brought out even more clearly by comparing rows 1 and concession extends over fifty years. 3 in table 3. Less than 1 per cent of the total number Cement production commenced in 1954 with a of establishments employ over one-fifth of the country's capacity of 110,000 tons per year. However, the rapid industrial workers, account for over one-half of the growth in cement consumption warranted the expan- total value of production, and contribute some 45 per sion of productive capacity by adding one kiln in I960 cent of total value added. and another in 1962. Production in 1963 amounted to A brief description of some of the main industrial 243,278 tons, of which 233,480 tons were consumed establishments in Jordan follows. locally and the rest exported to neighbouring Arab countries. The Jordan Phosphate Mines Company About 600 workers are employed by the company Large quantities of phosphate ore are available in and their annual wages and salaries amount to about various parts of Jordan. Proven reserves are estimated JD 116,000. M Induitrlil development in the Arab countrie» Cement production has developed since 1956 as dununis, and the produce is purchased by the cigarette follows (in 000 tons) : comiwnies. 19S6 19f7 195S 19!9 /?«<) 1961 10(1.' 1963 1964 196f Vegetable Oil Company 79 107 114 110 165 223 235 243 290 317 The original idea behind the establishment of the Vegetable Oil Company was to refine and process The Jordan Petroleum Refinery Ltd. various vegetable oils, and particularly olive oil, which Jordan's consumption of petrol and |>etroleum pro- is produced domestically in sizable amounts. In good ducts is estimated at 314,000 tons, valued at about ID years. Jordan's production of olive oil exceeds 20,000 6.2 million. The growth rate of local consumption" is tons. Domestic production of olive oil is expanding put at 10 per cent per year. yearly owing to the increase in the number of trees planted. The Jordan Petroleum Refinery was established in 1956 with an authorized capital of JO 4 million, of However, the rise in the price of virgin olive oil and which the Government held shares worth JD 250,000. the increasing demand have rendered the process of In 1961. the refinery's production amounted to 181,126 refining it economically not viable. As a result, the tons and reached 336,862 tons in 1964, of which company decided at the end of 1959 to produce veget- 313,619 tons were consumed locally and the remainder able ghee and concluded an agreement with a Dutch exported to Saudi Arabia and Lebanon. firm whereby the latter would supervise production and marketing operations. Production of vegetable ghee The refinery employed 730 workers in 1964 as started in 1960. Jordan used to import large quantities compared with 590 workers in 1963. The 1964 figure of this commodity. excludes temporary workers whom the refinery retained for certain short-term projects. This increase is The company is at present conducting the necessary attributable to the fact that the company began dis- studies to expand its output. It is considering also the tributing and transporting its products. Total wages establishment of a plant to press seed oils such as and salaries amounted to JD 319,590 in 1964, repre- safflower and sunflower, both of which could be senting an increase of JD 39,590 over 1963. Net profits grown locally and in particular in the Ghor area. Mean- in 1964 amounted to JD 720,000, thereby yielding a while the company is studying the possibility of rate of return of 18 per cent. installing a plant to produce margarine and another for oil hydrogénation. Following are the refinery's production figures bv type of fuel for the period 1961-1965 (in 000 tons) : The_ plant for refining vegetable oils was constructed in 1956 near the city of Nablus, with a productive 1961 196: capacity of 7,000 tons per year, capable of being ex- 1963 1964 1965 panded. The capital of the company was originally JD Liquid gas 0.6 1.8 3.6 6.4 7 5 200,000, but was increased to JD 500,000 in 1959. Benzine 37.2 43.6 46.9 53.1 61.2 Kerosene 39.6 47.0 54.3 66.0 66.7 Following are vegetable ghee production in recent Solar 41.2 62.4 103.8 106.2 134.2 years (in tons) : Fuel oil 50.6 52.9 62.1 76.3 816 Asphalt 11.9 20.9 34.1 26.9 30.0 1961196: 19611963 ¡•Ì63196I 196I196S 2,578 4.057 TOTAL 181.1 228.6 304.8 336.9 381.2 5,424 5,503 The Jordan Tanning Company Ltd. Cigarette companies The Jordan Tanning Company was founded in 1957 Cigarette manufacturing in Jordan dates back to the with a capital of JD 250,000, which was then raised to 1930's. At present, there are three major companies JD 400,000. The Government's share amounts to TD producing cigarettes : the Jordan Tobacco and Cigarette 100,000. J Company, the National Tobacco and Cigarette Com- pany, and the Jerusalem Cigarette Company Ltd. The The company commenced production in 1961. It total paid-in capital of these companies amounts to JD employs about 250 workers. The factory is considered 786,000. The total value of their annual production was one of the biggest and most modern tanneries in the ID 3.5 million in 1965. They employ 1,000 workers Middle East. and total salaries and wages paid out amounted to JD Production in recent years has been as follows : 227,000 in 1965. Dividends have ranged between 10 Protnct and 15 per cent during the last ten years. The value 1962 ¡963 1964 1965 of their exports is put at JD 500,000. Sule (tons) 288 264 222 361 Box (1,000 sq. ft.) Jordanian cigarettes have become well known in 1.780 1,638 1,266 1318 neighbouring Arab countries, especially in Kuwait, Lining (1,000 sq. ft.) 292 319 222 561 Lebanon, Saudi Arabia and Iraq. They have proved capable of competing with foreign cigarettes in quality United Indvties Corporation and price and are considered to be among the best This company was established in early 1960 with a brands in the Middle East. This is due to the method capital of JD 325,000. Production commenced in 1961. of processing and mixing locally produced tobacco with It employs 240 workers, whose annual wages and imported tobacco. salaries amounted to JD 42,000 in 1965. The cigarette industry in Jordan obtains between 65 . T.ne United Industries Corporation produces various and 75 per cent of its needs from locally produced kinds of wet batteries for cars. Its productive capacity tobacco, and imjxwts the rest from abroad, mostly from is about 300 batteries every eight hours. Sixty per the United States, Turkey and Greece. The Govern- cent of production is exported to neighbouring Arab ment limits the area planted with tobacco to 20,000 countries. Industrial aituation in the Arab countries 87 The company also produces reclaimed rubber and existing mies, recommend the provision of import jKiper. Reclaimed rubber is used in producing various licences for machinery, implement laws governing indus- types of shoes and boots as well as battery containers. try, and participate in decisions on tariff protection and The productive capacity for this type of rubber is 3 on the direction of government investment in industry. tons per day. In addition, the company produces neon The customs and excise department of the Ministry tultes which are used by commercial establishments for of Finance participates in making decisions on tariff advertising purposes. Productive capacity is 100 metres protection. The Ministry of Finance also participates ]>er day. in investing government funds in private undertakings. Rot.E OF GOVERNMENT IN INDUSTRIALIZATION The planning department of the Jordan Development Board is responsible for over-all industrial planning Industrial activity in Jordan falls mainly within the and review. It is in charge of placing contracts for private sector. However, the Government performs a feasibility studies and promoting industrial projects crucial role, which is partly regulatory and partly through the publication of brochures, special studies, promotional in nature. The regulatory function arises etc. nut of the need to protect the public interest and general welfare, and to minimize the misdirection of limited Mm e recently, an industrial advisory service has been resources within the framework of a generally free established at the Ministry of National Economy in economic system. The promotional function arises out co-operation with the International Labour Office. This of the need to foster rapid industrial growth in a coun- service has the following functions: try where industry is still a newcomer to the economic (a) Advising businessmen on industrial matters; and social structure. It consists in providing the proper (b) Training persons engaged in industry; environment and creating adequate institutional and (c) Presenting businessmen's problems to the financial systems to stimulate industrial growth. The government agencies concerned ; measures instituted by the Government to encourage and accelerate industrialization in the country are (rf) Interpreting government policies to business- Mimmarized below. men : Legislation (e) Providing technical and economic appraisals of industrial projects; The law for the encouragement of foreign capital (/) Providing "plant" industrial advisory services : investment. No. 28 for 1955, and the law for the encouragement and guidance of industry, No. 27 for (fi) Training experts' counterparts. 1955, provide a number of important facilities for the Equity participation establishment of new industries, including the following : As part of its policy to encourage industrial develop- (a) Foreign capital is treated on an equal footing ment, the Government has resorted to investing some with local capital invested in similar industries ; owners of its funds in industry. The presence of Government of foreign capital are permitted to transfer their annual as an owner in industry is greeted by the industrialist earnings from Jordan in foreign exchange ; as beneficial and by private investors as a sign of confidence. Moreover, government participation is (b) Foreign capital may be repatriated in the ex- considered to have contributed considerably to the change in which it was brought into the country without growth of private ownership of industrial snares. As any hindrance ; of 31 October 1965, government investments amounted (c) Foreign capital may be brought into the country to JD 6.2 million. in the form of cash or machinery, subject to the condi- tions agreed upon with the Ministry of National Eco- industrial credit nomy. It had long been recognized that scarcity of capital Moreover, law No. 27 for 1955 grants special facil- funds was one of the major obstacles facing industrial ities to approved industries and development projects. growth in Jordan. To alleviate the situation, the These facilities include exemption from customs duty Government created the Industrial Development Fund and all other fees in respect of all machinery, equipment (IDF) in August 1957 as an appendage of the Jordan and construction materials, and full exemption from Development Board, after combining the financial income tax for three years as from the date of com- resources of three of its projects which had been mencing production, and up to 50 per cent for the initiated with the co-operation of the United States following two years. Operations Mission (USOM). USOM provided tech- Other facilities provided by the Government include, nical and financial assistance totalling JD 485,303 to as the case may be, protection against foreign competi- develop the industrial and tourism sectors. The broad tion through non-importation of similar manufactures, objectives of the fund were to increase industrial pro- and protection from local competition through the non- duction and employment through expanding exports establishment of an identical industry, so long as the and/or decreasing imports. Industrial loans were given approved industry is capable of satisfying market for the purchase of machinery only, whereas in the demand in full. case of hotels they were given for construction and for the purchase of furniture and equipment. Both types of Institutions loans were for periods ranging between eight and ten A number of government ministries and agencies years. Loans paid out by IDF since its creation until are currently concerned with industry. the end of June, 1965, amounted to about JD 1 million. Thus, the Ministry of National Economy includes However, it has been realized since 1963 that, owing an industry section whose functions are to process to lack of adequate financial resources, the IDF could licence applications to set up new industries or expand not meet the demands for industrial credit. It was felt 88 Industrial development in the Arab countriea

necessary to establish an expanded institution vvitli In 1961, the five-year programme for economic adequate resources to take over the functions of the development, 1962-1967, was issued, setting out a series IDE. The Industrial Development Bank was therefore of goals for the economy and containing a large num- created in July 1965 as a predominantly private institu- ber of specific study and action proposals. A number of tion with an authorized capital of JD 3 million. Of the projects incorporated in that programme have been this, the Government would hold shares worth JD 1 implemented or begun within the past four years. million, while the remainder would be issued for public participation, including commercial banks. The bank Early in 1963, however, it became evident that some commenced commercial operations on 15 October 1965, change of emphasis in the above programme was desir- with subscribed capital of JD 2.24 million. able, particularly in the direction of accelerating the process of making the Jordanian economy self-sufficient. The bank's objectives are the following: Encouragement, activation, assistance, expansion, The seven-year programme is an integrated, com- development and renewal of industrial projects ; prehensive, economic blueprint which aims at moving Jordan as rapidly as possible along the path of eco- Increasing opportunities of work in the kingdom, nomic independence and self-sustained growth. It there- Assisting the growth and development of the stock- fore gives high priority to those sectors which would market in the kingdom ; increase exports and/or reduce imports through the Encouragement of small local and manual industries, expansion of productive capacity. These sectors are particularly through the establishment of co-operative agriculture, mining, tourism and manufacturing indus- societies and their support through technical assis- try. At the same time, it calls for the implementation tance and loans ; of projects in the supporting developmental activities, Encouragement of financing of industrial projects from both social and infrastructural, which provide the man- internal or external financial sources, whether public, power resources and facilities for the foregoing sectors. private or international. The main goals of the seven-year plan, in order of In addition, the Government has taken the necessary importance, are the following: a major reduction in measures to increase the supply of various types of the balance of trade deficit and a major reduction in skills needed for industrial purposes. The number of budget support ; an increase in per capita income at as trade and industry schools was increased from four rapid a rate as possible, consistent with the aforemen- in 1955-1956 to seventeen in 1963-1964. The number tioned objective, and a reduction in the level of un- employment. of students in these schools increased from 445 to 2,366 respectively. Moreover, training programmes at both In quantitative terms, the seven-year programme the professional and managerial levels were initiated as aims at increasing the gross national product from JD part of the technical assistance Jordan receives from 137 million in 1963 to JD 226 million in 1970, i.e. by friendly nations and international agencies. At the about 65 per cent. This involves raising output per same time, the Government has paid special attention capita from JD 75 in the base year to approximately to strengthening and supporting the co-operative move- JD 103 in 1970. Secondly, the trade deficit will be ment in the field of industry. In 1965, there were eleven reduced from JD 41 million in 1963 to JD 24 million industrial co-operatives having 321 members. Adequate in 1970; this deficit would then represent 11 per cent legislation has also been promulgated to organize of the gross national product as compared with 30 per management-labour relations and establish working cent in the initial period. Employment opportunities hours and minimum wage rates. are likewise programmed to increase at an annual rate exceeding 5 per cent. SEVEN-YEAR DEVELOPMENT PLANS 1964-1970 To achieve these targets, the programme calls, among other things, for the following: Conscious of the need to move the economy as The increase in aggregate private consumption to be rapidly as possible along the path of self-sustained growth and economic independence, and considering limited to 4 per cent per annum to offset population the smallness of Jordan's domestic market, its relatively growth and allow an annual increase of I per cent high population growth rate, and its limited natural in per capita living standards; aggregate private con- sumption is thus programmed to increase from JD and capita] resources, the Government of Jordan re- _ 116 million in 1963 to JD 153 million in 1970; cognizes the importance of long-range planning to use these scarce resources in such a way as to take fullest The increase in public consumption to be limited so advantage of their contribution to the achievement of that recurring periodic expenditures of the Govern- the country's over-all economic and social objectives. ment would rise from JD 33 million in 1963 to JD In 1957, the Jordan Development Board was reorgan- 41 million in 1970 and those of local governments ized so that it became the central agency responsible from JD 1.6 million to JD 2.4 million, respectively; for the formulation of national development policy JD 274 million to be invested during the plan period, through the preparation of comprehensive long-term of which JD 145 million to be expended by the public development programmes. sector (including local governments) and JD 129 Planning in Jordan is carried out in close co-opera- million by the private sector; of this total JD 74 tion between the Jordan Development Board and the million to be allocated to agriculture and water various ministries and departments and representatives development schemes, JD 55 million to mining, of the private sector. At the ministry level, planning manufacturing industry and electricity, JD 20 million officers are appointed, or planning committees formed, to tourism, and the remainder to infrastructural and to maintain liaison between their ministry and the social projects; board, to participate in the preparation of sectoral Jordan's exports oí goods and services to be increased programmes, and to follow up on the implementation from about JD 20 million in 1963 to over TD 59 of approved development projects. million in 1970; InduHtrial Hituation in the Arab countrien 89 Imports to lie increased from JD 61 million in 1963 integration and expansion of present operations and to about JD 83 million in 1970. organization into one large corporation responsible It can be seen that the ratio of exports of goods and for all Jordan's phosphate production activities ; this services to imports of goods and services would rise step was accomplished in January 1966; from 47 per cent in 1963 to 85 per cent in 1970. The An expanded programme of sales promotion ; achievement of this goal would bring the Jordanian Production from the low cost mines at Kl-Hasa at the economy a long way towards becoming self-sufficient. rate of 500,000 tons per year, to In^in by June 1966, A summary will now be given of the contents of the and to constitute a rapidly increasing pro]x>rtion of seven-year plan programmes for the mining and total production; manufacturing industries, and the development of Construction of railway facilities from El-Hasa to electricity supplies. Aqaba to accommodate the increasing volume of Mining phosphate shipments; prior to 1968, phosphate will be transported by road to Aqaba from El-Hasa and At present the only mineral resources being eco- Ruseifa, and to a lesser extent to Beirut from nomically exploited are phosphate, marble and salt, of Ruseifa ; the study pert-lining to the location of the which the latter two are quite small in value. In order railway facilities has been completed and design of to achieve a significant improvement in the balance of construction will be ready in a few months ; trade and national output by 1970, Jordan places heavy Additional storage and loading facilities for expanded reliance on the production and exportation of minerals. exports of phosphate at the port of Aqaba to be This includes a large increase in phosphate production, completed by 1966. the production of potash from the Dead Sea brines, an increase in marble exports, and the undertaking of an Potash extensive exploration and feasibility programme with The Arab Potash Company was founded in 1956 to respect to a number of other possible mineral resources. extract potash and other minerals from the Dead Sea brines. Specialized consultant firms were employed to Phosphate carry out the necessary economic and technical studies Jordan has for many years been producing and ex- and designs of the project. These have been completed porting phosphate. Extraction has been mainly from and steps are well under way to secure the necessary the phosphate mines at Kuseifa, but last year some financing. extraction was initiated at El-Hasa. Almost the entire The objective is to produce and export it least production is exported. 500,000 tons of potash per year by 1970 worth over In 1962, a specialized consultant firm was retained JD 5 million. To achieve this, the requirements listed by the Government to carry out the necessary explora- below must be met. tion and viability study to determine the size and Pan and dikes capacity and related plant capacity must quality, markets, production techniques and transporta- be 500,000 tons per year. tion facilities relating to the phosphate reserves avail- The Safi-Aqaba road of about 185 km must be con- able at El-Hasa. The findings of the consultants are structed to facilitate the transportation of potash listed below. to Aqaba and supplies from Aqaba to Safi. The In the area of about 500 km2 in the vicinity of El lay-out of the road is completed, and total cost is Hasa (principally north and east of El-Hasa), nine ore estimated at JD 3 million. While the road will I« parcels have been found close to the railway and desert constructed primarily for potash, it will serve the highway. These parcels cover an area of slightly less agricultural areas around Safi and the mineral than 10 km2, and contain about 30 million tons of developments in the VV'adi Araba. phosphate, of which 23 million tons are concentrated in The port of Aqaba loading facilities must be expanded. three ore bodies. These will be exploited first. A town must be developed following an approved plan Much of the ore is soft and grades about 70 per cent at or near Safi for the employees and service workers TCP. of the Arab Potash Company. The ore of all nine parcels, with the partial exception The expansion of the potash plant should occur about of one, lies close to the surface, which will make for 1975 to increase production; the timing of this expan- economic stripping. Mining costs are expected to be sion will be determined largely by the markets which considerably lower than at Ruseifa, where most of have been developed in the preceding years. Jordan's phosphate production is presently centred. Marble Preliminary tests indicate that the recovery is ex- There are four working marble companies in pected to be higher than at Kuseifa. Amman, in addition to a new company which is ex- Preliminary beneficiatiou tests indicate that the ore pected to commence production shortly. In 1961-1962, can be easily upgraded by simple dry separation and/ these companies employed 210 workers, produced JD or hydraulic classification to make it competitive with 148,000 of output, and exported JD 44,000 of marble the best phosphate being marketed. and related products. Transportation costs from El-Hasa to Aqaba will be The objective is to export not less than JD 150,000 considerably less than from Ruseifa to Aqaba or to worth of marble by 1970, and to satisfy all local Beirut, especially if a modern transportation technique demands. Although the growth of marble exports has is adopted. been encouraging, a feasibility study concerning the The objective is to produce and export 2 million or various export markets for different kinds of products more tons of phosphate per year by 1970. This should should be sponsored by the Jordan Development Board, be worth about JD 7 million. Steps to be undertaken in conjunction with the Ministry of National Economy include : and the Marble Companies. Moreover, a small tech- »o Industrial development in the Arab countries

nical section related to marble should be considered for The basis of the manufacturing industry programme the Amman industrial school or some other appropriate has been a detailed scrutiny of the viability of individual institution following the report of the feasibility study. industries with regard to consumption patterns, po- Copper tential import substitution, output, and capital require- Some copper prospects have been located on the ments. These industries are expected to operate in escarpment of (lie Wadi Araba and considerable ground the private sector, the role of the Government to be surveying has been conducted by Jordanian geologists confined to the creation of an economic climate in and the German Geological Mission. which industry can flourish through encouragement, A feasibility study has been carried out to ascertain technical advice and training, and the establishment of the extent of deposits of copper and silicates in and an adequate industrial credit system. near Wadi Abu Khusheiba in the Wadi Araba, and to The quantitative targets for manufacturing industry evaluate the economic viability of exploiting these consist of increasing local production by 62 per cent deposits. Further studies are needed, however, to and exports by 72 per cent as between the years 1963 determine the economic soundness of the scheme. It is and 1970. Consumption of manufactured goods is therefore proposed to develop mines and profitable assumed to increase by 41 per cent during the plan plants for the commercial production and export of period. copper, provided that such a programme has l>een New products envisaged under the programme are found to lie economically viable. the following: Iron (a) Food and feed: animal feed, biscuits, confec- An iron deposit has been discovered in the Ajloun tioneries, glucose and starch, dairy products, fruit and area; but at present its limited size makes it uneconomic vegetable juices, table salt, yeast, refined sugar; for exploitation except in conjunction with the making (/') Beverages and tobacco: carbonated beverages; of copper concentrates, or if enough additional deposits (c) Textiles and clothing: woollen clothes, under- are discovered to justify exploitation. Further ground wear, blankets, rugs, cotton piece-goods ; surveys are required. (d) Non-metallic minerals : concrete pipes, ceramics, Sulphur superphosphates, sheet glass, glass bottles; Deposits of sulphur are found in areas north and (*) Petroleum refinery: expansion of existing south of the Dead Sea, and considerable exploration capacity ; has been conducted. Further work will be required. (/) Other: cosmetics, pharmaceuticals, screws, shoe Petroleum }K)Iish, rails, barbed wire, paper cartons, buttons, Earlier drilling in Jordan was unsuccessful in finding cleaning products, batteries, auto parts, cardboard oil for a number of reasons : the geological information jxiint, building hardware, plywood, ropes, truck and available was very limited; the companies with con- bus assembly, plastic electrical fittings, corrugated card- cessions allocated only limited funds for their operations board, steel bars, and reinforced cement poles. in Jordan; the equipment used was not the most Total fixed capital requirements of these industries suitable for the requirements of Jordan. were estimated at JD 8.5 million, of which JD 6.5 for In 1964, a concession was granted to an American the purchase of machinery, JD 0.3 million for land, company to undertake drilling. Drilling operations are and JD 1.7 million for buildings. well under way. Consequently no allocations for this In addition, the industrial programme contains the activity have been made or revenue anticipated under following proposals designed to bring about the eco- the seven-year plan. nomic and institutional climate in which private enter- Manufacturing industry prise can be expected to achieve the foregoing goals : Re-organization of the Government structure in so far Jordan continues to import a significant proportion as it impinges on industry; of its total consumption of manufactured goods. On the other hand, exports of such goods constitute a Re-structuring of the Ministry of National Economy limited proportion of local production. As a result, this to make it a more fully effective promotional and sector accounts significantly for the adverse trade advisory agency for industry; balance. In so far as imports of consumer goods are Creation of a standards bureau ; determined by personal income, the increases in the Re-structuring and strengthening of the Customs and latter projected in the seven-year plan will exacerbate Excise Department ; the payments gap unless local production is expanded Effective promotion of foreign investment in Jordan; to replace imports and/or to increase exports. Such an expansion in production is the objective for this sector. Reconsideration of laws governing customs duties, Two specific obstacles handienn industrial develop- taxation, and encouragement of industry; ment in Jordan—shortage of loca raw materials and Establishment of an industrial development bank with j small domestic market. Against these, Jordan is sufficient capital resources to enable it to provide favoured by an easily adaptable and po ntially produc- credit in adequate amounts. tive labour force, a sound transport system, and estab- lished trade connexions with neighbouring countries. Electricity supply Above all, the fact that industry has reached its present The public electricity supply in Jordan is leu than level and that the major limitation on faster develop- twenty years old and in many respects still at the ment has been lack of finance rather than lack of pioneer and formative stage, as the total load doe« not opportunity or entrepreneurial ability, this sector may yet exceed 26,000 kW. Capital already invested is about be expected to contribute effectively to the over-all JD 5 million and persons employed about 1,000. Th» objective» of the plan. gives an investment of some JD 5,000 per employee, [nduHtrial »¡(nation in the Arab count rien SI reflecting a relatively high capital content uf electricity accountancy and, ninne all. engineering fields of supply in comparison to other industries. electricity supply. There are twenty-seven licensed undertakings, com- The electricity programme in the seven-year plan prising twenty-three municipalities and four companies, contains the provisions listed below. with the latter supplying some 80 per cent of all power Organisation of electricity supply consumed. Undertakings vary in size from the largest, in Amman, with a maximum load of over 16,000 k\V, Electricity supply services are to be fully integrated, to small villages with loads of under 20 k\Y. so that a Jordan Electricity Authority is set up whose main function will l)e the" generation of all electrical The development of the public electricity supply in power required and its transmission in bulk to distribu- Jordan has followed the familiar pattern observable tion undertakings in the northern area of the kingdom, in most parts of the world, that is to say, undertakings and the northern area is divided into four distribution have come into being more or less spontaneously in areas and all undertakings within such areas are response to public demand. The driving force in the merged. case of companies is the profit motive, and in the case of the municipalities a sense of public duty. Up to now The necessary legislation to provide for these changes has been drafted. It will also provide for a greater there has been no official legislation in Jordan to govern questions pertaining to power supply and State control measure of control over the industry by the electricity has been at a minimum. The Government has however division of the Ministry of National Economy, and lieen fully aware of the wastefulness inherent in a large institute a set of safety regulations covering persons number of small localized undertakings and has employed in the industry as well as the general public. endeavoured, not without success, to encourage the Generation merging of adjacent undertakings in the north of the In pursuance of the jwlicy set out in the previous country. No such integration is as yet justitied in the paragraph, a central thermal station (probably steam) south owing to the small size and scattered nature of will be constructed to provide base load energy with the undertakings. an initial capacity of about 30,000 kw. In addition, the Approximately 50 per cent of the total population five largest and most efficient diesel plants now existing live in electrified areas of which more than half are throughout the northern area will be retained during already connected, so that between 25 and 30 per cent their working life to meet the peak load. In addition, of the population is now supplied. a 30,000 k\V hydro-project on the Yaiuiouk river will be used to meet the peak load proper. This project is Only one form of tariff exists, namely, the variable now under construction and is expected to be com- or "stepped", block type, where the price and quantity missioned during 1968-1969. related to each block is varied to suit the policy and economic circumstances of the particular undertaking. Transmission The selling price of power in the primary block rate A 132 kilovolt transmission grid is to be constructed varies between 30 and 60 fils per unit and in the lowest in the northern part of the kingdom. This will take block rates between 15 and 30 fils. The average selling the form of a ring and will link all the above-mentioned price for the whole country is about 20 fils, the lowest stations, the sections between Zerqa (where the new (Amman) being about 19 fils. AU undertakings make a thermal station will be located) and Jerusalem probably connexion charge, which is often in the region of JD 10. being of double-circuit construction. It is estimated that The provision of capital has been a continuing prob- the voltage of 132 kv will cater for the load to be lem for both municipal and company undertakings, expected in north Jordan over the next twenty-five particularly where expansion has been taking place years or so. The life of the overhead lines—which will rapidly, as in Amman and Jerusalem. In the case of be of steel tower construction with aluminium conduc- companies, finance comes mainly from private invest- tors—is estimated to be at least twenty-five years and ment aided by loans from Government and outside in the favourable climate of Jordan may easily exceed sources. The municipalities, for the most part, have had thirty years. to rely on loans provided from the Government's Primary distribution within the distribution areas municipal loan fund. will be by means of 33 kv lines. Some 1,000 km of these It is considered that the initial pioneering stage of will be built under the seven-year programme, which public electricity supply in Jordan, as referred to calls for the shutting down of all existing small stations earlier, is now at an end and that a carefully planned while at the same time providing supplies to meet the programme of development is now required. To men- needs of villages and towns with 1,000 inhabitants or tion one important aspect, namely, generation, it is more, with transformation direct to 400/230 volts. recognized that the operation of a large number of small There will be no intermediate voltage, except in urban isolated generating sets is inefficient and that the areas where 6,600 volts will be used as feeders to sub- concentration of generation in fewer and larger units stations. should be aimed at. This is underlined by the fact that It is expected that the present demand for electric at present 96 per cent of the total number of generating power will increase by about 15 per cent per annum sets produce only 22 per cent of the total power. over the next seven years, giving a total requirement Another serious problem inherent in small undertakings of some 340 million kWh generated by 1972. This is their inability to pay salaries to professional em- expansion allows for all probable industrial develop- ployees commensurate with the level of skill and ex- ment within that period, together with a modest perience called for in the administrative, commercial, programme of extension into the rural areas. 92 Industrial development In the Arab countrlei 3. The industrial situation in Kuwait Communication presented by Kuwait INTRODUCTION Kuwait began producing oil in 1946. Production jumped rapidly from 787,500 tons in that year to 12 Whereas most developing countries depend primarily million tons in 1949 (or roughly fifteen times the on an agricultural sector which is primitive in nature, quantity produced in 1946), 36.3 million tons in 1962, Kuwait depended in the past on marine resources 81.5 million tons in 1958 and 114.2 million tons in which, through pearling, fishing, commerce and trans- 1964. portation, provided the major part of its income. The geographic location of Kuwait encouraged the develop- Natural gas is second in importance to petroleum. ment of sea transportation and commerce. The quantity of natural gas produced in 1962 was esti- mated at 337.5 billion cubic feet, of which only about 25 These conditions brought into existence certain types per cent was utilized. The quantity of natural gas pro- of industries, of which ship-building was very im- duced in 1964 was estimated at about 365 billion cubic portant. Together with this industry, other types of feet, of whicli only about 20 per cent was utilized. How- simple crafts were developed to satisfy domestic needs. ever, if we take Kuwait's share from the neutral zone, The discovery of petroleum, however! brought about a the estimated quantity of natural gas produced would complete change in the country's economic structure. amount to approximately 410 billion cubic feet. Capiti! investment grew in the different economic sec- tors, contributing to the development of the industrial Marine wealth sector. As a result, certain industries directly connected with the construction sector, such as the tile and brick Since the Persian Gulf was the prime source of life for Kuwait in the past, it is still capable of offering industries, blacksmithing and carpentry, came into several opportunities to industry. existence. The development of these industries, how- ever, was haphazard and was not based on economic Ship-building viability studies. Moreover, the liberal legislation Most coastal countries depend on sailing, ship- existing at the time contributed to the haphazard emer- building and related services for their livelihood. Like gence of such industries. other coastal countries, Kuwait formerly depended on Kuwait now depends mainly on petroleum, with the the manufacture of sailing boats and related activities huge annual oil revenues constituting the prime mover such as sea transport, pearling and fishing, and it is of economic activities. capable of reviving this traditional industry, which is This dependence on one major source of income the major indigenous craft. requires that serious measures should be taken to Fishing and related industries expand industrial activities. For although the petroleum The coastal area of the Gulf is a natural shelter for wealth of Kuwait is huge, it is by no means limitless in fish. The calm and warmth of the Gulf waters probably quantity. Furthermore, given the great technological account for the great variety of fish. Indeed, all infor- developments of our day, the utilization of atomic mation on this source of wealth indicates the need for energy may ultimately weaken the position of oil as a an extensive survey covering the establishment of source of energy. Atomic energy has already been fisheries, the organization of fishing periods and the utilized in the operation of submarines and power- establishment of industrial plants to prepare and pre- generating plants, and, through intensive research, in serve this wealth, especially high quality fish such as the operation of huge industrial plants. Therefor» the shrimps, which are exported to Europe and the Ame- day may come when oil takes second place as a source ricas. Such operations, if carried out on a modern tech- of power, as did coal following the expansion in the nical basis, will undoubtedly enhance the country's exploration and utilization of petroleum. wealth from this source. But, although oil is threatened by these technological Salt and its derivatives advances, its role in the development of new industries Table salt and other types of salt are another form has latterly been increasing, especially with the rapid of wealth which can be extracted from sea water. This expansion in the petrochemical industry. however, requires technical studies to determine thé types of salt that can be extracted, the possible expan- POSITION AND STRUCTURK OF THE INDUSTRIAL SECTOR sion of production, the economic cost of processing IN KUWAIT preparing and marketing, and other possible uses of salt. An investigation of the industrial position in Quarrying materials Kuwait necessitates a study of the bases of the indus- trial structure, namely, the country's natural wealth, The belief is held in some quarters that the quar- capital, labour force and, finally, the level of rying localities of Kuwait may be suitable for certain technology. types of industry such as the construction industry. To determine the suitability of the soil for industrial pur- Kuwait's natural resources consist of petroleum, poses it is necessary to undertake a close and careful natural gas, marine wealth and quarrying. geological survey and other studies. Petroleum and natural gas Industrial financing Petroleum is the main wealth of Kuwait and the Capital in Kuwait is abundant, but only a small por- primary source of its income. The ratio of oil revenues tion of it is channelled into the industrial sector This to total Government revenues amounted to about 94 situation has, in many cases, led the Government to per cent in 1963-1964, 93.3 per cent in 1964-1965, and finance industry either by establishing industrial plants 5 94.6 per cent in 1965-1966. such as the Kuwait Limestone Company, the Kuwait L Industrial «it iiat ¡un in (he Vi ab countrii.» »S Prefabricated Housing Company, the lile Factory and I le "'? I!; L»«ns approved and granted by the Savin»» and the Salt, Chlorine and Caustic Soda Company, or by Credit Bank from the time of its citablishment up tu participating in the equity of several industrial firms 31 March 1965 stich as the Kuwait National Industries Company, the Kuwait Flour Mills Company, the Kuwait National (Percentage oj total) Petroleum Company, and the Petrochemical Industries Company. The three companies in whose equity the InJns- K ,1 grunt, d to < 'lovernment has participated, hut which have not been trial e.s tat,- cultural ¡/,'Vt'rttmcnt offered to the public for general subscription, are the employees Kuwait Asbestos Industries Company, the Kuwait i-'rom the time oí Chemical Fertilizers Company, and the Kuwait Pre- its establishment fabricated Housing Company. up to 31 March 1962 : Approved 1J.8 861 Government participation in the capital of the above- (¡ranted . mentioned companies ranges between 38.25 and 80 per 6.7 93.2 cent. Total government participation in the capital of 1962-196J: the thirteen industrial joint-stock companies (including Approved 112 41.9 0.5 46.2 Granted companies in the oil sector) amounted to KD 19,202,700 10.9 30.5 0.2 58.7 at the end of 1964, representing 50.93 per cent of 1963-1964: the total authorized capital of those companies, which Approved 57 34.4 2.1 57.7 amounted to KD 37,697,345. (¡ranted 4.9 26.9 2.1 66.0 1964-1965 : The ratio of Government participation in the equity Approved 12.4 36.0 1.4 50.0 of the industrial joint-stock companies may be consi- Granted 7.2 32.1 dered high. This is due to many factors, the most 1.3 59.1 salient of which is that the financial requirements of TOTAL LOANS GRANTUI 5.8 25.6 1.1 67.4 some of the existing industrial projects are consider- able and beyond the capacity of the private sector. SOUKCK: This table was prepared by the Financial and Likewise, the relatively long ¡icriod of gestation, which hconomic Committee of the Kuwait Chamber of Commerce and Industry and is based on the published statistics of the may range from three to five years, tends to discourage hank. private investors from industrial ventures. Because the private sector is inclined to concentrate its investment on low-cost, quick-yielding commercial or industrial Table 2, which illustrates the bank's industrial acti- projects, the Government has assumed the responsi- vities, shows that, whereas approved loans in the fiscal bility of investing in these large industrial projects, an year 1962-1963 numbered eighteen, such loans num- action which, it was believed, would encourage the bered twenty-seven in the fiscal year 1964-1965. The entry of the private sector into a particular type of amount of the loans for the latter year was KD 936,250, long-term economic activity so badly needed by the representing an increase of 152 per cent over the 1962- country, and assist the private sector by providing the 1963 figure and 226 per cent over the 1063-1964 figure. huge funds required by those large industries. By the end of March 1965, 47.5 per cent of the total Moreover, through the Ministry of Finance and In- industrial loans had been granted to the producer goods dustry, the Government has provided loans to many industries, 34 per cent to the manufacturing industries Kuwaiti industrial joint-stock companies; such loans, and 18.5 to the services and repairs industries. at the end of 1964, amounted to KD 7,496,020. From the above figures, we can see that, by the Another source of industrial credit in Kuwait is the beginning of 1965, the actual participation of the public Savings and Credit Bank, a government bank first sector in the financing of industrial enterprises amounted established in October 1960 as the Credit Bank By to more than KD 17 million, including the participa- virtue of law No. 30 of 8 July 1965, all the assets and tion of Government in the equity of the industrial com- liabilities of the Credit Bank were surrendered to the panies and the loans actually granted by the Savings new Savings and Credit Bank. By virtue of the same and Credit Bank. This figure is high and represents law, the capital of this bank was increased from KD 7.5 roughly 140 per cent of the share of the private sector million to KD 20 million. This increase in capital, to- in the paid-up capital of these industrial enterprises, gether with the authorization to borrow, against the which amounted to KD 12.3 million at the end of 1964. guarantee of the Government, an amount equal to sub- Sources of private financing scribed capital, has enabled the bank to widen the scope of its activities. __ Because of the high level of national income in The bank actually started providing industrial loans Kuwait, capital is abundantly available in the private as well as in the public sectors. However, private capi- during the fiscal year 1962-1963. In that year, its loans tal in Kuwait has been channelled into tangible types amounted to KD 371,000, representing 11.2 per cent of the total approved loans. of investment such as land and real estate, and into commerce. Part of it has leaked out for investment Although the ratio of industrial credit to total credit abroad. It has moved slowly into the industrial and granted by the bank was increased during the fiscal utilities sectors. year 1964-1965, it was still considered low. Total cre- The preliminary estimates of national income recent- dit granted in that year amounted to KD 7,496,866 ly published by the Planning Board show the impor- and total industrial credit to only KD 936,250, rep- tance of income derived from tangible investments and resenting 12.4 per cent of total approved bank loans from investment abroad, compared with the total sour- (see table 1). ces of private income (see table 3). 04 Industrial development in the Arab countries

Tabic 2. InduitrUl loam of the Saving» and Credit Bank from the time of ite establish- ment to 31 March IMS

Loans approved Loans granted 19611961 19611964 19641963 1962 1963 196)1964 19641963 Typ* of industry Amount No. Amount No. Amount No. Amount Amount Amount

Pipe» 200,000 1 140,000 2 150,000 50,000 40,000 Engineering industries 50,000 1 100,000 1 — 50,000 50,000 __ Carpentry 45,000 3 50,800 3 12,000 3 35,000 50,800 3,100 Ice storage 15,000 1 55,000 4 92,000 4 9,000 45,000 55,230 Printing and publishing 20,000 1 20,000 1 — 19,500 5,000 15,500 Bicycles 26,000 5 11,000 3 24,150 8 13,000 8,000 19,900 Motor-car spare parts — 20,000 1 — — 13,791 Ice manufacture .. — 15,000 1 — — — 15,000 Tile, marble and mosaic — 10,000 1 7,400 1 3,500 6,500 Blacksmithing 6,500 2 3,000 2 8,700 2 4,."90 3,350 6,000 Tailoring 4,500 1 — — 4,500 — — Sweets 3,000 1 — 1 10,000 1 3,000 — — Decoration — — 6,000 1 — — 5,000 Forage — — 50,000 1 — — _ Fishing — — 250,000 1 — — 250,000 Insulating materials — — 30,000 1 — — 25,000 Ship-building — — 6,000 1 — — 6,000 Flour-milling — — 300,000 1 _ _ Miscellaneous .... 1,000 2 2,000 1 — 1 250 — — TOTAL 371,000 18 286,800 18 936,250 27 288,840 215,650 461,021

SOURCE: Annual report of the Savings and Credit Bank for the year ending 31 March 1965.

Table 3. Preliminary estimates of national Income for the and the authorized capital of all the industrial joint- years 1M2-1MI to 1M4-1M5 stock companies amounted to about KD 38 million, of (In KD million) which the private sector's participation amounted to KD 18.8 million, or 49.5 per cent of the total autho- 19611963 1961-1964 19641965 rized capital. The paid-up capital of these industrial companies, however, amounted to KD 21 million at the Wage' and salaries end of 1964, of which KD 12.3 million were advanced Public sector 48.8 59.6 68.2 Private sector 73.8 75.0 74.0 by the private sector, an amount which represents 58.6 Oil sector 14.6 15.0 16.0 per cent of the paid-up capital. However, if the loans which have been contracted by these companies are TOTAL 137.2 149.6 158.2 added to the paid-up capital, the ratio of the private Employment sector's participation drops to 42.4 per cent. Family income from Apart from private investment in joint-stock com- employment 38.0 41.4 45.8 panies, the estimated total investment of the private Properties sector in all the private business enterprises in Kuwait Family income from rent 40.5 42.3 46.0 Family income from now amounts to more than KD 100 million. The accu- interest and returns 15.7 18.0 24.6 mulated capital of the private sector was estimated at Income in the privately KD 27 million in 1962 and at KD 47 million in 1963. organised business sector 1.8 2.0 2.5 The major sources of this accumulated capital were the savings and business profits of this sector. TOTAL 58.0 62.3 73.1 Role of local banks in industriai financing Surplus arising in the organized private sector 4.0 4.7 5.2 Although capital is abundantly available in the pri- vate sector, it shies away from industrial ventures. It Different government therefore needs encouragement and support. Banks in Revenues 204.0 217.0 231.7 Kuwait can undoubtedly play an important role in this Estimates of gross field. A study of bank deposits, loans and advances domestic product 441.0 475.0 514.0 shows that the availability of ample deposits and liquid funds makes it possible for banks to provide working Sou»«: The Planning Board, estimates of national income. capital to industry.

Although it is difficult to estimate the financial invest- Foreign investment in Kuwait ment of the private sector in Kuwait, the facts cited If investment in the oil sector is excluded, the total below indicate the magnitude of such investments. The foreign capital invested in Kuwait becomes quite insig- authorized capital of all the joint-stock companies in nificant. This is due to the fact that no such capital Kuwait amounted to KD 59 million rt the end of 1964 is needed in Kuwait unless it is linked to foreign stolli. Induit rial situation in the Arab countries 93 The companies* law clearly states that the minimum per cent of the total work force in all industrial estab- Kuwaiti capital in any company should not fall below lishments, excluding the petroleum enterprises. 51 per cent. As far as joint-stock companies are con- cerned, although the law stipulates that stockholders Scientific and technical progress and level of technology should be Kuwaiti nationals, it opens the way to foreign participation in special cases requiring the approval of Although economic progress depends on other factors the government authorities concerned. as well, technological advancement is singularly im- portant to the process of development. Economic Thus, foreign investment in Kuwaiti joint-stock superiority belongs to countries which, through companies was dictated by the need for technical and scientific and technical advancement, possess the most managerial experience. It was also dictated by the need efficient factors of production, transport equipment and for outlets in the international markets. Two interna- distribution and marketing facilities. tional companies have participated to the extent of 40 p-;r cent of the capital of the Chemical Fertilizers One glance at the position of Kuwait is sufficient to indicate the country's dire need for such imports as Company. This represents the largest foreign participa- tion in the equity of industrial companies in Kuwait. capital goods and transport equipment and for im- provements in its distribution and marketing facilities. The labour forre It will also show Kuwait's limited industrial potential- ities and the absence of the kind of technology necessary Statistical estimates indicate that the total labour for efficient production and competition abroad. force in Kuwait exceeds 175,000. Other estimates, how- ever, put the total at between 150,000 and 175,000. The Government of Kuwait has made special efforts The main part of the labour force is in the public to raise the level of its labour force by sending groups sector or under special contracts. abroad for training and by establishing technical and vocational schools. One such school was established to At the end of 1964, those employed in the govern- provide trainees with modern industrial techniques; ment sector were estimated at 69,956, of whom 30,680, and a secondary commercial school has already been or 44 per cent, were Kuwaitis, and 39,276 or 56 per established. Private enterprise has also contributed to cent, were non-Kuwaitis. Of the non-Kuwaiti labour, the preparation of vocational and technical programmes. 48 per cent were non-Arabs. Total salaries and wages This is particularly true of the Kuwaiti joint-stock paid in 1964 by the Government were estimated at companies, especially the Kuwait National Petroleum KD 60.9 million, of which KD 28 million, or 46 per Company, which has provided technical and vocational cent, were paid to Kuwaiti nationals and KD 34 training programmes, and sent several groups for million, or 54 per cent, to the non-Kuwaiti part of the training abroad. Other petroleum companies also labour force in the government sector. provide regular training courses which can be improved According to the first industrial census, published in in number and in quality in order to meet the particular 1964, those employed in the industrial sector, including needs of industry. Despite the efforts which are being the oil sector, numbered 27,669, or 15.1 per cent of the undertaken by the public and private sectors, Kuwait total labour force. These were distributed among the still badly needs a greater number of technically trained industries in the country as follows: 6,063, or 21.9 per workers, especially if it decides to undertake large cent, in government industrial enterprises; 4,265, or industrial and agricultural programmes in the future. 15.4 per cent, in establishments employing fewer than Progress involves not only factors of production five persons; 10,402, or 37.6 per cent, in establishments but also scientific procedures. A successful project ¡3 employing five persons or more ; and 6,940, or 25 per one that is based on a thorough feasibility study cover- cent, in the production and distribution of oil. ing the financial, technical and marketing aspects. The marketing problem in a country like Kuwait is of Tabk 4. Industrial tmrloynwnt in Kuwait la INI crucial importance and should be given due considera- tion. Numttf Ptrctntei» INDUSTRIAL LEGISLATION Typ* of induitry *f. Production of oil 6,470 23.3 The industrial development law Distribution of oil 470 1.7 Repair and manufacturing This law was passed on 4 March 1965. It aims at organizing, encouraging and developing national indus- (employing 5 persons or more) 10,402 37.6 Repair and manufacturing (em- tries on a scientific, technical and economic basis. ploying fewer than 5 persons) 4,265 15.4 The law defines an industrial firm as an establishment Government industrial establish- ments engaged basically in transforming raw materials into 6,062 21.9 either finished or semi-processed products, or trans- TOTAL 27,669 9M forming the latter into fully processed products. This definition also includes establishments engaged in the mixing, assembling, filling or packing of products, if Employment in the construction sector was estimated these operations are carried out mechanically. at between 20,000 and 25,000 persons. Finally, the number of persons employed by the different com- Article 4 of the law provides for the establishment of mercial enterprises, banks and insurance companies, an industrial development committee composed of the was estimated at between 40,000 and 45,000. Minister of Finance and Industry or his deputy as chairman, representatives of the port and customs It is to be noted that the greater portion of the administration of the Ministry of Finance and Industry, labour force is employed not in manufacturing but in the industrial affairs department of the Ministry of the repair industries, which, according to the industrial Finance ami industry, the Ministry of Commerce, the census of 1963, employed about 8,800 workers, or 42 Planning Board, the Savings and Credit Bank and 96 Industrial development in the Arab countries three representatives from the private industrial sector information, statistical data, technical maps, exploration to be nominated by the Kuwait Chamber of Commerce results and other studies and research available at the and Industry. This committee is responsible for Ministry of Finance and Industry relating to specific studying and recommending proposals pertaining to the industries. The Government is empowered to con- development of national industries, including the adop- tribute financially towards the costs of studies. Should tion of measures for their organization, protection and projects prove unfeasible, the Government will bear 50 encouragement, for studying applications submitted by per cent of the expenses involved. If however, projects new industrial enterprises and for recommending nre successfully implemented, promoters will be measures pertaining to the standardization of measure- required to reimburse the Government fully for all ments and specifications. expenses incurred. Article 6 of the law requires owners or managers of Industrial loans existing industrial establishments, or of establishments under construction, to register within six months from The Savings and Credit Bank is required by the law the date of the enforcement of the law, and no indus- to give priority in the allocation of its loans to indus- trial firm will be licensed unless it has been established trial projects, especially new projects. in accordance with the provisions of the law. Upon the recommendations of the Industrial Development Priority in government purchases Committee, which will be made within sixty days from Preference in government purchases should be given the date of receipt of the application, the Minister of to domestic industries, provided that the products of Finance and Industry may grant or refuse the licensing these industries prove equal to foreign product from of industrial establishments, and, in the latter case, the point of view of quality and prices. must state the reasons for such refusal. In cases where licensing is granted, approval would be conditional The General Authority for the Shuaiba industrial zone upon joining the Kuwait Chamber of Commerce and Industry and adhering to the provisions of laws On 14 May 1964, the Shuaiba industrial zone was pertaining to the standardization of measurements and established under the Shuaiba Authority, a financially specifications. Licensing is granted in the light of and administratively independent organ attached to the certain considerations pertaining to the economic requi- Ministry of Finance and Industry. The authority is to rements of the country and the potentialities of local be operated on a strictly commercial basis. The objec- consumption and exports. The laws reserve for the tives of the Shuaiba industrial zone are to assemble all Minister of Finance and Industry the right to revoke public utilities and industrial establishments in the licences or to withdraw any privileges granted under Shuaiba zone and prepare the necessary plans for their the law if applicants fail to start contracted work, fail development, and to coordinate the individual requi- to produce within the specified period, introduce nltera rements of enterprises for the services of public utilities tions in the firm's objectives or violate the conditions within the general framework of the economic plan. under which licences have been issued. Another decree excluded the electricity generating Exemption from taxes and duties and transmission stations and the water desalination plant from the direct supervision of the Shuaiba board, Upon the recommendation of the Industrial Develop- attaching them to the Ministry of Power and Water ment Committee and the consent of the Council of Resources. Ministers, the Minister of Finance and Industry was empowered to exempt industrial establishments for a Industrial supervisory machinery period of ten years from all existing taxes, including income tax, or from any other tax that might be Between 1952-1961, a construction board supervised imposed in the future, from the date of licensing or construction and building activities in the country, in- registration or from the date of the commencement of cluding those related to industrial activity. This board production. These tax privileges include also: also supervised the construction of power generating (a) Exemption from customs duty of all imported plants, water plants, roads, schools and hospitals. Later, machiner)', equipment and spare parts, and of raw the Planning Board was set up to study the economic materials and semi-processed goods used by industrial situation in the country and to prepare a comprehensive firms for production purposes; development plan. A special industrial affairs depart- ment was set up at the Ministry of Finance and Indus- (b) Exemption of exports of local industrial pro- try in 1961 to supervise the industrial activities in the ducts from all export duties and taxes; country, to undertake industrial studies and to prepare (c) Raising of customs duties on competing im- statistical information on the state of industry in ported goods for a period not exceeding ten years (the Kuwait. high customs tariff, however, may be extended beyond ten years if the economic circumstances requiring the Law No. 6 of 1965 provided for the establishment of continuation of such protection necessitate such the Industrial Development Committee under the Ministry of Finance and Industry ; its membership and extension). functions have already been mentioned. Provision of Slate land for industrial purposes The Kuwait Chamber of Commerce and Industry, The law extends to industrial firms the privilege of which represents the private sector, widened the scope applying for free plots of land for plant construction, of its activities in 1963 by including industry. Of its the size depending on the needs of the particular enter- fifteen members, three represent industry and the prise and Us production requirements. remaining twelve the commercial sector. The industrial Technical information and studies development law made the licensing of industrial establishments conditional upon membership of the The law provides for assistance in the form of Kuwait Chamber of Commerce and Industry. Industrial situation in the Arab countries •7 Among the important government authorities which individual warehouses, and all the necessary road and supervise industrial activities are the Ministry of Power sea modes of transport. and Water, which administers the water desalination plants and other related industries, and the Ministry of In addition, private ports exist, which are used for Public Works. the export of petroleum. The Shuaiba industrial zone is also expected to have a modern harbour, comprising The General Authority of the Shuaiba industrial one quay 650 m long and 100 m wide, another pointing zone is at present undertaking the execution of several to the sea, 785 m long and 50 m wide ; a smaller one ; projects, including a power generating plant, a water and an oil pier. The principal quay can accommodate desalination plant, a pier and other infrastructural pro- hve ships of 15,000 tons capacity each at one time. jects such as utilities, housing and gas storage centres. Air transport. The first industry to be established in this zone was the Kuwait Chemical Fertilizers Company. An oil Airport movements are very active, with several refinery owned by the Kuwait National Petroleum routes connecting Kuwait with different parts of the Company is soon to be established. world. Although air transport is expensive, large quantities of goods are so transported. PUBLIC UTILITIES Telephone and telegraph communications industrial development in any country depends on Telephone and telegraphic communications in the availability of services and public utilities. Kuwait are adequate and connect the country with various parts of the world. Transport and communications Water and electricity Road transport The output capacity of the electricity generating Kuwait has a relatively adequate road system con- centre at Shuwaikh is estimated at 160,000 kW. There necting various regions. The Kuwait Transport Com- are also other power generating plants operated by fuel pany has just started to operate an organized bus oil. In order to accelerate industrial growth, the Govern- service, but private cars and taxis remain the major menfhas provided that a power generating plant should mode of transport in the country. be located in the Shuaiba industrial zone. Although Towards the end of tie nineteenth century, attempts total consumption of electricity in Kuwait, including were made to extend the railway system from Turkey all sectors, was 154,000 kW in 1964, the new plant is to Kuwait in order to expand Ottoman-German in- expected to have a capacity of 210,000 kW. The rate fluence in the area, bui nothing came of the project. for industrial use is 20 fils per kW. Kuwait, as an active, centrally located market, would Water is a major problem for Kuwait. 1,000 gallons doubtless have benefited from a railway system of sweet water arc sold to consumers at as high a rate connecting all countries of the region. as KD 1.5. In addition to the principal desalination Although adequate roads exist connecting Kuwait plant, a second plant will be established in the Shuaiba with neighbouring countries, there is no doubt that industrial zone with an output of 10 million gallons the exchange of goods with those countries would be per day. facilitated by the widening of those roads, the paving EXISTING INDUSTRIES of some of them and continuous maintenance and In 1963, the Ministry of Finance and Industry con- repair work. Kuwait's industrial expansion is depen- ducted an industrial census of the public and private dent on outside markets and therefore on the avail- establishments in Kuwait. The census covered establish- ability of an adequate transportation system. ments employing fewer than five persons, and five Sea transport persons or more. It revealed that typical industrial establishments in Kuwait were quite small and em- Kuwait's new port was ready for use by the middle ployed an average of nine persons. Very few establish- of 1960. Prior to its nationalization in 1953, the port ments, it was found, employed more than 100 persons. had been administered by a private company. The new The census also revealed that industrial establishments port has four deep-water berths, each 600 feet in length of all sizes and types, excluding the foreign oil enter- and dredged to M feet; three medium berths; two prises operating in the country, numbered 2,371 and floating berths ; one coastal berth ; one berth for small employed 21,199 persons, distributed as shown in craft; the old quay; mechanical and electric cranes; table 5.

Tabfe S. Number of industrial establishments and number of persona employed, IMI

Avérât* Number of Percentage Number of Percentage workeri per worker* »f total establishment! of Mai eitakiiikmcnt Distribution of oil » 470 2.2 1 — 470 Manufacturing and repair (employait five persons or more) 10,402 49.1 5M 24.8 17-11 Manufacturing and repair (employing fewer than five persons) 4,265 20.1 1,755 74.1 2-3 Government industrial establishments 6,062 28.6 26 1.1 23-24 TOTAI 21,199 iÖÖÖ ¿¿70 MO — »Covers only persons employed by the Kuwait National Petroleum Company. »8 Industrial development tai the Arab countries

Government industrial establishments constituted 1.1 The number of Kuwaiti nationals employed in these per cent of the total number of industrial establishments establishments was 353, of whom 278 were in admin- and employed 28.6 per cent of the total industrial istrative posts. labour force. The average number of persons per establishment was between twenty-three and twenty- GENERAL OBSERVATIONS PERTAINING TO INDUSTRIAL four. The twenty-six government establishments were STATISTICS * engaged in the type of industrial activity shown in The industrial census showed that some 8,800 table 6. persons, or about 42 per cent of the total industrial Table ». Number of government industrial establishments labour force in Kuwait, were employed in establish- and number of persona employed ments engaged solely in repair work. The typical indus- trial establishment in Kuwait was quite small, employed Avertit mainly non-Kuwaiti nationals, and was engaged mainly number of Number of werken in repair work rather than manufacturing. Only eight Number of establish- fer estak- industries employed more than 1,000 persons (see Industry workers ments Hthmtnt table 8). Food processing 531 1 531 "Salbook" type of Table 8. Kuwaiti industries employing more than building stone 2 1 2 1,*M persons, IMS Wood 408 4 102 Printing and publishing 588 1 518 S umber of Salt 63 1 63 Industry workert Tile» 10 1 10 Ironworks and metal Repair of motor vehicles . 6,767 product! 560 3 193 Oil production 6,470 Machinery and pumpi Tailoring 1,769 repair 678 1 «78 Metal products manufacture 1,692 Motor vehicle repair .. 2,524 12 210 Wood work 1J0S Electricity generation Bakeries 1.177 and water distillation 678 1 678 Tiles and mosaic 1,089 TOTAL 67« 26 233 Printing, etc 1,040

The number of Kuwaiti nationals employed in If government establishments are excluded, the government industrial establishments was 1,546, or 25 average number of persons employed per establishment per cent of the total number of persons employed. The was six. The average was brought down to this low census did not reveal the number of government figure because of the existence of a large number of establishments engaged in activities related to infra- small workshops in such industries as tailoring, structure such as roads, etc. furniture manufacture, precious metal work, and the The majority of Kuwaiti establishments employed one-man units in the repair industries. fewer than five persons and were either simple craft shops such as tailoring or repair and maintenance work- Table ». Average sise of establishments in certain laemo- shops. They constituted about 74.1 per cent of the tries, IMS (including oil and government establishments) total number of establishments and employed about 20 Average per cent of the total labour force. The average number number vf of persons per establishment was between two and merken fet eeUb- three. The number of Kuwaiti nationals employed in Industry " ' these establishments was 57, or 1.4 per cent of trie total number employed. Oil production 1,618 Establishments employing five or more persons Soft drinks manufacture 102 constituted 25 per cent of the total number of establish- Salt, chlorine and caustic soda ments and employed about 50 per cent of the total manufacture 63 Brick-making 42 labour force. The average number of persons employed Tiles and mosaic 35 ?:r establishment was between seventeen and eighteen, Repair of motor vehicles 17 his average, however, varied greatly from one indus- Metal products 10 try to another, as shown in table 7. Wood products 8 Bakeries 5 Table 7. Average number of persons employed in private Tailoring industrial establishments in INS 3

Average number of Industries in the private sector were manned very workert fer estab- largely by non-Kuwaiti nationals. Excluding the oil Type of industry litkment industry, only 410 Kuwaiti nationals were employed Carbonated soft drinks 102 in private industry as against 14,257 non-Kuwaitis. Tiles and marbles 44 In government industrial establishments the proportion Printing and publishing 41 of Kuwaitis was much higher, amounting to about Furniture 25 1,546 Kuwaitis as against 4,516 non-Kuwaitis. These Dairy goods and confectionery 23 figures show that, in government establishments, 25 per Ship-building and maintenance 20 Bakeries 12 * From "Industry in Kuwait", by Dr. Fcnelon, statistical ex- Wood 12 pert at the Planning Board; published in Bulletin No. 45 of the Kuwait Chamber of Commerce and Industry. Industrial litMtiM i» the Arab countries cent of the total number of person» employed were TaUt 11. Distribution «f cstaMishs»ents by tint, IMS Kuwaiti nationals, as compared with 2.8 per cent in (excluding »II companies and government industrial non-government establishments. establishments) The largest number of establishments in any one Number of establishments in trade was found in tailoring, with 557 establishments, nek «'« group Kuwait Towns followed by motor vehicle repair with 394 establish- Site group city and and ments. Table 10 shows the number of establishments (number of workers employed) suburbs villages Total in certain Kuwaiti industries. Fewer than S 798 957 1,755 S to 9 151 142 293 Table II. Number of MtaMMuneati la cartata Kuwaiti 10 to 14 69 31 100 15 to 19 39 16 55 industria*, IMI 20 to 24 24 9 33 25 to 29 22 22 Number 30 to 34 13 1 14 of estab- 35 to 39 9 3 12 Industry lishments 40 to 44 9 1 10 45 to 49 4 4 Tailoring SJ7 50 to 54 I S Repair of motor vehicle 394 55 to 39 1 1 Repair of electrical appliance! 27$ 60 to 64 1 1 65 to 69 2 2 Bakeriei 239 70 to 74 4 S Metal products 174 75 to 79 1 1 Wood product. 155 SO to 14 « 7 Repair of rubber tyres 132 SS to S9 2 2 90 to 94 — Repair of motorcycles and bicycle* . 91 95 to 99 I 1 100 to 149 12 12 130 to 199 2 3 It is to be noted that three out of every four establish- 200 to 249 2 2 ments employed fewer than five persons each and that only 2 per cent of the total establishments employed TOTAL 1,180 1,163 2Ü3 fifty or more persons each. The largest units were found in such industries as sand-line bricks, motor and Fifteen industries employed more than 400 workers other repair shops, tiles and soft drinks. In table 11, each, including all industries in the public and private industrial establishments are grouped according to size, sectors. Table 12 shows the industries employing more measured in terms of the number of workers employed. than 400 workers.

Table 11 Industrie« employing mere than 4M werben, 1M4 (sacMiag «41 esmpaniss and geverajMat eetabHabwsnts)

Publie lector Private lector ' Total Number of Number »f Number of establish- Number »f establish- Number of esUblish Numbrr of iuénstry ments workers menti workers menti workers mawww" - - imtif„.Mil, repair 12 2,524 382 4,243 394 6,767 557 1,769 557 1,769

IrwBInmÊB mfj Wè^WmmwwW • • • 3 580 171 1,112 174 1,692 Wood product» ... 4 4M 1S1 797 155 1,205 Bakeries» — — 239 1,177 239 1,177 Titea and mosaic.. — — M 1,019 31 1,019 Prbttiaf, etc 1 5« 11 452 12 1,049 Electrical machi- nery repair 275 752 273 752 Miecelaiaeotta food preparation* ... 1 5J1 21' 299 29 830 Repair of non^sfc» trical machinery 1 671 3 40 4 718 Soft drinks — — 7 713 7 715 Electricity and water 1 678 1 678 Brick works 1 10 13 577 14 587 (HI distribution ... 1 470 1 470 Furniture and naattress-maldng — — 75 464 75 464

• Includes companies with government participation. b Does not include bakeries attached to Government Central Kitchen. « Includes Government Central Kitchen and Bakery (school meals). » Excludes bakeries and soft drinks manufacture. IM Industrial deretopmeiit In tha Arab ewmtries

INDUSTRIAL JOINT-STOCK COMPANIES On the other hand, participation of the public sector amounted to KD 20,415,200, or 57.5 per cent of the During the last few years, a large number of joint- total capital, and foreign participation amounted to stock companies have been established in Kuwait, with only KD 826,700, or 2M per cent of the total capital an estimated capital amounting at the end of 1965 to of the industrial companies. about KD 80 million. Ownership of industrial joint-stock companies in The State has adopted a policy of encouraging these Kuwait varies in type. Some are totally owned by the companies by every means, including participation in private sector with no foreign or government participa- the equity of some of these enterprises. However, State tion, while others have mixed (private-government- participation has been limited to industrial and trans- foreign) ownership. Furthermore, a few companies have port companies, leaving banking and other services offered their stock for public subscription, while others completely in the hands of the private sector. have limited their shnres to the original promoters only. The paid-up capital of the joint-stock companies Five industrial joint-stock companies are totally amounted to KD 3(>.5 million at the end of 1964. Tables owned by the private sector, namely, the Kuwait 13 and 14 contain information pertaining to joint-stock National ' Fishing Company, the Americana Food companies up to the enJ of 1964. The growth of joint- Processing Company, the Kuwait Oil Tanker Company, stock companies in Kuwait will doubtless constitute an the Kuwait Limestone Company and tlie Cattle and important factor in the economic and social develop- Poultry Feed Company. ment of the country, and will help to develop a capital The Government has participated either directly or market on sound bases. Once this sector has been indirectly in the equity of a large number of Kuwaiti developed, its importance to the country may become joint-stock companies. It participates directly in the equal to that of the oil sector. In 1964, there were four- equity of the Kuwait National Petroleum Company teen Kuwaiti joint-stock companies, with a total capital (to the extent of 60 i>er cent), the Petrochemical Indus- of KD 35,494,227. Five of these companies, with a total tries Company (to the extent of 80 per cent), the capital of KD 29,018,227, were in the oil sector. Of National Industries Company (to the extent of 51 per thè remaining nine companies, four, with a capital of cent), and the Kuwait Flour Mills Company (to the KD 4,036,000. were in the food-processing industries extent of 50 per cent). The Government has also and five, with a capital of KD 2,095,000, were in indirectly participated in the equity of the Kuwait different construction materials industries. Chemical Fertilizers Company, the Kuwait Aviation The number of shareholders in these industrial com- Fuelling Company, and the Kuwait Prefabricated panies was 31,108 at the end of 1964. Whereas 31,075 Housing Company. persons owned shares in companies that had offered In addition to equity participation, the Government stocks for public subscription, only thirty-three persons hns assisted these companies in a variety of ways, for owned shares in companies whose stocks were closed instance, by granting loans and facilitating modes of to public subscription. repayment. Such assistance and encouragement has not Total investment of the private sector in industrial been confined to companies operating with government joint-stock companies amounted at the end of 1964 to participation, but has been extended to all other KD 14,252,327, or 40.1 per cent of their total capital. companies.

Takte 11 Inductrial jaiiit-staefc. corns«"!» i» Kuwait (capital and Ioana) (KD)

Government participation Authorited capital S en-Kuwaiti Year tf ———— Paid-up authoritci Her- Letti Upan irtaa- capitai capital crn- Antkorisei graniti Campany ¡ithment litkmant In 1964 lHi 1*64 tagt 1*64 1**4

, Companies which hai* offerte their stockt for subscription: Industrial companie» : National Industries Co 1961 1.500,000 1,500,000 750,000 51.00 765,000 382,500 Kuwait National Fishing Co. 1963 1,000,000 1,000,000 499,645 Kuwait Flour Mills Co 1961 2,000,000 2,000,000 1,000,000 50.00 1,000,000 500,000 Americana Food Processine Co. 1,000,000 1,000,000 250,000 TOTAL 5,500,000 5,500,000 2,499,645 — 1,765,000 882,500

Petroleum and Petrochemical Com- panies: Kuwait National Petroleum Ca .. 1960 7,500,000 7,500,000 7,500,000 — 60.00 4,500,000 4,500,000 Petrochemical Industries Co 1963 16,000,000 16,000,000 4,000,000 — 80.00 12,800,000 3,200,000 Kuwait Oil Tanker Co 1957 3,518,227 &75M4S 4,888,643 TOTAL for the seven companies 32,518,227 34,751,345 18,888,288 _ 19,065,000 8,582,500 InchMtrial situation in th« Arab countries 101

Table 11 Industrial joint-stock companies in Kuwait (capital and loans) (eontlnuti)

Gavtmmtnt participarían Authorised capital Sun-Kuvpai Year of Paid-up authorised Per- estab- Vpon estab- capital capital Authorised aranted Company lishment ¡iskmrnt In 1964 lift* 1964 1964 1964

2. Companies which do not offer their stockt fur subscription: Kuwait Asbestos Industries Co. 1960 45,000 360,000 360,000 38.25 137,700 137,700 Kuwait Chemical Fertiliiers Co. 1964 2,000,000 2,000,000 1,500,000 800,000 48.00 Indirect Participation Kuwait Limestone Co. 1963 10,000 10,000 10,000 Kuwait Prefabricated Housing Co. 1965 500,000 500.000 250,000 50.49 Indirect Participation Kuwait Felt Co 1964 40,000 40,000 40,000 12,000 Cattle and Poultry Feed Co. 1964 36,000 36,000 9,000 —

TOTAL for the six companies 2,631,000 2,946,000 2,169,000 812,000 137,700 137,700

GiAND TOTAL 35,149,227 37,697,345 21,057,288 812,000 19,202,700 8,720.200

Table 14. Industrial joint-stock companies in Kuwait (Capital and reserves, in KD)

Obligatory reserves Cthcr reserves Total equity Cnmpany 1963 1964 1963 1964 1963 1964 Industrial companies which have offered their stocks for subscription: Industrial companies: National Industriel Co. 44,781 70,407 83,033 148,666 877,814 969,073 Kuwait National Fishing Co — 193 193 499,645 500.031 Kuwait Flour Mills Co 5,995 5,995 5,995 39,842 1,011,990 1,045,837 Americana Food Processing Co — 250,000

TOTAL 50,776 76,595 89,028 188,701 2,389,449 2,764,941 Petroleum and petrochemical companies: Kuwait National Petroleum Co 489,484 775,372 3,102,569 4,767,566 11,093.053 13,042,938 Petrochemical Industries Co — 17,108 17,108 4,000.000 4,034,216 Kuwait CHI Tanker Co 119,877 168,731 266,168 368,446 6,137,390 6,288,522

TOTAL for the seven companici 660,137 1,037,806 3.457,765 5441,821 23,619,892 26,130,617 2. Compiutiti which io not offer their stocks for subscription: Kuwait A ibes tos Industriel Co. 307 23,360 -- 157,960 360,307 541,628 Kuwait Chemical Fertilizers Ca — 1,500,000 Kuwait Limestone Co. — — Kuwait Prefabricated Housing Co — — Kuwait Felt Co — — Cattle and Poultry Feed Ca — — 9,000 9,000

TOTAL for the tix companies 307 23,360 157,960 369,307 2,050,628

GIAN* TOTAL 660,444 1,061,166 3,457,765 5,499,781 23,989,199 28,181,245

OlT. AlfD METIOCHEMICAL INDUSTRIES million, in which the Government participated to the extent of 60 per cent. The remaining part of the capital Oil production and transportation was offered for public subscription. KNPC was to engage in all activities pertaining to the petroleum The rapid growth achieved by foreign companies sector, including the processing of oil for local con- operating in Kuwait in all fields of oil production, sumption and export. refining and marketing provided an impetus to the establishment of domestic oil industries owned and In 1961, the Kuwait Oil Company Ltd. surrendered managed by Kuwaiti nationals. The crucial step in its concession for the distribution of oil products in this regard was the establishment of, and the support the local market to the Government. Consequently, given to, the Kuwait National Petroleum Company KNPC replaced the Kuwait Oil Company as the sole and the Kuwait Oil Tanker Company. distributor of oil products in the domestic market. The company at present owns sixteen distribution centres. The Kuwait National Petroleum Company In May 1962, KNPC petitioned the Government for The Kuwait National Petroleum Company (KNPC) a concession to explore and exploit oil resources in was established in 1960 with a capital of KD 7.5 regions relinquished by the Kuwait Oil Company Ltd. in InduitrUl development in the Arab covatrice Sales of petroleum products in Kuwait amounted to Kuwait has adopted a policy of co-operating with KD 4,614,471 in 1964. An analysis of the company's large foreign companies to provide the petrochemical sales is shown in table 15. industry with the necessary technical skills and to ensure international marketing outlets, thereby Table 15. Analysis of the Kuwait National Petroleum resolving the two crucial problems hampering its Company's aalen, 19*4 growth. (m gallons) The Petrochemical Industries Company The Petrochemical Industries Company was founded Premium gasoline 52,215,090 in 1963 by the Government of Kuwait, the Kuwait Oil Regular gasoline 3,727,998 Company Ltd. and the National Industries Company. Kerosene 11.677.1S4 The distribution of the equity ownership of this indus- Gat oil 16,407,126 trial project is as follows : Lubricating oil 194,366 Nominal Motor boat fuel 8,571 Number of vaines Asphalt (bitumen) 18,879 ¡harts (KD) Percentage Residual oil 5,521 Government of Kuwait 1,600,000 12,800,000 »0 Kuwait National Petro- leum Company 100,000 800,000 5 Tn the field of refining, the Government granted National Industries Com- KNPC a loan of KD 25 million for the establishment of pany 60,000 480,000 3 an oil refinery in Kuwait with a 4.5 million tons TOTAL 1,760,000 14,080,000 88 capacity. The Kuwait Oil Tanker Company The remaining 240,000 shares, or 12 per cent of total capital, were offered for public subscription. The authorized capital of the Kuwait Oil Tanker Comptiny, an enterprise wholly owned by the private The establishment of this company was motivated by «ector, was raised from KD 3.5 million to KD 5.75 the desire to erect a petrochemical complex in Kuwait million at the end of 1964. The paid-up capital was by using natural pas, petroleum products and salt for KD 4.88 million at the end of 1964. The Government the production of ammonia, urea, sulphuric acid, hai provided the company with a loan of KD 6.8 polyvinyl chloride (PVC), caustic soda and other million. The realized net profits equalled KD 488.544 derivatives of the petrochemical complex. in 1964 (compared with KD 441,618 in 1963), and The company has established a subsidiary company, the total distributed dividends amounted in 1964 to the Kuwait Chemical Fertilizers Company, for the KD 337,412 (as against KD 306,738 in 1963), production of chemical fertilizers, and is also planning representing 5.87 (as against 5.33) per cent of total to establish other industries, especially in the field of paid-up capital. petrochemicals. The company owns three large modern tankers—the The Kuwait Chemical Fertilisers Company Kazima, the Warba and the Sabia—with a total loading The intensive studies undertaken by the Petro- capacity of roughly 161,000 tons. The company also chemical Industries Company and the Ministry of distributes gas in Kuwait, and the board of directors is Finance and Industry with a view to assessing produc- at present considering the possibility of exporting gas tion possibilities indicates that priority should be given to neighbouring countries. to the production of chemical fertilizers. The company does not undertake activities in the The Kuwait Chemical Fertilizers Company was industrial field, althottgh its existence may encourage established on 18 March 1964, with a capital of KD and support the industrial sector, especially the oil 2 million, of which the Petrochemical Industries Com- sector. The company constitutes an essential and pany's participation amounted to 60 per cent and the integrated basis for the establishment of a national oil Hritish Petroleum Company (Bermuda) and the Gulf industry, owned and managed by Kuwaiti nationals. Oil Corporation to 20 per cent each. Prospects for expansion The board of directors of the company is composed Excellent potentialities are available in Kuwait for of ten members, six representing the Petrochemical the establishment of a domestic petroleum industry. Industries Company, two the British Petroleum Com- Huge quantities of petroleum are expected to be pany and two the Gulf Oil Corporation. As a first discovered in areas relinquished by the Kuwait Oil stage, the company is building four plants in the Company Ltd. Likewise, the establishment of the new Shuaiba zone, namely, an ammonia plant with a daily refinery in the Shuaiba zone is expected to open new- capacity of 400 tons ; a urea plant with a daily capacity horizons for public and private expansion in this vital of 550 tons; an ammonia sulphate plant with a daily sector of the Kuwaiti and Arab economies. capacity of 550 tons, and a sulphuric acid plant with a daily capacity of 400 tons. The petrochemical industry The company concluded an agreement with Foster Kuwait has shown great interest in the development Wheeler Ltd. for the establishment of these plants and of a petrochemical industry because of the availability other related infrastructural facilities. Foster Wheeler in Kuwait of raw materials and capital and the was requested to make use of local contracting facilities existence of a strong world demand for the products whenever possible. Construction is under way and is of this industry. Two companies are in the process of expected to be completed in 1966. establishment: the National Petrochemical Industries Prospects for industrial expansion Company and the Kuwait Chemical Fertilizers Petrochemicals have developed during the last ten Company. years in such a way as to become one of the essential Industrial situation in the Arab countries IN bases of industrialized countries. Efforts have already Private construction establishments employing fewer been exerted to develop this type of industry by than five persons channelling into it substantial investment funds. Such establishments numbered 180 and employed a Opportunities for expansion have been provided total of 416 persons, distributed as follows : through technological progress and many essential raw materials are being replaced by petrochemical products Number of S umber of such as fertilizers, plastic, rubber and nylon, Type of iniustry establishments workers Of the industries that should be established in Wood manufacture 105 234 Kuwait, the following are important: petrochemical Iron manufacture 75 182 fertilizers; paints; plastic and plastic products; phar- TOTAL 180 416 maceutical products; insecticides; rubber, rubber tyres and related products ; textiles and perfumes. Private construction establishments employing five Potentialities for expanding this field of industrial persons or more activity are available, especially since world demand for Such establishments numbered 190 and employed petrochemical products has increased very rapidly, 3,300 workers, ns shown in the following table: causing many countries to compete for the establish- ment of petrochemical industries as a means of support- Table 17. Number of private consttruetien establishments ing and strengthening their economies. employing tve person* or more, and number of per—a employed, INI THE CONSTRUCTION INDUSTRIES Average The construction industries in Kuwait comprise the number af Number of workers per manufacture of such building materials as asphalt, iron establish Number of establish and metal products, marble tiles, bricks and mosaics, Industry Workers and related industries. The stimulus for the growth of this group of industries was provided by the building Wood 46 549 12 boom which characterized the Kuwaiti economy in Tiles 31 1,076 35 (llass and glass products J 85 28 the early nineteen-fifties. Bricks and marbles U 559 43 These industries depended on domestic raw materials. Iron and metal products 97 881 9 Suitable deposits of limestone and rock containing a Asbeste* 1 150 150 good calcium carbonate content were discovered in the TOTA . 191 J.300 17 Ushairej area, where a deposit of sand with a high silica content had been located. Thus all raw materials were available for the sand-lime brick plant which was The tile and marble industry whidi was developed established in 1953. The production of bricks using during the construction boom is largely in the hands imported lime was begun in 1956. In the following year, of Iranians who are traditionally skilled in tile and a lime-making plant was completed so that lime pro- mosaic work. Marble is imported, but cutting to size duced domestically could be substituted for imports. It and polishing are carried out by local firms using is to be noted that natural gas supplied by oil fields modem machinery. has been used as the fuel in the lime-making industry. Thus a total of 379 public and private establishments Government establishments are engaged in the production of building materials and employ a total of 4,716 workers, of whom 1,000 are in The need to provide building materials to govern- the public establishments and 3,716 in the private ment projects at reasonable prices necessitated govern- sector. The average number of workers per establish- ment participation in the construction of industries. ment is 111 in public establishments, three in private According to the industrial census of 1963, there were establishments employing fewer than five persons and nine government establishments providing employment seventeen in private establishments employing five for 1,000 workers (see table 16). persons or more. Joint-stock Construction companies Tab!« 1«. Number of government construction establish- ment! and number of persons employed, INS The first private company formed for the production of building materials, the Asbestos Industries Company, (KD) was established in 1960. In 1961, the National Indus- tries Company was founded, and several other private Average number of joint-stock companies were established thereafter. This M umber uvrkers ff Number Value per sector is still small but prospects for its expansion are establish- of establish- promising. Some of the more important companies in °l production ment Industry meats workers the construction sector are listed below. Salbook« 1 2 139,831 2 The National Industries Company Wood 4 408 76,370 102 The National Industries Company was established in Bricks 1 10 2,402 10 1961 with a capital of KD 1.5 million, 50 per cent of Iron and metal products 3 580 366,126 193 which was subscribed by the State. The company was to take over and operate the sand-lime and brick factory TOTAL 9 1,000 584,729 111 and the State-owned cement factory and to set up other appropriate industries to meet domestic or export * Salbook is used in construction and is found in the northern section of Kuwait City. demands. IM Industrial development in the Arab countries

During the first year of its operation, the company Private establishments employing fewer than five concluded an agreement with the Kuwait Asbestos persons Company under which it acquired a 75 per cent interest Such establishments constituted more than 39.6 per in that company. The company is engaged in the cent of the total establishments in the repair and production of snnd-lime. lime, concrete pipes of all maintenance industries and employed roughly 33 per sizes, bricks, sidewalk tiles, electric and telephone wire cent of the total work force in that group of industries. coatings and paving stones. The National Industries There were on average between two and three Company acquired equity shares in several joint-stock workers per establishment, and the number of Kuwaiti industrial companies, the most important of which are nationals employed in such establishments constituted the Petrochemical Industries Company, the Kuwait only about 1.5 per cent of the total. Table 18 gives the Prefabricated Housing Company and the Kuwait number of establishments and of persons employed in Asbesto > Company. the repair and maintenance industries. The Kuwait Asbestos Company The Kuwait Asbestos Company was established at Table 18. Private establishments engaged in the repair the end of 1%0 with a capital of KD 45,000, of which and maintenance industrie«, 1943, and employing fewer than live person» the National Industries Company held 75 per cent. The company is engaged in the production of asbes- tos sheets and pipes and related products. In terms of «t Number establish- of Îuality and prices, the products of the Kuwait Asbestos ments workers !ompany enjoy an advantage over foreign imports. Consequently, the company made considerable profits in Repair of rubber tyres 132 301 1964, which were re-invested in a second asbestos plant Repair of electric appliances and designed to produce sewer and water pipes. An agree- machinery 266 524 ment has already been concluded with a foreign concern Repair of motor cars 141 343 Repair of bicycle» 91 121 for the construction of the new plant. Repair of watches 46 75 Other joint-stock construction companies ^firrors and frames 20 45 A number of other joint-stock cor-jtruction com- TOTAL 696 1,409 panies have recently been established ' i supply building materials. The most important of tr. />e are the Kuwait Prefabricated Housing Company, which was established Private establishments employing jive persons or won jointly by the Kuwait Investment Company and the Such establishments numbered 260, or 44 per cent National Industries Company with a capital of KD of the total number of establishments, and provided 500,000; the Kuwait Felt Company, which produces employment for 4,287 workers, or 43 per cent of the asphalt-coated papers and other asphalted materials total number of persons employed in the repair and used in construction (the company started operations in maintenance industries. The majority of these were 1965 and expects to export part of its production to engaged in the repair of motor vehicles (see table 19). the Arab Gulf Kmirates and to Saudi Arabia) ; the Kuwait Limestone Company, which is engaged in the Table II. Private establishments engaged in the repair extraction and cutting of stones. and maintenance industries, IMS, and employing ive persons or more REPAIR AND MAINTENANCE INDUSTRIE! The rapid increase in the number of imported motor Number of Number vehicles in the country has brought about the develop- establish- ment of the repair and maintenance industries. The ments workers number of motor vehicles in Kuwait is estimated at Repair of rubber tyres 3 35 about 100,000, or approximately one car to every five Repair of machinery other than persons in the country. Kuwait imports an average of electric 3 40 1,000 cars per month. This great development in motor Repairs oí electric machinery and transportation has led to the growth of an important appliances 9 2» group of industries engaged in motor car repairs, main- Boat-building and repair 5 «4 tenance and servicing. According to the 1963 industrial Repair of motor vehicles 241 3,900 census, this group of industries offered more employ- TOTAL 261 4¿¡7 ment than any other industry in the private sector. In that year, 6,767 persons were employed in 400 repair establishments, and 447 in the rebuilding and repair of The average numter of workers per establishment tyres, motor-cycles and bicycles. Other establishments was roughly eleven in the rubber tyre repair, sixteen were engaged in the repair of electrical appliances such in the motor vehicle repair and twenty-five in the as refrigerators, radios and television sets, whose con- machinery and apparatus repair. sumption has increased tremendously over the last few Prospects for expansion years, and of sailing boats, the construction of which was formerly the most important local industry. The rapid developments that have taken place in Kuwait will no doubt result in the further expansion Government establishments of the repair and maintenance industries. Some believe The Government has set up establishments for the that availability of skills in the motor vehicles repairs repair and maintenance of State-owned motor vehicles industry may even bring about the establishment of and machinery. There were thirteen such establishments an assembly industry in the future. However, the in 1963, employing 3,202 persons. establishment of such an industry may not prove Indimtrial situation in the Arab countries 105 feasible owing to the high cost of labour and the absence development of food processing industries cannot be of needed raw materials. achieved. Whatever food processing industries exist in Expansion in the ship-building industry is also Kuwait are largely confined to the home market. The possible, although this requires elaborate technical and fish industry has been able, however, to satisfy not only economic studies pertaining to Kuwait's export poten- the local market but also to export considerable quan- tialities. Other possibilities include the setting up of a tifie-; of high quality fish, such as shrimps. radio and television assembly plant, and a small plant Government establishments to manufacture rubl>er tyres. Kuwait imports about 100,000 tyres annually, a quantity justifying the The Government lias established several food pro- establishment of such industry. cessing industries to satisfy the requirements of public schools and hospitals. SALT, CHLORINE AND CAUSTIC SODA Private establishments employing ¡ewer than five The salt and chlorine plant is situated at Showaikh, persons adjacent to the electricity generating and water According to the 1963 census, such establishments desalination plants. The Ministry of Electricity and numbered 214 and employed 732 workers, distributed Water Resources chose that site in order to ensure an as follows: adequate supply of chlorine for the water desalination plant. At present, the plant produces 2.4 tons of Xumber of Xttmber of establish- pertons chlorine gas per day, of which 80 per cent is dissolved Tyfe of estMsLiin ni employee with the sea water, and the remaining 20 per cent is Bakeries 199 687 used in the hydrochloric acid plant. This plant pro- l-'lour mills 12 34 duces about 350 gallons of hydrochloric acid per year, L'airy goods and confectioneries J 11 of which 100 gallons were sold last year to the oil- producing companies. In addition to chlorine gas, the TOTAL 214 732 plant produces 4.5 tons of caustic soda per day. The Ministry of Electricity and Water Resources has con- Private establishments employing five or more persons cluded an agreement with the Kuwait Oil Company Such establishments numbered sixty and provided Ltd. under which the plant is to supply the company employment for 1,459 workers distributed as follows: with 600 tons of caustic soda annually. In addition, the soft drinks plants consume about 200 tons of caustic Number of Number o/ establish- pertons soda annually. Type of establishment employed Furthermore, about 20 tons of salt are produced Bakeries 40 490 daily, oí which 5 tons are consumed in the chlorine and Ice 9 161 caustic soda operation, 3 tons are sold as table salt in Carbonated soft drinks 7 715 packets of 1 kg each, and the remaining 12 tons are Dairy goods and confectioneries 4 93 packed in jute bags containing 60 kg each for industrial TOTAL 60 M59 uses. A total of sixty-three persons were employed in this The average number of workers per establishment group of industries, only two of them Kuwaiti nationals. was twenty-four, a figure higher than the general aver- The Ministry of Electricity and Water Resources is age in Kuwait of sixteen per establishment. The average at present considering expanding this plant, in order to in this group was brought up to this high figure because ensure an adequate supply of chlorine to the new water of the large number of persons employed in the desalination plant which is to be located in the Shuaiba carbonated soft drinks industry, where »he average is industrial zone. Such expansion will result in doubling 102 workers per establishment. the production of chlorine and caustic soda and in The Kuwait Flour Mills Company trebling the production of hydrochloric acid. The ministry is also considering the setting up of four This company began operations at the beginning of units : one for liquefying chlorine gas in cylinders con- 1%6. It aims at providing flour and bread according taining one ton each; another for compressing caustic to established health standards and, according to its soda in barrels to facilitate its export to neighbouring statutes, its annual profits should not exceed 5 per cent. Arab markets where the demand for this important Fish Industry commodity has lately increased; a third for the pro- A plentiful variety of fish breeds are to be found duction of sodium chloride, which is used by the in the Persian Gulf. In the past, fishing and pearling Ministry of Public Health in detergents and sterilizers ; were of crucial importance to the economy of the and a fourth for bottling hydrogen gas, which will be country, but, as has been mentioned in the early part used by the new electricity generating plant located in of this paper, the importance of fishing and pearling has the Shuaiba industrial zone. diminished. The private sector, however, has recently FOOD PROCESSING, FISH AND OTHER PROCESSING shown great interest in developing the traditional fish INDUSTRIES industry. Two companies have been established using modern methods of catching, handling, preserving and Rapid progress has been achieved in a number of marketing, namely, the Gulf Fishing Company and the food processing industries such as flour milling, bake- Kuwait National Fishing Company. ries, dairy goods, confectioneries, carbonated soft The Kuwait National Fishing Company drinks, fish preserving and other industries. This progress, however, has been hampered by several This company was established in 1963 with a capital factors, the most important of which is the complete of KD 1 million. It was to undertake such activities as absence of an agricultural sector, without which the pearling, fishing, handling, packing, preserving, market-

IM „ '"«'•»trial development in the Arab eeuntriea mg and all related activities. The company owns ten boats, of which the largest is 54 m long, 10 m wide, Countries of the region each have certain comparative and with a draft of 3 m, and eight similar boats, each advantages m the establishment of particular projects ¿7 m long, 6.7 m wide and with a draft of 2.7 m The Specialization, however, may not be fruitful unless all company is still in the early stapes of operation. countries of the region co-ordinate their industrial projects in the light of existing potentialities in each I'rospects for expansion one of them. The food processing industries may witness consider- Training of workers, foremen and managers should able expans,on when the project of pumping water from be dealt with on a regional level, by establishing Shat-al-Arab is realized. This project will assist in the voca lonal centres whose facilities would be available creation of a modern agricultural sector in the country to all countries of the region. The Kuwait Flour Mills Company has been con- Standardization of specifications and measures is of sidering the question of expanding its productive crucial importance and needs to be tackled on a regional capacity with a view to realizing an export surplus leve if the region is to develop in the future into a Ureater expansion is, however, expected to take place single market. in the nsn processing and preserving industry. Solution of problems on an international level Again, it must be emphasized that no considerable expansion in the food processing industry is likely to Most of the difficulties of marketing industrial take place unless a modern agricultural sector is created domestic products arise from the consumers' lack of m Kuwait; and this in turn depends on increasing the confidence in national products. If agreement on the water resources in the country. use of the trade-marks of reputable international con- cerns could I« reached, consumers* confidence in the OTHER INDUSTRIES quality of domestically produced goods would be enhanced. For this reason, it is necessary for the coun- Other industries which exist in Kuwait are the small tries of the region to benefit from the experience of crafts and workshops such as tailoring, furniture developed countries, to adopt the technical specifications manufacturing and blacksmithing, which are market- oriented industries. applied to their products and operate under the super- vision of the international firms concerned. CONCLUSION The countries of the region need to co-operate with international establishments, and it is preferable that It is evident from the foregoing discussion that lie basis of such co-operation be undertaken within the potentialities exist in Kuwait for developing an indus- framework of the United Nations. trial sector The following factors, however, may im- pede the full growth of this sector: industrial co- The inability of these countries to undertake precise studies related to industrial productivity is due to lack ordination with the countries of the region ; availability of adequately trained economists and experts; it is of technicians and engineers; training of workers herefore advisable for the United Nationfto unde ! foremen and managers; industrial productivity; stan- take such productivity studies in every industrial field dardization of specifications and measures ; marketing. Industrial surpluses may have to be marketed outside The Government of Kuwait is doing its utmost to the region. Breaking into international markets may find so utions to these difficulties, some of which can prove to be a difficult, if not an impossible, task. There- be tackled only on a regional or an international level. ,°•,r!M? eSSe"t,ai ÍOVhe Uni^d Nations to try to Solution of problems on a regional level f£ï ÎH!Mnc!u!!,on of agreements between the cbun- The Droblem of industrial co-ordination should be ïhereb°Î £ ¡T" and°ther . developed countries resolved on a regional level. whereby the latter would permit the marketing of qualified good, produced uncîer competitive SSLS.

4. The industrial situation in Lebanon Communication presented by Lebanon HISTORICAL REVIEW nr^f °?d co,nPeVt,on in «ports of manufactured During the Second World War, industry in Lebanon products and a growing technological suprema« S enjoyed exceptional protection and high profits It advanced over developing economies. ThesTSctorT continued to enjoy a seller's market for several years following the war, and that period was one of industrial Lebanon had adopted, reduced the compiritivenesT of expansion for the country. Available statistics do not Lebanese industrial products, both at hoi£ anïïbSad permit measurement of the rate of such expansion, but The rupture of the customs union with SyrkinW» the rapid growth of imports of capital goods during further limited the market for Lebanese induatrkl •Z those years indicates that it was substantial. The ducts. Many industries which E3 U" «taWi,^ behaviour of these imports since 1950 shows a decline with a view to serving both the U^esT and the in this rate of expansion. Syrian markets and under condition?^ ordv JSA Y Unlike neighbouring countries, Lebanon did not competition from foreign producta hr~t • follow a policy of building high protective tariff walls market limitions, and fheir'oÄs^e 5328 for new industries, and established industries continued by varying degrees to less than full capacita to enjoy varying degrees of protection which had been granted to them. The years after the Second World War witnessed ÄeÄ * the market and in the markets AU" cSmtrieTwere

j. Industrial situation in the Arab countries 107 contributing to a rapid expansion of the construction, the national product, the importance of the industrial trade and finance sectors and of several other service sector appears slight, but as a source of employment it sectors. The rapid expansion in these sectors resulted in is relatively more impressive. a gradual widening of the domestic market for manufactured, semi-finished intermediate and finished PRESENT STRUCTURE OK INDUSTRY products and helped promote the development and growth of a number of industries. Although difficult With only a few exceptions, industries in Lebanon to establish statistically, industrial expansion, as are small and devoted chiefly to the production of evidenced by the growth of imports of capital equip- light consumer goods. The most inijwrtaiit industries, ment and of intermediate products and raw material judging by capital invested, are food manufacturing for industry, appears to have revived in the late nine- ferrous and metallic industries, textiles and chemical teen-fifties and resumed a moderately upward trend. products. Together they include some 45 per cent of the number of industrial establishments and represent Industrial expansion has been associated with about 3/ per cent of the industrial sector in terms of significant changes in the relative importance of the persons employed and 40 per cent in terms of capital different branches of the manufacturing industry. invested. Table 1 gives Lebanon's principal industries, Taking the number of establishments as a basis, the capital investment and emplovment statistics for the establishments producing clothing, footwear and made- various categories of industry in 1964. up textiles registered the greatest increase (over thirty- fold) followed by printing and publishing (fourfold), Scale of operation wool products and furniture establishments (twofold) and petroleum, mineral and metal products and food Smallness of size is a major characteristic of beverages. Judging by the value of output, the branches Lebanese industry. The extent to which the small-scale of industry which registered the most impressive ex- enterprise predominates is reflected in the data com- pansion have been clothing, footwear and made-up piled in tables 2 and 3. An outstanding feature of these textiles, petroleum mineral and metal products, paper small firms, and to a lesser extent of the large firms, and paper products and food and beverages. is their individual or family form. This feature is evidenced by the fact that most Lebanese industrial Income arising in the industrial sector is estimated firms bear family names. to have been LL 280 million at 1954 prices, or approxi- mately 12 per cent of the national income. It is next The size of establishments in textiles and non- only to trade and agriculture, which account for 27 metalhc industries is well alxne average from the per cent and 13 per cent of the national income res- ï-tandpoint of capital invested, laliour employed and the pectively. Lebanese industrial exports approximate LL value of output. The average size of establishments in 50 million annually and account for about 18 per cent the food industries, although accounting for a greater of total exports and about 12 per cent of the total value of output than any other industry, is far below average in terms of capital invested, labour employed products of the industrial sector. The balance of the and value of output. products of this sector is consumed locally. The establishments generally known as handicrafts The 6,650 establishments constituting the Lebanese m Lebanon consist principally of carpentry, tailoring, industrial sector in 1964 employed some 63,100 shoemaking, knitting, hasketmaking, pottery, etc. They workers, or approximately 13 per cent of the Lebanese employ slightly less than one-third of the labour force labour force. About one-third of the workers in industry engaged in industry and produce about 15 per cent of arc in handicrafts; the remaining two-thirds are in the income arising in the industrial sector. various manufacturing industries, the majority of them small-scale enterprises. The average number of workers Oxvnership per industrial enterprise has been 9.5 and the approx- imate capital invested per person LL 1,000. Compared Most industrial enterprises in Lebanon are privately with the services sector of the economy, i.e. with sectors owned. The Government operates only certain public other than agriculture and industry, per capita invest- utilities, of which the Beirut Electricity Service and ment in industry is low. This implies a relatively higher the Tobacco Monopoly are industrial. Principal foreign contribution to employment by industry than by the capital investments in Lebanon are Arab, French, services sector. British and American. United States private capital investment is mainly in the petroleum industry and Given the present estimated rate of population Arab investment mainly in apartment buildings. In growth in Lebanon of 2.3 per cent per year, some addition, there are numerous foreign investments in 37,000 persons are added to the population every year. industry, trade and services. A large number of foreign With the small proportion of women entering the firms, attracted by the facilities, conveniences and labour force, it may be assumed that some 18,000 to specialized services which Lebanon provides, have 20,000 persons enter the labour force every year. regional representatives in Beirut. They generally Furthermore, the modernization of agriculture, slow as maintain rented offices and have limited, if any, capital it may be, has resulted in a reduction in the agricultural investment in Lebanon. labour force. Judging by the small size of the Lebanese trading, financial and other service firms and by the Geographical distribution relatively inferior contribution of these activities to Geographically, industrial establishments in Lebanon employment, a very large number of new firms would are concentrated in Beirut and vicinity, particularly have to be established every year to absorb the increase those which are of large size ; it is estimated now that in the labour force. These sectors can certainly not 50 per cent of all industrial establishments in Lebanon expand at the necessary rate and heavy dependence on are located in Beirut, some 25 per cent of them in industrial expansion to absorb the increasing labour Mount Lebanon and the remaining 25 per cent dis- force is unavoidable. Hence, judged by its share in tributed among the other three muhafazats—about 13 1*8 Induit rial development in the Arab countries

lier cent in north Lebanon, 7 per cent in the Beka'a in the production of chemical products, plastics, com- and S per cent in south Lebanon. pressed wood, steel structures, aluminium, heaters, etc. Industrial financing In contrast to such heavy dejiendence on imports As to the methods of industrial financing, it is the Lebanese industrial sector depends very little on generally true that in mo&t ca.-es the firm's capital is foreign markets to dispose of its products. Kximrts of provided largely or entirely by the family or associated industrial products hardly reach LL 50 million a year, relatives or friends and is built up and extended out which leaves the hulk of the output of this sector to be' of profits. There is no significant dependence on absorbed by the domestic market. The major industrial external long-term capital, and investment institutions products of Lebanon are textiles and textile articles are practically non-existent. It follows that a large part products of chemicals and allied industries, articles of of investment is carried out directly by those who save plaster, cement, asbestos and ceramics. Lebanese indus- and a good portion of the profits are reinvested in the trial exports are largely destined to Arab markets and same or related activities. the share of other markets in these exports is veryJ small. The organized credit market, however, provides relatively limited amounts of short-term and medium- Although the bulk of Lebanese industrial products term credit. According to the 1964 annual report of are consumed locally, Lebanon depends heavily on the Bank of Lebanon, outstanding industrial credits imports to satisfy its requirements of such products, from commercial banks amounted at the end of 1964 particularly machines, equipment and most products to LL 236 million, or roughly one-fourth of the total of large-scale industries. In addition, Lebanon imports declared capital of industrial establishments, which substantial quantities of industrial goods which are stood at the time at LL 828 million. These credits produced locally but which are so different in quality are believed to be mostly short-term credits; but a that they may be considered as different products significant portion represents short-term credits ex- altogether The major categories of industrial products tended with the understanding that they will be renewed which Lebanon imports are textiles and textile pro- automatically several times until their duration is about ducts, machinery and mechanical appliances and five years. electrical equipment, base metals and articles made Such credit and most industrial credits extended by thereof, vehicles and other transport equipment commercial banks come from local banks. Foreign material for the manufacture of paper and paper board banks have very little or no interest in financing and articles made thereof, artificial resins and plastic materials, rubber and substitutes, articles of wood cork domestic industry. Their share in industrial financing in products of straw, esparto, etc. Lebanon was hardly 10 per cent of the LL 236 million outstanding industrial credits at the end of 1964, and TRANSPORTATION AND IOWKK FACILITIES SERVING THE is believed to be extended largely to a tew large foreign iirms that operate in the country. MANUFACTURING SECTOR One additional but limited source of industrial credit With the exception of the petroleum refinery plants in Lebanon is represented by the semi-public Agricul- and the cement plants which to some extent use the tural, Industrial and Real Estate Credit Bank. Out- railway system, industry in Lebanon depends entirely standing credits of the industrial portfolio of this bank on highway transportation facilities. This system is were only LL 36.6 million at the end of January 1965. predominant in Lebanon and is generally considered adequate and economical for the economy as a whole. STRUCTURE OF THE COUNTRY'S FOREIGN TRADE WITH

REFERENTE TO THE MANUFACTURING SECTOR* The road network is largely influenced by the presence of the coastal mountain chain. The country The structure of Lebanon's foreign trade suggests has two main highways: The coastal road running from significant dependence on imported equipment and Nakura on the Palestinian border through Beirut and materials for the industrial sector. Foreign trade I npoh to the Syrian liorder ; and The Beirut-Damascus statistics for the period 1957-1963 show that Lebanon road, which climbs from Beirut over a mile-high pass imports annually for its industrial sector about LL 27 through the mountains. Secondary feeder roads run million worth of machinery and equipment, about LL east from the coastal highway up to the mountain 105 million worth of intermediate products and some towns. A fairly good road runs the length of the LL 40 million worth of raw materials. broad Bekaa valley. It is connected with the east- Assuming prices in Lebanon to have been rising at west highway at three passes across the Lebanon the rate of about 2 per cent per year since 1954, the mountains at Marjayoun in the south, at Chtaura income arising in 1964 in the industrial sector and on the Beirut-Damascus highway, and at Horns in estimated at LL 280 million at 1954 prices will T!? °'ù- í* ^RoK-Aleppo road. The total length approximate LL 342 million at current 1964 prices. of the highways is about 6,000 km (3,750 miles) Assuming further that the income generated by the and constitutes an extensive network of generally industrial sector is twice the cost of materials and adequate roads which connect all industrial and intermediate products used, total costs of materials and business centres with one another and with the intermediate products, i.e. local and imported, would country s seaports and airports. Operating on these be about LL 170 million. Given the value of imported roads art some 98,000 motor vehicles, of which 11 intermediate products and raw material for industry per cent are trucks, 2 per cent buses and the remaining to be about LL 145 million, there appears to be a heavy 87 per cent passenger cars. dependence on imports; the data, however, are very general and calculations based on almost arbitrary INDUSTRIAL PROGRAMMES AND MAJOR PROJECTS assumptions. The main branches of manufacturing which depend heavily on imports are those engaged Lebanon has no set industrial programme The five- year plan adopted by the Government in April 1965 ImliMtrUI situation in the Arab country* . I» provides for the implementation of a number of projects on a number of industrial environmental factors which which are essential for the development of the indus- are absent in Lebanon. trial infrastructure. They are nuiiuly concerned with providing power and improving transportation facilities. Another inijwrtant type of serialized skill which The plan leaves industrial development essentially in seems to be lacking in Lebanon is industrial entre- the hands of the private sector, with the government prencnml ability. The success of the Lebanese in other function limited to indirect encouragement, provision busmess avenues suggests that emrepreueurial ability of incentives, implementation of certain projects, and as such is not lacking in Lebanon but that insuflicien't the provision of services and facilities essential for the interest has lieen shown in industry. Given favourable development of the industrial hase. conditions for industrial development, it is believed industrial entrepreneurial skills will develop ar a The selection of such projects or facilities may be sufficient pace. There are ahvadv some obvious signs initiated by any ministry within wbo«e jurisdiction the of development in this direction. project falls, but the Ministry of General Planning and the economic Planning Board have the function of Market limitations might be thought to IK- partly the studying the projects proposed by the various ministries result of an insufficient supply of socialized entre- and presenting them to the Government in the form pieneurship. While Lebanese business entrepreneurship of a general programme, which includes all tvpes of is engaged heavily in securing foreign product.-, and projects contemplated by the authorities. finding market outlets for them, very li ¡e specialized efforts are made to secure market outlets for local ENVIRONMENTAL CONDITIONS AFFECTING INDUSTRIAL manufacturing products. This may be partly due to DEVELOPMENT the relatively inferior quality of these products ; but their quality is not independent of the availability of Judging by the environmental factors affecting indus- markets and scale of operation. The limitation of the trial development in Lebanon, it may be concluded that: local market, combined with the lack of any important There is a general shortage of capital for industry, foreign outlets, excludes many industrie, whose despite a potential abundance of short term capital technically feasible minimum output is relatively large, for the financing of other activities, mainly trade and checks expansion and specialization in many direc- and other services activities ; tions; per unit costs are in many instances kept high The level of skill of industrial workers and foremen is and improvement in quality is also impeded. Securing foreign market outlets and improvement in the comj>eti- low by standards of industrially developed countries; tiveness of Lebanese manufactures are interdependent. Specialized entrepreneurial experience, particularly in Natural resources are scarce in Lebanon. The mining investigating and grasping investment opportunities industry is very limited and there are at present no in industry and in opening up new market outlets, is good prospects for its expansion. All mineral oil is also lacking ; imported. The cost of fuel and power is relatively high There are serious market limitations, and compared with the cost of those items in industrial countries. This constitutes a seriou, handicap for a There is a dearth of natural resources. number of industries whose inel and power costs The conclusion that industry faces a shortage of represent a significant proportion of their over all capital is evidenced by the high rates for long-term expenditures. Until low-cost power is made available, credit. High rates generally reflect high risks rather this factor will continue to constitute n deterrent to than market discrimination against the activities increased industrialization. involved. But the fact that highly secured loans to Lebanese industries pay substantially higher rates than INDUSTRIAL POLICIES those charged for similar types of loans in developed Lebanon'^ industrial and economic policies are markets indicates the prevalence of market discrimina- oriented towards providing a favourable climate for tion. The market seems to favour trade and activities private enterprise. This is reflected in the Lebanese in the field of services, and to some extent construction exchange and tariff regulations, which provide for a activities. The credit system with its developed money free exchange market and a libeial trade control policy market, but much less developed capital market, has with low import duties on raw materials and non- been channelling a relatively abundant supply of capital competitive items. In an attempt to promote industrial mainly into activities that usually require short-term development and growth, the Government has been credits. It fails to provide any significant supply of favouring industry by raising import duties on those niedium and long-term credit, which is essential for items which compete with domestic production. industrial expansion, especially for the establishment of new industrial enterprises. Lebanon's liberal policies give private investors virtually a free hand in their operations. As a further As to the technical skills needed in the manufacturing inducement, the Government passed a law on 29 industries, there is a serious shortage of such skills at December 1953, which came into effect on 10 February the level of workers and foremen. There is no serious 1954, granting exemption from income tax to certain short;, ge of engineers. The scarcity of skilled workers new corporations or companies for a period of six is reflected in the sizable wage difference between skilled years. Before expiration of this period in 1959, the and unskilled workers, in the relatively high wages of law was extended for a period of five years ending 10 foremen and specialized technicians, and also in the February 1964. To enjoy the tax exemption, a com- poor quality of a number of locally produced goods by pany must have as its objective the exploitation of a comparison with similar goods produced in indus- new project to enhance national production, contribut- trialized countries. The development of such skills ing at the same time to the economic development of normally takes place as industry develops and expands, the country ; it must have a minimum initial capital of but this process is a time-consuming one and depends LL 1 million, invested totally in Lebanon, and it must Ill Industrial devflopiwent in the Arab countries

pay out a minimum of LL 100,000 annually in the feasibility study and give its recommendations thereon form of wages and salaries to Lebanese employees and within three months; workers. (c) Should the project be found not feasible and A recent draft |xilicy, formulated with a view to should the applicant insist on carrying out the project, promoting industrial development in Lebanon, makes he will be permitted to import the necessary machinery the stipulations listed below. but will not be entitled to any official supjmrt or help; 1. General principles for developing industry in (

Tab!« 1. Number of establishmenta and declared capital in manufacturing industry, by branch of industry, 19M and IMS

Declared capital Perce«- Number of establishments 1950 1965 lane Industry annual (in LL (in LL annual 1950 1965 change million') million) Foodstuffs 616 2,424 26.2 31 153 32.9 Beverages 12J 198 10.7 10 43 Textiles 56 28.7 174 20.7 31 85 Clothing and shoes 15 18.3 330 146.7 1 22 146.7 Wood products (other than furniture) 48 .142 47.5 1 46 Furniture 94 306.7 114 8.1 4 16 26.7 Paper and paper products 9 59 43.7 0.5 Printing 79 11 146.7 263 22.2 5 39 52.0 Leather products 64 127 13.2 17 13 5.1 Rubber and byproducts 6 48 53.3 1 5 333 Chemical products 64 219 22.8 5 82 109.3 Non-metallic mining 156 867 37.1 38 62 10.9 Ferrous and metallic industries. 25 382 101.9 3 t)7 193.3 Electrical machinery and Ap- pliances 29 26 6.9 5 28 Miscellaneous 29 37.3 1,074 246.9 8 114 95.0 TOTAL 1,414 ¿¿47 Í6Í 806

Tabi« 2. Number of establishments classifled by type of legal organisation

Indivi- General Limited dually Industry partner- partner- Corpora- owned ship ship lions Other Total All industries 1,129 659 28 38 1,861 Mining and quarrying 47 21 68 Metal mining, stone quarrying, clay and sand pits 41 18 59 Other non-metallic mining and quarrying 6 3 9 Manufacturing 1,082 638 28 38 1,793 Food manufacturing, except beverages... 389 150 4 11 554 Tobacco manufacturing 1 2 3 Beverages industries 46 21 2 5 74 Textiles 49 58 2 4 113 Footwear, wearing apparel and other made-up textile goods 165 80 — _ _ 245 Wood and cork manufacturing, except furniture 43 27 I 71 Furniture and fixtures HI 55 1 168 Paper and paper products 5 8 2 16 Printing, publishing and allied industries. 61 42 2 — 3 108 Leather and other products, except foot- wear and apparel 21 24 45 Rubber products 7 6 1 15 Chemical and chemical products 18 14 2 3 — 37 Non-metallic mineral products 69 72 8 3 1 153 Basic metal industries 3 3 Metal products, except machinery and transport equipment 51 43 102 Manufacture of machinery except electri- cal machinery 13 9 23 Electrical machinery and appliances 7 3 10 Transport equipment 6 3 1 — 10 Miscellaneous 17 23 2 1 43

SOUKCE: Ministry of National Economy, Beirut, June 1957, pp. 37-39. Ill Industrial development in the Arab cwatria* Table 3. Lebanese industrial establishments by number of employees

Mount North South All Beirut Lebanon Lebanon Lebanon Beka'a districts Total number of establishments 995 480 241 57 88 1,681 Establishments in which the following number of persons are employed: 5 to 9 persons 531 250 152 39 59 1,031 10 to 24 persons 341 131 72 15 22 581 25 to 49 persons 94 43 5 2 5 149 50 to 99 persons 24 31 5 60 100 and over 5 25 7 1 2 40

5. The industrial situation in Saudi Arabia

Communication submitted by Saudi Arabia A. General survey industrialization has been confined to the limited natural resources so far explored. The Kingdom of Saudi Arabia depends almost entirely on the export of one commodity, oil. Since Owing to their recent origin, some industries in oil production and prices are subject to exogenous Saudi Arabia have not been sufficiently developed to factors, the economy of Saudi Arabia is highly vulner- stand on their own feet or to produce high quality able, a situation that calls for diversification and goods. They cannot compete effectively with the development of production in various sectors as an quality and prices of imports from the highly indus- essential prerequisite for the achievement of economic trialized countries, owing to the advantages which those stability and self-sufficiency. In such circumstances, the countries derive from large-scale production and the greatest possible development and encouragement of resulting reduction in costs. The small scale at which the industrial sector becomes essential, especially since many industries in Saudi Arabia operate, together with Saudi Arabia depends greatly on imports to meet the other factors which will be discussed below, have bulk of the local demand for consumer goods. In addi- contributed to the high cost of industrial production in Saudi Arabia. tion, several other economic benefits can be derived from the process of industrialization, such as the raising At the same time, consumers' preferences as well of national income, expansion of employment opportun- as the level and distribution of income have operated in ities and the opening of new channels for the invest- favour of imported goods. While the high-income ment of idle capital funds. groups of the urban population are mainly interested in the quality of products and hence prefer high-quality PLESENT SITUATION AND PROBLEMS FACING INDUSTRY imports irrespective of price, most middle-class con- IN SAUDI ARABIA sumers, including the rural population, are more interested in price than in quality and consequently Industrial activity in Saudi Arabia is quite recent. In consume goods which are sold at prices lower than 1954, for example, there were only five industrial^ com- those of imported goods. panies with a total invested capital of SR 42 million. S trend was countered b Four of these companies were financed by domestic • TÍl y the implementation in 1961 of the law for the protection and encouragement capital and the fifth by mixed capital (domestic and of domestic industries. foreign). In 1964, the number of industrial companies rose to sixty-seven, with a total invested capital of Although labour in general is relatively abundant in SR 211 million. Of these companies, forty-seven oper- Saudi Arabia, skilled labour is fairly scarce. Domestic ated with domestic capital and the remaining twenty industries are therefere forced either to employ skilled with.»lin •mixed••i.-it.u >..capital.lentil. Furthermore,J UlllltllllUlt, theUIC IdlCrate Ulof IllUUSirUUindustrial labour. .from , outside , . at high-"»-• wages""t,^» v/,or tolu UEJ^CIIUdepend onUli growth during the last five years in Saudi Arabia has ,n?xPerwnt*d domestic labour. Obviously, in both cases varied..„_:„.! betweenK... A 4.75 re andi 6.88e. oo per cent.*. A A higher• • i rate. of «• this will leadlean tnto Inurlow nrnAiproductivityi«»;»:».. and„-J highL:_L production!..-»•_._ industrial growth could have been achieved had it not costs. In addition to the problem of shortage of skilled been for the deep-rooted obstacles which industrialization labour, domestic industry has to face the problem usually encounters in the developing countries. How- created by the bedouin workers who, being still un- ever, Saudi Arabia is fortunate in having ample capital accustomed to urban life, exhibit a high degree of funds and a high purchasing power due to oil revenue, mobility. which most developing countries obviously lack. The In order to obviate these problems, the Government obstacles impeding the process of industrialization in has recently established technical and vocational Saudi Arabia are summarized below. training centres in most of the principal cities. So far, Saudi Arabia's national resources have not Industrialization is a process of transforming raw been adequately assessed, with the exception of oil, materials and other inputs brought in from various natural gas and other minerals such as iron and locations into finished or semi-finished products. Once magnesium. Moreover, the studies and surveys that processed, these goods have to be transported to con- are being undertaken in that direction suffer from lack sumers in various parts of the country. In all phases of technical know-how and skilled labour and from of industrialization, therefore, the presence of an deficiencies in the means of transport and communica- adequate system of communications and transport is tions within the vast areas to be surveyed. Consequently most essential. Industrial situation in tin Arab countries 113 The absence of such a system in Saudi Arabia is one of the important factors tending to retard the The State will spare no effort to eliminate the growth and progress of industrial activity in the problems confronting local industries and to provide the country. climate suitable for the expansion of such industries ÌT mg nd ,n lem The Government has given this problem special A.LrÀ ì J ?P entation of several projects attention and has l>een able to construct about 3,000 km been started. The following examples may be cited : of modern roads during the past three years. However, re t0r 01 1 the vastness of Saudi Arabia—an area about two-thirds tJnL^ n"î. , í" »*• studies and promotion has been established with United Nations Special Fund the size of Western Europe—and the nature of its soil participation; O,«.MI ruiiu and its climatic conditions render the construction of an adequate communications network in the country a hnÌiÌL1"^8^1 eSt,?tes '7 tl,e P"n«>il "ties are being slow and costly operation. built or. scientific and modem bases consistent with the principles of the law pertaining to the protection and Abundant water is of vital importance to the expan- encouragement of local industries ; sion and progress of industrial activity. It is known, for example, that 65.000 gallons of water are needed (<•) The metric system has been adopted and for the production of one ton of iron, 66,000 gallons measures are being taken for the standardization of for the production of one ton of paper and five gallons measurements and specifications ; for the processing of one gallon of milk. (

to producing, refining and marketing oil, the processing the essential measures that have to be taken to ensure a of various stages of the mineral industry, and assists in continuous rise in production and income. Many the expansion of industries that depend on oil. natural Governments have increased their allocations for gas and minerals. development projects; and public investment in health, 3. Decree on foreign capital investment (Royal decree education, transport, communications, social and other issued in 1963) public fields has become an essential prerequisite for the development process. This decree, which replaced an earlier decree on the In the Kingdom of Saudi Arabia, government investment of foreign capital, has liheralized policies revenues from oil production have been increasing with respect to investments. Although foreign capital rapidly, and the amounts allocated for development is not needed in Saudi Arabia at the present, the inflow projects have continuously risen. The Government's and investment of such capital in domestic industrial policy is based on the need to implement the economic de- development may achieve two objectives: first, it may velopment programme and to diversify the economic base attract or encourage domestic capital to enter the of the country, which now dejwnds heavily on one source industrial field and, secondly, it may pave the way for of wealth, namely, oil. Undoubtedly, the attainment of the importation of technical and managerial talent. this goal requires great efforts based essentially on the The decree contains the following provisions : exploitation of oil revenues, on the one hand, and on the (a) It allows foreign capital invested in approved mobilization of all available human and natural resources, development projects to enjoy all the concessions on the other. accorded to domestic capital under the decree for the The oil industry is at present the most important protection and encouragement of local industries referred industrial activity in Saudi Arabia. In fact, the whole to above; economy is directly affected and dominated by oil (h) It exempts foreign capital invested in approved production, since the value added in the oil sector development projects from income and corporate taxes exceeds 50 per cent of the gross national product for five years commencing from the date of production, (GNP). Moreover, government income from petroleum provided that the share of domestic capital in such activities, including royalties and taxes, constitutes about ventures does not fall short of 25 per cent of total 80 per cent of its total revenues. Fortunately, oil prices capital over the whole period of tax exemption ; in the world market have been relatively stable. Hence, (c) It calls upon the ministries concerned to issue at least for the time being, Saudi Arabia is not suffering visas and residence permits to foreign investors, their violent fluctuations in its national income. Such employees and workers ; fluctuations occur in countries producing other primary products, undermining the implementation of their long- (rf) It excludes oil and mineral industries from the term economic development plans provisions of this regulation, since these are organized under a separate decree on the public bureau for It should be pointed out that about one half of the oil petroleum and minerals. revenues remain outside the country, and that about 20 per cent of the remaining part is pa'id out in the form CONCLUSION of wages and salaries. Moreover, about 40 per cent of Saudi Arabia is striving to resolve the problems in the whole income from oil accrues to the Government in the way of its industrial expansion, but the achievement the form of taxes and royalties. The heavy burden of of a quick and effective remedy may require close and industrial development in Saudi Arabia must therefore fruitful co-operation at the international level, especially fall on the State. The measures that have been adopted in the technical, economic and social fields. for the encouragement of private industries through the It has now become obvious that the means used by exemption of machinery and raw materials from customs the United Nations in its attempts to resolve these duties, the trend towards the establishment of industrial problems, by way of advisory services, information and estates and the granting to industrial establishments of technical assistance, have not l>een adequate in fulfilling public facilities, technical and financial support and the aspirations of the developing countries. It is there- advisory services on industrial feasibility studies, are all fore essential tor the United Nations and its specialized measures necessary for creating an environment agencies to expand their activities and to give these conducive to private investment in industry. countries needed support in a field which has become of The need to adopt development programmes, whether jKiramount importance to their economies. in industry or in agriculture, is obvious. However, it may be mentioned that a considerable portion of the B. Role of the General Organization for Petro- national income in Saudi Arabia is spent on the leum and Mineral* (PETROMIN) in the importation of consumer goods and foodstuffs. This économie development of Saudi Arabia leakage in the domestic purchasing power is likely to reduce the volume of local investments in productive INTRODUCTION projects. For this reason, it is believed that the establish- ment of import substitutes as well as of export industries Economic development is a vital and sensitive field, will help to safeguard domestic savings and to channel and has become indeed the subject of the hour. these savings into such fields as may strengthen the Governments are seriously engaged in finding ways and economic base of the country. means of achieving balanced economic growth, especially since the large gap that exists in the standards of living ESTABLISHMENT OF THE GENERAL ORGANIZATION FOB in the developed and developing countries is widening PETROLEUM AND MINERALS (PETROMIN) in such a way that serious and continuous action hns In line with the policy adopted for the development become imperative. The spread of moder i means of of the country and the diversification of the sources of communication has strongly influenced the attitude of national income, the Government established this peoples and Governments of the developing countries to organization late in 1962 for the specific purpose of Industrial situation in the Arab cstiatries IIS setting up basic industries that depend on petroleum, special attention to this resource and has prepared plans mineral and other resources. The main objective behind for the establishment of a petrochemical industry. the creation of PF/TROMIN was to ensure the effective participation of the State in industrial promotion and in Because of the narrowness of the tlomesttc market the channelling of foreign and domestic investment into and the lack of subsidiary industries, the establishment vital and basic industries. Since the nature of industries of a petrochemical industry in Saudi Arabia must depend on foreign markets. Heme an e^ential pre- such as iron, steel and petrochemicals requires huge capital investments and is characterized by high risks, requisite for the establishment of such an i aistry is its ability to compete effectively in world markets To it may prove difficult for private investors to undertake ensure its competitive strength, production must be large such ventures, esjKcially since profits can l>e achieved only after a long time. Nevertheless, due consideration enough for economies of scale to lie adequately reflected in lower production costs. Moreover, the marketing of has been given to the participation of private domestic this large-scale production must I* guaranteed so that and foreign capital in these huge ventures, which are the returns on investment remain high and attrattive. expected to contribute to employment and income, on PETROMIN has always been aware of this marketing the one hand, and to the acquisition of technical and problem. managerial experience on the other. Obviously, the Fertilizer project main purpose in attracting foreign capital into PETROMIN'S projects k to invite technical and The establishment of a fertilizer industry, which will managerial skills. put part of this wasted wealth to use, will create new The Government allocates funds for new industrial employment opportunities and prepare a pool of well- projects in tlie light of the technical and economic trained personnel. Moreover this project will cater to studies which must precede the implementation of the country's need and provide the necessary fertilizers industrial projects, and with a view to orienting these for the development and expansion of its agricultural projects to conditions prevailing in the country. sector, The establishment of such basic industries as The results of the detailed studies undertaken by petrochemicals, iron and oil refining will result in the PETROMIN clearly indicated the necessity of closer expansion of the economic base, diversification of income co-operation with specialized international organizations and the creation of external economies. This, in turn, and companies in order to make use of their technical will lead to the establishment of subsidiary industries expertise and ensure the success of the fertilizer project which depend for their raw materials and intermediary In line with this policy, PETROMIN towards the end products on the products of the basic industries. The of 1964 concluded agreements with two American presence of conditions favourable to industrialization has companies, the Occidental Petroleum Corporation ami motivated the creation of these IKISìC industries, and itî affiliate, the International Ore and Fertilizer permitted the exploitation of such resources as natural Company. Under these agreements, the first company gas, minerals and crude oil. Furthermore, the undertook to provide the technical skills necessary for establishment of these industries will tend to reduce the operation of the fertilizer project and to train Saudi the country's dependence on oil as a source of revenue Arabian nationals in all technical and managerial fields. and will create opportunities for the training of the The International Ore and Fertilizer Company is to labour force in various fields of industry. Training in market externally the output of fertilizers in excess of itself constitutes a considerable gain since it will help local requirements. to produce an industrially trained and experienced Mention may also be made of the royal decree generation, especially since shortage in technical skills is establishing the S indi Arabian Fertilizer Company, one of the main bottlenecks in Saudi Arabia. which should begin operations as soon as certain studies PETROM1N, which has been aware of this serious connected with the project are ctmipleted. Furthermore, problem, has mobilized its facilities for vocational the establishment of a nitrate industry at the industrial training in all fields related to these projects. It is estate in Dammam has been deckled upon. The total believed that such training will raise labour productivity capital invested in this industry will amount to about and therefore reduce the cost of production and maintain $40 million (SR 180 million). PETROMIN plans to stability and continuity. issue about 1 million »hi res, valued at SR 100 million, In this study, discussion will be centred on the two for public subscription. This is undertaken for the most important industries which are being promoted specific purpose of channelling domestic savings into because of their importance to industrial development : effective exploitation of local resources. the petrorhcmkal and the iron and steel industries. The productive capacity of the fertilizer project, which The petrochemical industry is designed to use about JO million cubic feet of natural gas daily, will amount to 1,000 tons per day. Natural gas is one of the most important resources Accordingly, this project may provide the impetus for in Saudi Arabia. Unlike other resources, natural gas further expansion in the application of fertilizers to tends to be dissipated if not properly exploited. In fact, agricultura] areas, thereby raising agricultural produc- the Arabian American Oil Company (ARAMCO) tivity in general. At the same time, the export of injects part of the natural gas to maintain underground fertilizers is expected to raise Saudi Arabia's annual Ïressure, but the larger portion of it remains unexploited. earnings of foreign exchange by about $.10 million, he total production of natural gas during tlie last *even which may be used in various other economic activities. year» was 2,000 billion cubic feet, of which 6.1 per cent was put to domestic and industriiti use and 32.1 per cent The PVC project injected. The remaining 61.8 per cent was lost. This PETROMIN has shown great interest in the gives an idea of the heavy loss sustained bv Saudi development of a PVC project which uses natural gas Arabia as a result of its inability adequately to exploit as a raw material and transforms it into plastic resins. all its sources of natural wealth. PETROMIN has given Because of technical inexperience and the narrowness m Inferirte! fai the Arab t—ti tei oí domestic markets, the Government called upon certain per cent and a concentration of 58 per cent ; the Edsas petroleum companies to participate with PETROMIN mountain, where iron ore reserves are estimated m establishing petrochemical projects. Thereupon an tentatively at 6.5 million tons ; the degree of purity of Italian company, ENI, which specializes in the this ore reaches up to 64 per cent ; and Wadi Swawine, etroch Ilicals ^^^1°/IP « . «P»«' an agreement with where iron ore reserves are estimated at 1,500 million PETROMIN on 13 June 1965. The agreement tons, with a purity of 39 per cent. provided for the carrying out of a feasibility study for a PVC project with an annual capacity of 6,000 tons and Owing to the manifold benefits that may I« derived a total investment of SR 250 million (55 million) from an iron and steel industry, PETROMIN, having This feasibility study has been started ami it is hoped completed several feasibility studies, decided to establish that the results will prove encouraging. Moreover, it is such an industry in Saudi'Arabia. To ensure economic hoped that the availability of natural 5ns at low cost viability, PETROMIN plans to enter the steel industry and the rapid expansion of the plastics industry by stages the implementation of each stage being throughout the world may promote the successful dependent on the success of the preceding one. implementation of the proposed PVC project. PETROMIN chose to begin with the most manageable and technically simple stage, namely, the rolling mill PETROMIN is giving special attention to this PVC project in order to encourage Saudi capital to participate operation at Jedda, which happens to be the last stage more effectively in the development of other industries. in the project. During its first years of ofieration, this mill will use imported iron billet to manufacture a u ,le" £hTROMIN acquires sufficient experience in the I VC industry, it may decide to undertake the variety of light products. The capacity of the plant is establishment of other projects. planned at 45,000 tons .\nmiallv on the basis of three working seasons. However, it has been decided that, The establishment of tiie nitrogenous fertilizer and during the first years of ojH-ration. production is to PVC projects at the industrial estate in Damman will proceed on the basis of two working seasons with an undoubtedly enhance the importance of that area and annual capacity of 30,000 tons only. The possibility of therefore lend to the emergence of external markets and expanding this annual capacity to 70,000 tons is now the establishment of subsidiary projects. The availability under careful study, in view of the recent rise in the of various industrial facilities such as electricity water country's imports of iron bars. The total value of and gas will further raise prospects for the exploitation imported iron bars over the last four years amounted of ni«turai gas which is abundantly available in the to SR 180 million. eastern part of Saudi Arabia. PETROMIN is also studying the possibility of It is expected that this stage will be completed by the establishing a plant for the production of raw sulphur end of 1966. The next stage niav be undertaken with the The revenue to be accrued from the sale of this by- purjwse of installing a new plant that will use imported product will be discounted from the cost of operating pig iron to manufacture iron billets used as a raw the fertilizer and plastic projects. There is also the material for the rolling mill operation. The final stage will involve the exploitation of iron ore in Wadi Fatima possibility of extracting sulphuric acid from the raw and otlier districts. sulphur and using it for the expansion of the fertilizer industry; sulphur will thus become an effective factor

*. Ilka Cemmttnkmti*n prtttntti by Syria

IMTIWMJCTIO?» Wa tTy ,rfed from YJÌL^ZIA * Í* ?°T ^omUOm, Industrial development in Syria dates far back and fvmg famed complete independence at the cost of great first appeared in the form of small primitive industries sacrifices on the part of its people, than a great industrial and handicrafts. It was not until th» establishment near renaissance took place in all fields, leading to the I3|"?a*cm °* the firit cempn* factory in 1930 that establishment of a modern mechanized industry. modern mechanized industry was introduced. However industrial development was very slow because of the The spinning and weaving industry led the way colonial policy followed by the French authorities during Among other important industries to be established or the mandate period. lp to the outbreak of the Second wJrTtLÍT* .the Peri0d fo,k,win* independence, World War, Syrian industry remained dependent JELJ^i JÄ*- •u^r-.can«"nK. cereal milling; mainly on manual production methods and had to face «men«,jrlass, modern tannmr, matches, rubber and strong competition from machine-made imports a P^K product, and metal products. Among the factors situation which seriously hampered its development were scarcity of foreign industrial products and the rise iMtaatrial sitasti«« tai tW Arab CMBtries 117 in their prices during, and immediately following, the The firm submitted its report to the Syrian Ministry war. of Public Works and Communications on 30 April 194/. The State contributed substantially and successfully The report was made up as follows : to this development, either through the regulation and Section 1 : Topography, population, meteorology ; encouragement of industry or through customs protection. Section 2: Natural resources: agriculture, metallic minerals, water resources, irrigation and drainage ; The development of the bancs of industrialisation, i.e., Section 3: Economic resources: transportation, power, transport and communication, contributed to the industry, fuel and power, public buildings and social development of industry. This development was also services as related to industry and agriculture ; furthered by industrial planning in the context of comprehensive economic and social planning. It is Section 4: Summary of the report and conclusions; therefore necessary, in a general survey of the industrial with a programme of priorities for the différent invest- position and policy of the country, to discuss industrial ment projects and suggestions for achieving economic planning and the bases of industrialization. This is what development. we intend to do in the pages that follow. The report included, in its fourth section, a ten-year programme providing for the expenditude of about INDUSTBIAL PLANNING AND PROGRAMMING LS 477 million, or about $171 million (converted at the average rate of $1=LS 2.80), distributed as follows: Historical background (I.S million) ($ milium) The economically backward or developing countries are characterized, according to modern terminology, as Irrigation and drainage 70 25.0 having unutilized economic resources, both material and Electric and thermal power 70 25.0 human, low levels of technical know-how and low Water resources 65 23.2 productivity. The result is a low level of national and Roads 40 14.3 per capita income, and average savings and rate of Railways Oj 33.2 investment, leading inevitably to a slowing down and Airports 12 4.9 weakening of economic growth. Seaports 25 9.0 The fact that Governments in economically advanced Telephone and broadcasting 32 11.4 countries play an active part in guiding and accelerating Public buildings 70 2S.0 economic progress indicates the need for the State to play a similar role in developing countries, such as the 477 171.0 Syrian Arab Republic, and to formulate the plans necessary for accelerating economic and social progress. This report did not, however, meet with the approval Hence, economic progress is linked with the setting of of the Syrian Government, lwcnuse it failed to a well defined economic policy, the formulation of a recommend basic measures essential for the develop- comprehensive economic plan and continuous concern ment of a sound industrial structure in Syria. with its implementation. This is what is known as Early in 1954, the Syrian Government called uj>on a planning, which is a means of accelerating progress and group of experts from the International Bank for is mainly the responsibility of the State. Reconstruction and Development (IBRD) to study the country's economic potentialities and submit suggestions Planning, in this sense, is a new concept in Syria, for a long-range programme for the development of introduced only after the Second World War, i.e., since Í>roductive capacities and the raising of the standard of independence. However, during the early years of that iving of the population. The group of experts undertook period, the successive Governments were unable to their study in Syria during the period February-April formulate « comprehensive development plan owing to 1954. In March 1955, their re])ort was submitted to the the wide responsibilities which they had to shoulder and President of the Syrian Republic. the circumstances in which the country was placed. It was nevertheless possible to initiate development It consisted of two main parts. Part I included by executing certain important projects, some parts of recommendations for the organization and financing of which were financed under the regular budget through a six-year programme. It covered the following: loans extended by the Currency and Credit Board, and structure and development of the Syrian economy; with Treasury crediti financing the major part economic programmes and data ; agriculture and animal husbandry; industry; electric power; transport and Surveys of economic potentialities communications ; education, public health and housing ; rural planning and services; financing and imple- In February 1946, the Syrian Government called upon mentation of the plan. Part II included a number of the firm of Sir Alexander Gibbs and Partners to study appendices containing technical information on Syria's economic conditions in Syria in accordance with the following terms of reference: international economic position, public financing, agriculture, irrigation, agricultural institutions, industry, (o) To survey Syria's virgin resources, concentrating electric power, transport and communications, housing on thermal and electric power, irrigation and water and social services. utilization, industrial development and public buildings; The proposed investment programme for the period (ft) To report and submit recommendations relating 1955-1960 was estimated at about LS 1,903.5 million, to the hem» referred to above, indicating the priorities or about $533 million (converted at the average rate of to be accorded. $1=LS 3.575), distributed as shown in table I. 118 Industrial development in the Arab countries Table 1. Estimates expenditures for the period 1955-1960 13 May 1958 and submitted a report in three parts Vrarty average containing the results of its work and certain Total recommendations on petroleum, mineral resources and (LS million) (Î million) OS million) (1 million) industry, as follows: Development projects : Irrigation and land Part I. Petroleum — Historical background ; petro- reclamation 33.5 leum exploration authorities and their activities- 9.4 201.2 56.3 prospects; imports; marketing; prices; requirements: Agriculture 23.2 6.S 139.1 38.9 Industry 2.0 0.5 12.0 storage ; transportation ; a brief account of petroleum Tourism jj 3.4 0.4 7.9 2.2 agi cements; recommendations; Electric power 10.1 2.8 60.7 17.0 Part II Mineral resources — Government machinery Transport and com- responsible for supervising mining operations, mining munications 28.9 8.1 173.3 Education 45,3 48.5 and quarrying legislation, potentialities, the Soviet 12.7 271.8 76.0 Public health \2A agreement, observations and recommendations ; 3.5 74.2 20.8 Rural planning and Part III. Industry — General survey, spinning and services 4.2 1.2 25.0 weaving industry, foodstuffs industries, cement industry Housing 13 7.0 0.4 7.5 2.1 engineering industries, industrial expansion. Miscellaneous 2.3 0.6 13.5 3.8 This report was utilized in the preparation of the TOTAL 164L3 4oT 986.2 276.0 first industrial programme for the Syrian region, which provided for the expenditure of alwtit LS 560 million, Public administration 73.2 20.5 439.3 Defence 75 5 123.0 or about $155.7 million (converted at the average rate" 21.1 453.0 Salary incrementi of 127.0 of $1 = LS 3.60), distributed as follows : employees 4.2 1.2 25.0 7.0 Allocations G«AND TOTAL 317.2 8^9 1,903.5 534.0 F"!"" iLS milium) it million) Petroleum 266.160 74.0 This report was useful in that it included, in addition Mining 2.430 0.7 Manufacturing 216.900 60.2 to those mentioned, specific proposals regarding policies Productivity and vocational train- that must be followed in the various fields of economic nB J „ 14283 4.0 activity. These proposals were utilized later as a basis Miscellaneous 60.227 16.7 for the extraordinary budget, also known as the seven- year programme, 1955-1961. which was promulgated by TOTAL 560.000 155.7 law No. 116, dated 29 July 1955. y In 1958, some time More the formulation of the This extraordinary budget comprised old and new first industrial programme, a decree was issued projects totalling LS 659.89 million or about $184 7 promulgating Law No. 133, which contained the ten- million (converted at the average rate of $1 = LS 3 575) year economic development programme 1958-1968 This distributed as follows : programme aimed at freeing agriculture from dependence on rainfall, improving agricultural methods, Alloeutionx producing different types of fertilizers, building a road iLS million) it million) network connecting production and distribution centres Irrigation and agriculture 221.10 61.9 constructing a petroleum refinery, creating an industrial Industry 117.00 32.« base, and preparing a general geological map for the Transport and communications 185.12 51.8 country. The programme provided for the expenditure Public buildings 32.52 9.1 of about LS 2,139.9 million, or about $595 million Defence 45.00 12.6 (converted at the average rate of $1 — LS 3 60) Social development 12.30 3.4 distributed as follows : " Miscellaneous 46.85 13.1 Allocation! TOTAL 659.89 1847 (LS million) (1 miUicn) Agriculture, irrigation and However, the Government had to refrain from electric power 1,461.5 406.3 spending on the new projects included in the extra- Communications 365.0 101.5 ordinary budget because of the circumstances prevailing Industry and petroleum 160.0 44.5 m the country following the tripartite aggression on Technical and vocational fcgypt. The sum of LS 136.16 million ($28.1 million) training 10.0 2.8 was «pent on projects of the extraordinary budget Tourism, summer resorts, etc 143.4 39.9 during 1955 and 1956. TOTAL 2,139.9 595.0 Following the establishment of union between the Egyptian and Syrian regions on 22 February 1958, a The country's economic and social objectives for the mission from the Ministry of Industry in the Egyptian ten years 1960-1970 were defined in 1960 as follows: region undertook a general study of the industrial doubling the national income in ten years by raising situation in Syria and studied the bases for formulating it from LS 2,400 million, in the base year, to LS 4,800 industrial development plans, especially since Syria, in million in the tenth year; achieving stable growth in 1957. had concluded with the Soviet Union an agreement which economic disturbances are minimised, and without for technical and economic assistance under which the inflation ; improving the distribution of income. Soviet Union undertook to study and implement a numlxT of important developmental projects. The On the basis of these objectives, the first five-year mission carried out the assignment between 28 April and plan for economic and social development 1960-1965 was formulated with the participation of both private J. Industrial situation in the Arab countries 11» and public sectors. Implementation of the plan started LS 2,720 million, or $756.3 million (converted at the on 1 July 1960. average rate of $1= LS 3.60), during five years, First five-year plan, 1960-1965 distributed among different projects in the public and This plan provided for the expenditure of about private sectors, as shown in table 2.

Table 2. Distribution of expenditures under the first five-year plan, 1960-1965

Investments Public Private sector sector Total Economic sectors (/-Ò million) (.LS million) Il nulli, ni l'ere, ntaqe 1. Irrigation and land reclama- 780 50 830 230.7 30.5 2. Agriculture .. 95 175 270 73.1 9.9 3. Industry, elec- tricity, mining and petroleum 509 141.5 18.7 4. Transport and communications 387 150 537 149.3 19.7 5. Education — 100 100 27.8 3.7 6. Health 46 10 56 15.6 2.1 7. Public utilities and tourism .. 32 32 8.9 1.2 15 245 260 72.3 9.5 9. Social affairs . 18 18 5.0 0.7 10. Entertainment 11 11 3.1 0.4 11. Laboratories, training and research 7 7 2.0 0.3 12. Changes in 90 90 25.0 3.3

TOTAL 1,720 1,000 2,720 756.3 100.0

This investment programme was aimed at achieving Proposed investments in the second five-year plan, an increase of LS 960 million in national income by 1966-1970, for the industrial, mining, electricity, fuel 1964-1965, or a 40 per cent increase over the base year, and transport and communications sectors arc as at an average rate of 7.9 per cent per annum. The plan follows : was divided into five yearly stages. Invtstmenls Implementation encountered a number of obstacles, Economic sectors (LS million) ($ million *) including shortage of funds, scarcity of technicians and Industry, mining and fuel 1,059.5 264.9 reluctance of the private sector to carry out its share Electricity 237.6 59.4 of investments, as envisaged under the plan. As a result, Transport and communi- implementation was limited to certain proportions of cations 1,040.0 285.0 allocated investments differing, according to variations » Converted at the average rate of $1 := LS 4.0. in the available financial resources, from year to year. We shall attempt to set out, in some detail, the Actual expenditures in the industrial, power and fuel proposed investments in projects of the industrial, sectors, in both public and private sectors, amounted during the plan period to the following : mining and fuel sectors in connexion with future indus- trialization plans. Period LS milium Planning machinery 1960-1961 127 The highest planning authority in Syria is the 1961-1962 143 Supreme Planning Council, created by legislative 1962-1963 128 decree No. 97, dated 3 July 1963. The Council is com- posed of the head of the National Revolutionary 1964 145 Council, who serves as chairman ; the Prime Minister, TOTAL 543 vice-chairman; the Ministers of Defence, Planning, Finance, Economy, Agriculture, Industry and Public Works, and the Governor of the Central Bank of Syria ; Second five-year plan, 1966-1970 and the Secretary-General of the Ministry of Planning, Upon the suggestion of the Supreme Planning rapporteur. Council, it was decided to consider the year 1965 as a The Supreme Planning Council is responsible for the continuation of the first five-year plan, and begin the development of economic and social affairs, in accor- second five-year plan in 1966. The latter plan is dance with well worked out plans, and for the mobil- currently under consideration and is expected to be ization of the economic and human resources, both released soon. Its aim is to increase the national income public and private, needed for the implementation of at the rate of 72 per cent per annum. those plans. In addition, the council co-ordinates eco- 120 înduitrial development in the Arab eouatrie» norme, financial, currency and social policies with a committees). Legislative decree No. 97 of 3 July 1963 view to achieving national objectives. Accordingly the council fulfils the following functions: provided for the establishment in each ministry or public department of a planning unit to be attached Supervises the formulation of the general economic and directly to the minister and headed by the secretary- social development plan as well as the annual plans ; general or an assistant secretary-general in the minis- Defines the economic, financial and currency policies tries, and by the director-general or his deputy in the that guarantee the adequate implementation of the public departments. plan; These units are established by a decree issued by the Supervises the formulation of the State's annual draft minister or director-general concerned. Their function budget within the general framework of the economic consists of collecting data and statistics, and preparing and social development plan; studying and analysing reports on the progress achieved Defines the principles to be followed in implementing in development projects in accordance with forms and the development plan and studies projects, recom- models laid down by the Ministry of Planning. mendations and other matters relating to the plan ; Decree No. 38 of 20 October 1963 issued by the Supervises the progress made in implementing and Supreme Planning Council provided for the establish- financing projects ; studies the obstacles encountered ment of planning committees in each mohafazat These and takes the necessary measures to overcome them ; committees are headed by the mohafez (governor) and Ratifies contracts for implementing projects whose cost have a membership of at least ten, representing official exceeds LS 1 million, and all contracts enjoying bodies and various other social and economic groups credit facilities. m the mohafazat. However, it was stipulated that one- The Ministry of planning is the central technical third of the members of the planning committees should represent the private sector. planning body which serves as the link between the higher political authorities, such as the Council of The committees are to be established by decree of Ministers and the Supreme Planning Council, on the the mohafez, to undertake a study of the human and one hand, and the executive authorities such as the material resources available in the mohafazat, and ministries and public departments, on the other It was recommend viable economic and social projects for created by law No. Y)\, 195S, and re-organized by law their exploitation. The reports and recommendations of No 120, of 11 May 1959. Under that law, the Ministry these committees will be submitted, through the Minis- of 1 lannmg undertakes the following : try of Planning, to the sectoral preparatory committees tor study and consideration in the formulation of the Formulation of comprehensive long-term plans em- over-all plan. bodying defined major targets for accelerating eco- nomic and social development ; By decree No. 10 of 19 September 1963, the Supreme Mobilization of public and private resources to imple- I lanmng Council created preparatory committees for ment proposed plans, which are divided into a num- each of the following sectors: irrigation and land ber of specific stages in which the required rate of reclamation, agriculture, industry, mining, petroleum development and means of achieving that rate art- electricity, transjxjrt and communications, culture' indicated ; guidance, education and health services, public utilities' housing social and labour services, public administra- Distribution of programmes and projects whose imple- tion and municipalities. These committees are to be mentation will take a definite number of years over established by decree issued by the minister concerned the different stages of the plan ; subject to the approval of the Ministry of Planning' Division of the plan into annual plans ; Lach committee is headed by the secretary-general of Preparation of recommendations, proposals and legisla- the ministry whose field of activity lies closest to the tion drafted in the light of studies and statistics to relevant sector. Meetings are attended by a member ensure the implementation of plans ; designated by the Minister of Planning to represent Follow-up of progress in the over-all plan and its the ministry, and by one or more members representinir various stages, and periodic revisions and adjust- the private sector. * ments ; The committees are concerned with the formulation Preparation of statistics, especially those necessary for of over-all long-and medium-term plans, as well as the formulation of comprehensive plans and develop- with annual plans, and with the collection of data and ment programmes; the preparation of studies in the sectors within their Organization, co-ordination and supervision of technical competence. They are established by decree of the assistance offered by the United Nations and its ministers concerned, with a membership of between specialized agencies, or by public and private foreign ten and thirteen. They are empowered to form sub- organizations and institutions. committees to study matters which cannot be handled by the mam committee. The Ministry of Planning, in accordance with the provisions of legislative decree No. 205 of 11 December 1961, and decree No. SO issued by the Ministry of DEVELOPMENT OF THE BASES OF INDUSTRIALIZATION Planning on 24 March 1964, is composed of the Power following directorates : statistics and census ; economic and social planning; programmes and follow-up; tech- The development of electricity is a factor of major nical and economic assistance; administrative and importance to the general development of Syrian indus- financial affairs. try. Llectric power is used in a number of industries The central technical planning machinery is assisted especially the manufacturing industries which predom- by planning units in the ministries and public depart- inate in Syria. The following figures show the develop- ments (previously this function had been assumed by r9e56andt1964COnSUmpti0n °f deCtrÌC ^^ betw**" 1 Industria] situation in the Arab countries 121 Per capita consumption of electric pmver (kWh/year) Participation with the central authorities in the execu- tion of projects assigned to the latter ; Year Consumption Investment operations. 1956 41 Electric power generating facilities in Syria are 19S7 56 varied and are distributed all over the country. They 1958 59 comprise steam generators, diesel generators—varying 1959 64 from the smallest units to those exceeding 3,000 steam hp—and hydroelectric installations. 1960 67 1961 76 Table 3 shows the installed capacity in each of Syria's electricity districts, and the development of this capacity 1962 86 since 1956. 1963 86 1964 91 Table 3 A. Installed capañty in each of Syria's electricity districts A comparison of these figures with corresponding figures for developed countries such as Switzerland (2,685 kWh/year) or Western Germany (1,950 kWh/ Installed cc pacity (*(f ) Perttn- year) indicates the extent to which Syria lags behind Hydro- in the field of economic development. electric Diesel S tram Total total The industry has been characterized in recent years Southern district 7,000 13,261 45,000 65,261 27.0 by the multiplicity of projects and companies engaged in the generation and distribution of electricity, and Middle district . 7,000 5,200 30,000 42,200 17.0 in the number of government supervisory agencies. This Northern district — 17,905 25,000 42,905 17.0 has resulted in a wastage of power, a dissipation of effort and in discrepancies in rates and regulations. Eastern district . . — 6,915 — 6,915 2.8 In order to organize this vital activity, legislative Coastal district . — 6,732 — 6,732 2.7 decree No. 8 of 11 January 1965 nationalized all Industrial estab- electricity companies and established the Public Or- lishments — 61,926 10,000 71,926 28.5 ganization for Electricity to supervise the industry Other govern- throughout the country. To that end, the new organ- ment establish- ization was divided into the following five districts : ments — 12,311 — 12,311 5.0 The southern district, with Damascus as centre, TOTAL 14,000 124,250 110,000 248,250 covering the city of Damascus and the mohafazats 100.0 of Damascus, Darà', Suweida and Quneitra ; The middle district, with Horns as centre, covering the two mohafazats of Horns and Hama; B. Development of installed capacity The northern district, with Aleppo as centre, covering the two mohafazats of Aleppo and Idlib ; Installed capacity Installed capacity Year (kW) Year <»W) The eastern district, with Deir Ez-zor as centre, cover- 1956 51,392 1%1 129,265 ing the mohafazat of Deir Ez-zor ; 1957 71,051 1962 186,067 The coastal district, with Latakia as centre, covering 1958 105,076 1963 221,254 the mohafazat of Latakia. 1059 94,751 1964 208,329 1960 120,264 1965 248,250 The duties of the central administration of the Public Organization for Electricity include the following; General and detailed studies of power generation and The power used at present has a voltage of 110-190, distribution installations of 20 kv or more ; except in industrial establishments and in some Implementation of projects relating to the installations electricity branches where voltage has a range of 220- referred to above; 380. The southern district has started to introduce the Supervision of the implementation of projects carried 220-380 voltage system in some of its networks. It is out by the districts ; noteworthy that the 110-190 voltage system calls for an increase in the length of medium-voltage networks, Guidance and organization, and matters pertaining the number of transformation stations, and certain thereto; other modifications which will increase costs and lower Investment operations; technical, administrative and efficiency. financial control of investment operations in the dis- On average, medium voltage equals 6.75 kv, with tricts. some lines operating on 13.5 kv. Both lines, however, District directorates are responsible for the following: are irregular. The Public Organization of Electricity, upon the recommendation of a French company, has Studies relating to voltage up to 20 kv ; adopted 20 kv as an average, with the neutral connected Implementation of projects relating to power generation to the ground. This will enable the networks to carry and distribution installations of 20 lev or more; large quantities of electricity at lower costs. m Industrial development in the Arab countries

Table 4. Production and consumption» of power, number of subscribers and Population in Syria, 1956-1964

Consumption I\\i/io of industrial {.Hunting and Industrial Total i". nsrioiptiun to Population Production transportation) Consumption initl!:on<) unU'h) :

1956 4.025 165,710 90,596 46,602 137,288 34.0 1057 4.145 26^,142 95,562 136,777 232,33') 58.5 1958 4.421 292,669 105,790 152,819 258,609 59.0 1959 4.657 334,381 122,285 177,358 299,643 59.1 1960 4.841 368,209 12338 209,562 332,850 63.0 1961 4.972 430,789 139,885 241,948 381,833 63.3 1962 5.180 502,399 153,604 202,066 445,670 65.5 1963 5.308 524,997 167,213 387,663 454,876 63.2 1964 5.467 574,181 179,870 319,.'4S 499,215 63.9

Index number) (1956 = 100)

19.S6 100 100 100 100 100 100 1957 103 158 105 293 170 172 1958 110 !77 115 327 188 174 1959 116 202 135 380 218 174 1960 120 222 136 449 242 185 1961 124 260 154 518 278 186 1962 129 303 170 626 325 192 1963 131 317 185 616 331 186 1964 136 347 198 684 364 186

Lately, a number of studies have been conducted to Table 5. Distribution of investment allocations for the determine the magnitude of the new generating facilities electricity sector that should be added to those in existence in order to meet the rapidly growing demand for electric power. Investment These studies have shown that it is necessary to limit Percentage purchases of small diesel units in favour of steam Project (LS millton) (t million) of total generators which have a larger capacity, and to extend Main network and its the electricity network to the various consumption centres. generation units» . 81.69 20.4 34.4 Projects for lighting The Public Organization for Electricity in Syria the Syrian country- has set the following targets for the electricity sector side 26.00 6.5 10.9 under the five-year plan, 1966-1970: Projects of internal distribution of Follow a unified policy providing large towns with electric power 25.50 6.4 10.7 electric power by building a main network that would Distribution projects . 95.16 link these towns together ; the main generation centre 23.8 40.0 to be located in Horns because of the economic Complementary projects 9.28 2.3 3.9 advantages peculiar to the site ; TOTAL 237.63 59.4 100.0 Extend electricity to small towns and villages so as to cover the major part of the Syrian countryside ; »Installations of the main network consist of: the tranimis- Jrf".i3 •Tting .DamasÇ«s-Homs-Aleppo, having a length Provide consumers with a regular and adequate supply of about 220 km and a voltage of 230 kv; four main trans- of electric power. formation centres in Damascus, Horns and Aleppo: and three steam-generation units with a capacity of 90 mW. Thus the programme for expanding the generation of electric power during 1966-1970 includes the At the end of 1964, the number of persons employed following : m the electricity sector was estimated at 3,600. This l ber is Installing a steam-generating unit having a capacity of î ^ expected to rise by the end of the plan, in 30 mW in Horns during 1967; 1970, to about 4,200. Income arising from the execution of these project» Installing a second stenm-generating unit with a is estimated at LS 75 million, i.e. at an annual average capacity of 30 mW in Horns early in 1968; of LS 15 million. Installing a third steam unit with a capacity of 30 mW in Horns during the first half of 1968; Transport and communications Installing a number of diesel units to provide distant The geographic location of the Syrian Arab Republic villages with electricity, and expanding existing derives its importance from the fact of being a meeting generation facilities as the need arises. point between east and west. Syria's land is fertile and rich in natural resources, but its transportation system Investment allocations for the electricity sector were is poor. The development of its transport facilities is estimated in the five-year plan, 1966-Ì970, at LS necessary for the promotion of the country's internal 2.Î7.63 million, or about $59.4 (converted at the average and external trade as well as for the transit of goods rate of $1 = LS 4.0). across its territory. Industrial attuatimi in the Arab countries 123 Transport and communication facilities may be These statistics reveal clearly the weakness of the classified as follows: inland transport, consisting of Syrian railway network, not to mention competition railways and motor roads; airways; waterways, and from motor vehicles. telecommunications. Motor roads Railways Ry the end of 1964, the length of motor roads usable The length of the Syrian railway network is 855 km. 2 throughout the year was 8,389 km, consisting of 5.59o Bearing in mind that Syria lias an area of 185,000 km , km asphalted roads; 915 km javed. non-asphalted we find that there are 4.65 kin of lines for every 1,000 3 roads, and 1,878 km levelled roads. Thus for every km . This ratio is small compared with those of other 1,000 km2 of the country's area, there arc 45.3 km countries. The following figures, based on statistics for usable roads. Again, this ratio is small in relation to 1950, show the number of kilometres of railway per Syria's present and future needs. 1,000 km2 of territory in four industrialized countries: Belgium, 161 km ; United Kingdom, 100 km ; France, Table 7. Length of motor road* in Syria, 1960-18*4 75 km ; United States, 45 km. (In km) Syrian railways are of two types: ordinary gauge and narrow gauge. Paved no». Asphalted asphalted levelled Ordinary-gauge lines cover a total of 548 km and Year roads Telai consist of: 1960 4,170 660 2,780 The line extending from Tel Kojak on the Iraqi border 7,610 1961 4,094 1,109 1,970 7.173 to Kamishli on the Turkish border, with a length of 1962 4,763 788 1,879 7,430 82 km; 1963 4,926 898 2,062 7,886 The line extending from Jopanbey on the Turkish 1964 5,596 915 1,878 8,389 border through Muslimia to Aleppo, with a length oí 64 km; The types of motor transport available as of the The line extending from Muslimia to Midan Ekbes on end of 1964 are shown below. the Turkish border, with a length of 103 km ; Type {furnier The Aleppo-Homs-Akkar line on the Lebanese border, with a length of 260 km ; Taxis and private cars 26,635 Buses 1,676 The Riyak line, extending from Horns to the Lebanese Trucks 10,550 border, with a length of 39 km. Pick-ups 1,477 Narrow-gauge lines cover a total of 314 km and Tank trucks 675 consist of : Jeeps 384 The line extending from Damascus to Sergaya on the TOTAL 41397 Lebanese border, with a length of 67 km ; The Hejaz line, extending from Damascus-Dar'a and Postal and télécommunication services the Jordanian border, and from Dar'a to Himmeh, Table 8 shows the development in the number of with a length of 247 km. post and telegraph offices between 1956 and 1964.

Type Ordinary gauge Narrow gauge Total Table 8. Poat and telegraph onkea, 19M-1N4 Automotrice* .4 4 8 Locomotive! 41 35 76 Telegraph Goods cars 985 452 1437 Year t offices oficet Passenger cars 50 47 97 Ï956~ 282 209 Tank can 107 25 132 1957 282 213 Other cart 48 22 70 1958 309 213 1959 290 212 Table I Railway trank, lMMtM 1960 296 212 1961 295 212 A. In goods (ton/km) 1962 305 220 1963 315 221 Year Ordinary gunge Narrow gauge Total 1964 352 221

1960 .. 82,849,886 24,286,266 107,136,152 Table 9 contains statistical data on the telephone 1961 . 59,633,214 17,339,063 76,972,277 system between 1958 and 1964. 1962 .. 77,413,572 16,780,357 94,193,929 1963 . 75,484,377 12,177,027 87,661,404 Table 9 1964 84,822,785 18,653,858 103,476,643 A. Number of telephone exchanges and lines, 1958-1964

B. In passengers (passenger/km) Automatic Manual Automatic Manual Year exchanges exchanges Total lines linei Total Year Ordinary gauge Narrow gauge Total 1958 ... 5 141 146 29,676 4,871 34.S47 1959 ... 5 80 85 30,890 5,120 36,010 1960 ... 24,575,662 17,276,029 41,851,691 1960 ... 5 77 82 33,722 5,163 38,885 1961 ... 31,222,620 15,705,590 46,928.210 1961 ... 5 78 83 34,349 6,282 40,631 1962 ... 36,719,252 18,693,150 55,412,402 1962 ... 5 76 81 35,366 6,413 41,779 1963 ... 36,452,705 19,465,08? 55,917,794 1963 ... 5 72 77 40,518 7,975 48,493 1964 38,063,856 22,292,067 60,355,923 1964 ... 5 75 80 45,238 9,105 54,342 124 Industrial development In the Arab countries Table 9 (.continued) comprehensive surveys. The construction of these P. Automatic tclcpkmcs in cities, 1964 roads will be financed with another loan from the International Development Association. Avcrafie number Table 10. Project» for motor roads in the second five-year of yearly Existing S'umb'r of applications plan, 1966-1970 City capacity subscribers Í059-J965 Damascus 30,000 22,301 3,000 Allocations Zaharlanj 1,000 492 39 Project (L.V mt Ilio »> (} million) Alcpim 17.400 14.966 2,000 Financing of road operations Hoins 3,800 2,615 425 with the participation of the Harria 2,600 1,993 200 International Development Latakia 3,200 1,986 350 Association ... 56.65 14.2 Dcir-tz-Zor 1.500 885 163 Strengthening and widening the existing network of inter- TOTA I. 59,500 45,238 6.177 national and first-class roads 22.00 5.5 Paving and covering with Raihvay projects asphalt sections of inter- From the foregoing it is clear that the Syrian railway national and first-class roads 24.00 60 network is inadequate and unable to meet the new Building of new roads (rural development projects) 30.00 7.5 demands resulting from the economic and social Expenditures under the developments that have taken place in the country. New World Food Programme lines have to be built to develop the network. The agreements . 20.00 principal projects envisaged are listed below. 50 Machinery and spare parts 5.00 1.2 A line is to be built linking Latakia-Aleppo-Kamishli (passing through Deir-ez-Zor) with a length of atout TOTAL 157.65 3*4 /06 km (Latakia-Aleppo = 206 km; Aleppo-Kamishli — 560 kms). The cost of the project is estimated at Postal and tclccommnniration services projects about LS 385 million or $96.3 million (converted at the The five-year plan includes a number of projects in average rate of $1 = LS 4.0). In 1960. work- started ect estim:,ted •'* l ?ri. at LS 100.99 million, or about on the first section of this project, i.e. Aleppo-Latakia, ic'ím A " (converted at the average rate of $1 = at an estimated cost of about LS 203 million, as part LS 4.0) Among the projects included are : internal and of the technical assistance agreement concluded be- external telephone networks, inter-town telephone net- tween Syria and the Soviet Union in 1957. So far, works, telegraphic networks, rural telephone networks only LS 44.9 million have been spent on this project,' telegraphic equipment, transportation for postal ser- which is very important to Syria because it links vices, buildings and other installations. Latakia to Aleppo city and the Tazireh area, the principal producer of agricultural crops in the country. INDUSTRIAI, POLICY The 260 km line linking Aleppo-Homs-Al'Akkari is Introduction to l>e renewed. The cost of this project is estimated at about LS 97 million or $24.3 million (converted at Industry plays an important role in the country's the average rate of $1 = LS 4.0). economic development because of its varied scope and aims, such as: the efficient utilization of domestic A 220 km line is to link Horns with Damascus'at natural resources ; transformation of a large number of an estimated cost of about LS 113 million, or about raw materials and semi-manufactured articles into final $2ri.3 million (converted at the average rate of $1 = LS 4.0). products ; provision of employment and creation of an experienced and skilled work force ; promotion of self- The sum of LS 583.36 million, or $145.84 million sufficiency in the sense of reducing dependence on (converted at the average rate of $1 = LS 4.0), has imports, and expansion of export possibilities; pro- been allocated in the second five-year plan for invest- vision of employment opportunities for indigenous ments by the Public Authority for Syrian Railways. specialists in their specific fields of competence, and Motor road projects growth in national income. Because of the high cost of building good roads, If industry is to achieve its goals, suitable machinery the State has sought to finance them by means of long- must exist to handle matters pertaining to it. Until a term external loans. A loan agreement was signed with few years ago, the Syrian Arab Republic lacked such the International Development Association on 24 machinery. Law No. 212 of 8 December 1958, amended February 1963. This agreement, which was approved by presidential decree No. 903 of 11 June 1966 by legislative decree No. 39 of 5 March 1964, aims at: established a Ministry of Industry to deal with matters Ensuring the financing of the studies needed to carry relating to industry and the mineral resources of the country. out a comprehensive survey of Syria's need for roads; The establishment of the ministry was the first step Improving two of the most important roads, i.e., the taken to organize this field. It was followed, however, Damascus-Aleppo road, which is the main north- by a number of other important steps. The public south road in Syria, and the Aleppo-Raqqa road, on interest called for the establishment of a number of which the agricultural produce of the eastern agricul- public bodies constituting legal entities and enioyiiw tural area is transported : administrative independence. The main objective in Preparing final studies and designs for 600 km of main giving these agencies financial and administrative roads to be determined later in the light of the independence was to motivate them to undertake serious and fruitful work with flexibility and vigour 1 Industrial situation in the Arab countries 125 and to be able to achieve their aims independently of Law No. 21 of 1958 on the regulation and encourage- any government routine. ment of industry, containing provisions relating to The first body to be established was the Public the licensing of industrial establishments ; deter- Petroleum Authority, created in accordance with mining specifications for industrial products and raw legislative decree No. 113 of 22 November 1961. A materials, and encouraging and supporting industry ; number of other authorities were later established, Legislative decree No. 103 of 7 August 1952 on grant- among them the following: the Public Authority for ing industrial establishments certain tax exemptions the Execution of Industrial Projects, established by and privileges, including: legislative decree No. 156 of 4 December 1961 ; the Nasr Television Company, established and attached to Exemption of new factories from the real estate the Public Authority for the Execution of Industrial tax for six years, from the income tax for three years Projects referred to above ; the Public Organization for and from the "temettu" tax for six years ; Electricity in Syria, established by legislative decree Exemption from the income tax of all reserve No. 8 of 11 November 1965 ; and the General Authority funds allocated for expansion, provided that certain for the Public Industrial Sector, established by legis- conditions are met; lative decree No. 84 of 13 May 1965. Exemptions from customs duties on machinery, Functions and structure of the Ministry of Industry equipment and tools imported for use by enterprises ; The functions of the Ministry of Industry were Legislative decree No. 245 of 16 May 1952 on trade- broadly defined in the law establishing it as covering marks of certain national and foreign products ; all matters relating to industry and the country's mineral wealth. The ministry is to : Legislative decree No. 138 of 8 October 1953 on fraudulent practices in the manufacturing of indus- Supervise and raise the standard of the different indus- trial products. tries through increased productivity, improvement in quality and lower costs of production ; The Industrial Bank Carry out all matters relating to the mining industry by determining the location of mineral deposits and It has been mentioned at the beginning of the report the manner of conducting exploration and exploita- that the scarcity of foreign industrial products and the tion; rise in the prices of those products during, and im- Guide industries within the frame-work of the indus- mediately following, the Second World War were trial development programmes by suggesting mea- important factors contributing to the development of sures that will achieve the aims of such programmes industry in the country. Windfall profits in industry through legislation, encouragement, protection or attracted considerable national capital, resulting in the other means ; establishment of a number of new factories. Collect statistics on industrial establishments, industrial After independence, the State contributed further to production and the different types of factors of pro- the growth of industry by emphasizing the importance duction ; of the industrial sector to the national economy. Concern itself with matters relating to the needs of Owing to capital shortage in the industrial sector, industry, such as formulating industrial vocational and because commercial banks confined their activities training programmes; promoting industrial products in this field to the extension of credit in the form of by issuing brochures and participating in the holding operating capital only, such growth could not have of international fairs and exhibits, etc. ; been sustained. The State decided to intervene and Organize and supervise chambers of industry. in 1949 issued law No. 139, allowing the Ministry of The centra] administration of the Ministry of Indus- Finance to guarantee long- and medium-term loans to try consists of the following directorates: industrial industrial joint-stock companies for periods ranging control and supervision; industrial organization; pro- from five to ten years, at a rate of interest of 3 per ductivity and vocational training; geological and cent per annum. mineral research ; quarries, mines, salts and fuel. Under This legislation proved inadequate to meet the law No. 212, the Minister of Industry is authorized to demands of industry for long- and medium-term capital define in detail the functions of the departments in each because it lacked flexibility and comprehensiveness. An directorate in the light of the country's needs. Industrial Bank was therefore established under law Following the adoption of socialist measures provid- No. 177 of 1958, later amended by law No. 31 of 1959. ing for the nationalization of the main sources of This law provided for the establishment of the Indus- ? reduction in Syria, the General Authority for the trial Bank as a joint-stock company with a capital of 'ublic Industrial Sector was established to deal with LS 12 million. Its objectives were defined as follows : all matters relating to industry. As a result, it became (a) To extend medium-term loans for periods not necessary to reorganize the Ministry of Industry in exceeding five years, and long-term loans for periods line with the new changes and the new government not exceeding ten years ; plans in the sector. The subject is now under discussion. (b) To extend short-term credit and loans for Laws for the regulation, encouragement and control of seasonal financing; industry (c) To participate in the establishment of national Industrial legislation in the Syrian region includes joint-stock industrial companies; the following : Law No. 82 of 19 March 1959 on the application of (d) To purchase shares and bonds of national indus- the provisions of law No. 21 for 1958 to the Syrian trial companies; region; (f ) To provide technical advice to industrialists ; 121 Industrial development in the Arsii countries (/) To carry out all banking operations relating to The bank's credit operations since its inception are industry. shown in the table 11. Tabi« 11. Credit opération« of the Industrial Bank according to their duration, 19M-1M4 (LS 000)

Short-term Percentage Medium-term /•erect Total loans due of total loans due ,./ /,./„; ,ef total credit (.') + (I) (4) + it) Iti) -1 il) End of extended one \car X 100 five years year x 100 • 10,) (I) ih (il 14) If) idi ¡7) 1960 4.8 11,930 48.10 9,903 39.91 1961 26.2 12,557 47.90 10,844 41.37 1962 28.2 9,977 35.35 13,438 46.62 0.380 1.34 1963 33.8 14,951 44.23 13,461 39.82 0.873 2.57 1964 35.7 14,530 40.73 14,200 39.78 0.930 2.60

The above figures indicate clearly the important role surements, carrying out tests and analvses on indus- played by the Industrial Bank in the financing and trial raw materials and products, and conducting development of the industrial sector. applied research in ilie various aspects of industry ; Productivity and Management Development Centre Guide industry in raising the quality of products and Syrian industry was founded, developed and ex- the level of productivity and assist in the installation panded without the benefit of scientific and technical of testing equipment in factories ; studies in the fields of public administration and tech- Assist in research and development activities, particul- nical and financial management. For this reason, the arly in connexion with the utilization and exploita- Ministry of Industry considered it essential to establish tion of local raw materials on the largest possible a centre for the development of management and scale ; productivity to train those engaged in industry, at all Carry out the research necessary for the development levels, in management, production and supervision and co-ordination of industrial development institu- methods as applied in the industrially advanced coun- tions programmes, and supply industrial establish- tries. ments with technical and economic assistance ; The Ministry of Industry submitted to the Special Train technicians and persons engaged in industry in Fund of the United Nations a request for technical the activities of the centre. In this area, there is to assistance to establish such a centre. The Special Fund l)e co-operation between the centre, the universities agreed to participate in this important project and, on and the colleges. 11 November 1965, the agreement was signed between the Syrian Government (Ministry of Industry) and The centre includes the following branches : specifica- the United Nations (Special Fund and the Interna- tions and information; chemistry and textiles; tional Labour Organisation). mechanics and electricity: supervisory; technical and economic studies ; financial and administrative affairs. The total cost of the project is $1,077,350, or LS 4,309,400, distributed as follows: The Centre for Industrial Research and Exper- imentation is one of the projects implemented with the Contribution of the help of the United Nations Special Fund. The agree- United Nations Special Fund $490,800 (or LS 1,96^200) ment for this project was signed between the Syrian Contribution of the Government (Ministry of Industry) and the United Syrian Government $586,550 (or LS 2,346,200) Nations (Special Fund and the United Nations Educa- tional. Scientific and Cultural Organization (UNES- Implementation is to take place over a period of CO)) on 26 March 1965. The total cost of the project five years, with the International Labour Organisation is $2,539,199, or LS 10,156,796, distributed as follows: designated as the executing agency. The objectives of the project consist, briefly, in Contribution of the providing training in industrial engineering; industrial United Nation» Special Fund $989,099 (or LS 3,956,396) cost accounting; management and organization; mar- Contribution of the keting and selling operations; instructing supervisors; Syrian Government $1550,100 (or LS 6J00.400) productivity in the spinning and weaving industry. The project is to be implemented over a period of These objectives cover the most important activities five years, with UNESCO as the designated executing in fields so vital to Syrian industry because of the need agency. Implementation began following the signing to raise its technical, managerial and productivity of the agreement. standards. It is worth mentioning that t: centre is the first Centre for Industrial Research and Experimentation project of its kind to be undert..Ken in the Syrian region, and the authorities, fully realizing the country's By virtue of legislative decree No. 71 of 25 March pressing need for this vital project, are doing their 1965, the Centre for Industrial Research and Exper- utmost to ensure its success and to raise its level to imentation was established in Damascus to serve indus- that of similar centres in advanced countries. try in a number of fields. The purposes of the centre are to: Vocational training Improve the quality of industrial products by providing In 1960, the Syrian Arab Republic, like mort other industrial enterprises with technical studies, prepar- developing countries, formulated a project for voca- ing studies on specifications, calibration, and mea- tional training comprising the establishment of two laéaatrial «K—ti— !• tU Ara» aaaattiaa 117 training centre» in Damascus and Aleppo, with ten authorities concerned indkate tlie presence of an urgent training units in the main industries: spinning and need for vocational training in all sectors, and not in weaving, metals, electricity, construction and carpentry, the industrial sector alone. Since the general fiolicy of printing, car repairs, etc. |n« Sfc,te is concerned with the quality of tlie country's The centres were established to meet tlie n^ed to labour force, it is natural for tlie State to attempt to create a skilled work force, in line with the country's raise the educational, social, behavioural and profes- industrial development programme, in order to raise sional standard of the working population, which will productivity, increase and improve the quality of out- thus be lietter equipped and ahi«- to participle more put and consequently raise national income and the fully in tlie development of their homeland. standard of living. The whole project should have been completed during 1965. However, this «lid not prove Investment in the ¡mi us tria! sec tar possible. The Ministry of Industry has exerted con- The statistical information available at tlie Ministry siderable effort to push forward the implementation of of Industry indicates that the capital invested in the the project. As a result, it became possible by the end industrial sector constitutes a small proportion

The vocational training centres will ultimately be 1. Spinning ami wtmmtg able to provide training for the following numbers of Cotton gmntng 116 17.7 workers and technicians: Cottea yarn • 2S.1» . . Wtrhrtt/t—r industry (ti mfortni kvtli) Cotton fabrics 147 11J Mechanical silk fabrics 1,366 30.4 Spinning and weaving 200 • 250 Mechankal wool fabrics 5 41 Motor cart 100- 150 Nylon sockt 14 21 Metali 250- 300 Nylon stocking« 6 15 Etoctrkity 100- 150 Wool (knitted) WO 4.3 Electron*! 100-150 Cotton (knitted) 75 2.3 Construction and commerce 200-230 Printing and dyctag oí laarki 2 7.3 Nylon threads 1 a.* TOTAL 950-1250 Mechanical carnet* 2 1.0 Other 24 | J It may be too early as yet to assess the results of this project. However, the studies conducted by the TOTAL 2,027 100.« m ht Ik« Ara»

Teile 11 Tat* 14 N ratte af IMS

Nw*+rr of Vmkr tttaMsm- Capitai af ffrtam -> »f I-. Imémtry mentt (LS mtlliemS tmplayté Kmmtet af tmvettej f tramen utahhikmemmi total Spinning and 2. Engineering mentirtet wcavmg 44 96.00 14,9» Engineering 10 13.75 771 Electric power generation 49 Chrinicalb » 72.50 4,579 Cabir» 1 Food» tuff» 19 49 34 3,717 Plywood I TOTAL 103 231.59 Comprttsed wood 1 24,094 Tin containers M Cigarette paper I TaMe IS. Stale-owned hsawetrlos Ñaua and »trews « Metallic hrmtar« 27 Tiles M Capitai af M—n* Marble «awing M ¡nénatry (LS mtUutn) Pinas 7 •amina chairs I Tabacca and tom- bac (iaadstaffs) 3 AnNtNMIMI tMCIMHI mm 20.00 2JJJ Refrigarators II Petretram (Hansa Washing mschim. 7 refinery) 1 6500 7M lattai tanking M Electricity Other m (enginaermg) 49 »47 3441 Nasr Television Tafia IM MM Co. (en- gineering) . . . . I 3» J. Ckemieal mémtriet TOTAL 54 ¿524 Cement f 41.3 Soap él 11« Tabi» H. af «ka la hufastry Détergents S 1.4 "Ar)**»»" ail 9 1.7 JwVJennFnV dry

Paints U 1.1 Inémjtrj (tf «*v¿JàuZd Glass 1 7.4 Oxygon J *t Spinarne aad Shoes and rubber predarti .. • 3.1 weaving 44 9*00 14,9» Plastics H 14 Enginsering .. 40 42.92 Matches S 4\7# 2J Chmskals 30 72.30 Pharmaceutical* 14 4,579 1.4 Feedstafs 22 «9.34 Hides taming IIS 25 Pstriiia» 1 «5.00 700 Ceramics I 1.« Porcelain 1 1.1 TatAL 157 343.71 ¡Tali Laundries 21 147 Other «2 1.7 Thss brisara tap the »hare of the public sector in the TOTAL 347 MM industrial lettor to 63.9 per cent of the total capital invested in industry. 4. r—ét*ufi métutrki

Tatas 17. ••I V^a^aWVaml SnWwTs*a**#é*PJJ Hi Graia mtitiag 1422 u af woeatry **V* 2 tu Conservas M 2J Biscusts 4 a.t Tatti Ak ahntet beverages 31 24 Confectioneries and eisaeaiatts M %M Steh» gslmäkm) 7¡£¡ aftX Tabacca and tamas* 1 tu SpMtlflWf IM aWr 2 4J weaving 202 475 OU*« ai 141 52.5 34 Esamini 73 SM 41J Veaatebies ails 17 IS.« Oniiiili 117 •24 Dairy pr adatta 2 u Foisitsnts «4 124 174 Other M 42 Petratta« «| 100.0 Tatas, L4t2 Inaddrtionto the data already presented, it is poatible to illuatratc rise development of existing industries fat Syria by asing certain other »elected date on the struc- The ownership of a large Msmber of indentrisi ture of the industrial sector, such as: share of industry establishments fell to the State a* a reatsh of the adop- m tht *?"* "f00"»1 P*0*"* w «» nrtiontj income; tioR of the socialist nMaeaves in «he Syria« Arab mittrnmtKNi erf industry to etneioyment; extent to ar^^sjrWBHBwemk'KtpsjMir nrwistmaTasm m7 • a^e^saaaa. farsv^ana theeja eaaiamatiamtasaaawama^a^aaasnpaaaaa^sa^aaaei ^svof theajasvaa ñwaaaata »ore%sv which hsofcstry is capable of satisfying the daftaubd to of production. Tahka 14, 15 aad 16 of a»dnstry to the oaths i ta UM An* 1»

IUI« 11. CatHritatìaa of industry to national The above figures show that the income originating 1M6-1M4 in the industrial sector was constantly increasing during that period, and that by 1964 it was 75 per cent above (In LS million, ut «mitant 1956 prie**) the 1956 level. However, the share of the industrial sector in national income failed to rise consistently ; on Vtlut tiiei the contrary, it fluctuated from one year to another. N trions! i» tht Percent»/* i«MM Inie» St. industrial Ini,* St. ratio of It may be useful at this point to show the relative utimmtet lector (19S6-1M) (J) »« (Í) share of the different economic sectors in national in- r*m (?) (J) (J) (J) come. »56 .. . 2,445 100 267 100 10.9 It may be concluded from the following set of figures 19S7 . 2,593 106 288 108 111 that agriculture is the most important economic activity 1931 . 2,244 92 304 114 13.5 in Syria, contributing the largest share of the national »59 2,275 93 315 118 13.8 income. I960 .. . 2,265 93 321 128 15.1 1961 .. 2,496 102 352 132 14.1 Contribution of industry to employment 1963 3,183 130 387 145 12.2 Table 21 shows the number of paid workers in the 1963 .. 3,311 135 443 166 13.4 Syrian Arab Republic during 1961-1964 and the pro- 1964 .. .. 3,594 147 467 175 13.0 portion of those employed in different sectors of indus-

TaMo II. Industrial «risili of the national income, 1M6-1M4 (percentages)

Bctntmie lector m* j«r iti» iti« mo 1961 1962 1963 1964

Agriculture 39.3 42.1 32.4 32.7 29.1 33.2 39.5 36.2 36.9 Industry 10.9 11.1 13.5 13.8 15.1 14.1 122 13.4 13.0 Construction 4.0 2.9 4.0 3.5 5.2 4.7 5.7 3.9 4.0 Transport and communications 10.5 9.3 11.1 11.2 11.4 10.0 9.1 9.1 9.2 Trade 15.3 14.9 14.9 14.1 13.6 13.5 13.2 16.2 15.8 Banking and insurance 1.8 1.8 2.0 2.0 2.0 1.3 1.5 1.6 1.4 Ownership of dwellings ... 5.6 5.6 6.9 7.2 7.5 7.1 5.8 5.8 5.7 Public administration 6.1 6.1 7.5 7.8 8.0 8.1 7.0 7.2 7.6 Services 6.5 6.2 7.7 7.7 8.1 8.0 6.5 6.6 6.4

Table It. Ms» imktn for national Income estimate., 1M7-1M4 (1956 = 100)

Bctntmie tecttr 19S7 19SI 19Ì9 I960 1961 1962 I96i 1964

114 76 78 69 86 129 125 138 108 114 118 128 132 145 166 175 Construction 76 92 81 119 119 185 133 148 Transport and communica- tions 95 97 100 109 98 114 118 130 Trade 103 89 85 82 90 153 143 151 Banking and insurance 109 105 102 102 73 HI 120 116 Ownership of dwellings 105 113 119 124 130 134 140 148 Public administration 105 112 119 121 135 148 158 182 102 108 111 116 126 131 1.18 145

NATIONAL INCOME 106 92 93 93 102 130 135 147

Tant« SI. Contribution «I indastry to employment

Number of paid wotkerî Proportion ofpaii Sumter of Percentage Percentott Mtnnfoc- Minina Percentage workers faii òf malo tf few.Je luring in- Electricity ant of male in industry r*w worker» • wirken workers iustries ani sanier quarrying Total workers to total lf«l 346,556 90.7 9.3 76,858 6,945 1,951 85,754 93.5 24.7 1M2 334,553 91.4 8.6 80,086 6,126 1,468 87,680 956 254 M) 410345 87.4 12.6 89,091 5,961 2,400 97,452 947 23.7 IM« 355,697 91.1 8.9 84,601 6,095 5,391 96,087 96.3 27.0

NOTE: The above figures exclude paid worker» m the construction sector. • Comparing these figures, in particular the 1964 figures, with those mentioned m the section on the general framework of the industriel aector, we find that the above figures exceed those given previously by 94 per cent. This could be explained by the met that a large number of those working in different sectors of industry were not recorded m the industrial IN Industrial development in the Arab countries try. This information is based on the results of the It is clear from the figures in tables 22 and 23 that sample survey conducted jointly by the Ministry of the ratio of the labour force to the total population is Planning and the Ministry of Labour and Social relatively low. The figures in table 24 may help to Affairs. explain this fact. .

Table 22. Employment in relation to population, 1961-1964

Xo. of No. of No. of persons persons employed unemployed unemployed as per- as per- Labour employed as per- centage rentage force as as per- centage Xo. of of total Xo. of UH- of total percentage centage of total Population Labour employed labour employed Year of Syria labour of popu- of total popu- force portons force laiton population lation 1961 4,972,316 1,194,47«) 1,086,403 90 108,076 10 24.0 21.8 + 2.2 1962 5.179,684 1,175,348 1,099,522 93 75,826 7 22.6 21.2 + 1.4 1963 5,307,753 1,244,760 1,112,319 89 132,441 11 23.0 20.9 + 2.1 19« 5,467,135 1,264,783 1.120,832 88 143,951 12 23.1 20.5 + 2.6

Table 21 Employment in industry in relation to population, 1961-1964

Labour force Labour force Persons employed Persons unem- in industry in industry Labour in industry ployed in industry force in as percentage as percentage of total Year industry So. «, of total No. % labour forre population 1961 144,146 134,077 93 10,069 7 12.0 19ò2 2.9 149,670 140.753 94 8,920 6 12.7 2.9 1963 176,589 166,039 94 10,550 6 14.1 1964 3.3 170,346 158.152 93 12,194 7 13.4 3.1

Table 24. Ratio of male and female workers to labour force, 1961-1964

Population of Syria Labour force • Ratio of male Ratio of female Males labour force labour force Females to male population to female population

1%1 2,546,176 2,426,140 1,024,418 170,061 40.2 7.0 1962 2,649,768 2,529,916 1,028,672 146,676 38.8 5.8 1963 2,715,691 2,592,062 1,046,924 197,836 38.5 7.8 1964 2,799,129 2,668,006 1,037,360 227,423 37.0 8.5 » This figure excludes the lalxwr fore« employed in the construction and building sector.

These figures show that while the ratio of male Table 25. Distribution of the labour force among the labour to the total male population is a reasonable one, different sectors of economic activity, 1964 the corresponding ratio of female labour is extremely low because of prevailing social conditions and values. The result is that the total labour forre in Syria (male Number S umber and female) represents only 2$ per cent of the total •} Total Percental* employed unemployed labour imputation. Sector of persons persons force total We notice from table 25 that alwut one-half of the labour force in Syria is engaged in the agricultural sector. Agriculture and fishing 556,023 79,950 635,973 50.3 To determine domestic industry's role in satisfying the demand for industrial products, such demand must Industry 158,152 12,194 170,346 13 4 itself be determined on the basis of the following Construction formula : demand for industrial products equals imports and building 51,335 21,063 72,398 5.7 of industrial products less exports of industrial products Trade phis value of domestic industrial output. The contribu- 134,172 3,487 137,659 10.9 tion of domestic industry to satisfying the total demand Transportation for industrial products is determined by dividing the and communi- value of domestic industrial output by the total demand cations 38,839 4,863 43,702 3.5 for industrial products. Services 177,601 8,206 185,807 147 In the absence of reliable statistics on the value of industrial production, use will be made of the value Miscellaneous .. 4,710 14,188 18,898 1.5 added in the industrial sector. On this basis, it is TOTAL 1.120,832 143,951 1,264,783 10ÖÖ possible to reach the results shown in table 26. I Industrial situation in iht Arab countries 1S1

Table 28. Domestic industry's share in satisfying demand for industrial products, 1956-19*4

Imports Exports Contribution of finished of finished t'f domestic manufactured manufactured industry to Year products products Demand for total demand add.d in industrial for industrial (000 (000 industry products products (LS million) (LS million) (LS million) (LS million) ¡percentage

1956 429 195 94 56 267 602 44.3 1957 ... 369 192 90 53 288 564 51.0 1958 . . 383 268 78 78 304 709 42.8 1959... 414 270 121 98 315 608 51.8 1960 473 261 113 75 341 701 48.6 1961 398 218 89 63 352 661 53.2 1962.... 513 327 72 80 387 828 46.7 1963.... 542 266 69 74 443 916 48.3 1964 481 256 76 52 467 872 53.5

It may be useful at this point to give some informa- It should be mentioned that the deficit in the trade tion on the export and import trade of Syria during balance is more than covered by invisible receipts and 1956—1964, in order to provide an idea of the position revenues from the transit of crude petroleum across of the trade balance and of exports and imports of Syrian territory. In fact, these receipts and revenues finished manufactured products. not only cover the trade deficit but also produce a surplus. Table 27. Trade balance, 1954-1964 Table 28. Ratio of esporta and imports of taishtd Imports Exports manufactured products, 19M-1M4 (LS Year (LS militan) (1 milioni (000 tons) million) (t million) (000 tons) Percentage ratio of 690 191.7 1,206 516 143.3 874 value of imported Percentage ratio of 1956 finished manu- vaine of exportée 1957 716 171.1 1,188 548 152.2 1,140 factured products finished industrial 730 201.8 1,349 420 116.1 680 to value of products to value 1958 total imports of total exports 1959 694 191.4 1,712 425 117.2 412 Year 1960 858 227.5 2,129 405 107.3 357 197.5 1,908 395 109.7 397 1956 16.2 18.2 1961 711 16.4 862 231.5 1,905 617 165.7 1,164 1957 162 1962 18.5 896 228.5 2,046 621 183.9 1,260 1958 19° 1963 28.4 1964 898 223.3 2,202 673 167.3 996 1959 157 1960 123 27.9 22.5 SOURCE: Syrian Arab Republic, Ministry of Planning, statis- 1961 114 1962 IM 11.6 tical abstract. 9.5 NOTE: Figures for 1958-1961 include trade with the United 1963 130 Arab Republic. Relation of LS to $ at free market rates, as 1964 U.6 11.2 published in the bulletin of the Central Bank of Syria, as follows ($100.00= LS): Table 29 illustrates the relative changes in the con- 19S6 mi 19U 195» I960 1961 1962 1963 1964 tribution of industry and other sectors to total exports. 360.00 160.00 361.80 362.60 377.10 360.00 372.31 392.15 402.11

Tab» ». Relative contribute of industry sad other sectors to exports, 1956-19*4

Exports of raw Exports of finished materials and manufactured semi manufac- Exports of tured products fooastuff i as percentage or Exporta percentage of ax percentage total exports of total exports total exports Vaine Quantity Quantity Value Quantity Year (LS miUion) (MO tont) Vaine Quantity Value

39.4 72.3 1956 516 874 18.2 6.4 42.4 21.3 22.8 36.1 72.6 1957 . 1,140 16.4 4.6 47.5 32.4 26.1 56.1 1958 . 420 680 18.5 11.5 55.4 58.9 11.8 17.3 1959 .. 425 412 28.4 23.8 59.8 62.8 10.2 161 I960.... 405 357 279 21.1 61.9 58.9 8.3 25.3 19Ó1 395 397 225 15.8 69.2 28.7 23.7 64.4 1962 . 617 1,164 11.6 6.9 54.7 35.0 25.6 59.1 1963...... 621 1,260 9.5 5.9 64.9 37.9 24.9 56.9 1964 673 996 11.2 6.2 63.9 Ill Industrial developm» nt to the Arab countries

These figures clearly indicate that the rise in the Table SI. Value added per worker in indurir?, 1M1-1964 relative share of exports of manufactured products during 1959-1961 was due to the fall in the relative Number of paid Valut aditi ¡u Valut aidtd par share of foodstuffs, which was caused by poor harvests workers m industry worker Year industry (LS million) (LS) and an increased volume of exports of manufactured products to the United Arab Republic. 1961 85,754 352 4,104 1962. 87,680 387 4,413 1963 97,452 443 4,545 Table 30. Per capita value added in industry, 1956-1964 1964 96.087 467 4,860

1 alut aidtd %n Per capita valut Number of industry added Both the per capita value added and the value added Year population {LS million) (LS) per worker in industry are low because of low pro- ductivity and redundant labour, a fact which points 1956 4.025,165 267 66.3 to the need for adequate training in order to create 1957 4,144,980 288 69.4 1958 a highly skilled and productive work force. 4,420,587 304 68.7 1959 4,656,688 315 Industrial growth rates 1960 67.6 4,840,539 341 70.4 1961 It is possible to express the growth of industry over 4,972,315 352 70.7 1962 5,179,684 387 a certain period of time either by means of index 1963 74.7 5.307,753 443 83.4 numbers of industrial production, òr by showing the 1964 5,467,135 467 85.4 developments that have taken place in the output of the principal industries.

Table 82. Index number« of the output of principal industries, 1M7-1964 (1956 = 100)

Type of industry J957 ¡fsi 1959 I960 1961 1962 1963 1964 Mining and quarrying 77 68 75 76 51 41 36 40 Food and food processing 95 115 79 138 150 157 173 192 Alcoholic beverages 186 207 177 187 188 246 243 255 Tobacco and tombac 94 93 103 112 127 128 139 143 Spinning and weaving 115 123 124 134 139 161 156 206 Rubber and rubber products 143 152 212 215 227 294 368 Chemicals 13g 149 390 189 187 191 217 206 221 Non-metallic industries .. 90 124 130 149 152 177 192 174 General index number 112 124 125 143 147 167 173 197

Table 33. Production of the principal industries, 1936-1964

Type of industry Unit 19S6 19ÌT 195S 1959 I960 1961 1962 1963 1964 Spinning and weaving Silk and cotton fabrics Tons 18,000 2!,000 22,000 23,000 25,000 Tricot Tons 25,625 26,999 25,731 31,622 610 613 685 494 494 500 601 605 728 Wool 000 metres 95 119 123 140 157 Socks and stockings 000 dozen 172 380 389 671 671 469 1.71)0 972 1,065 Underwear Tons 1.100 1,128 1,000 1,181 775 1,113 1,218 890 1,091 Cotton yarn Tons 1,200 1,126 1,150 1,373 7,952 7,965 9,327 9,500 9,737 Silk yarn Tons 9,937 15,324 16,273 18,113 3,478 3,201 3,000 3,000 3,000 Wool yarn Tons 3,000 3,823 3,326 2,825 221 322 310 320 320 320 35 141 278 Chemicals Cement 000 tons 326 315 408 447 489 540 607 685 635 Glass Tons 10,654 6,712 12,633 10,578 Soap Tons 15,275 10,105 14,704 12,403 9,241 11,146 17,416 18,650 25,000 Matche» 000 grot • 25,000 25,625 26,189 34,329 26,550 662 736 813 775 Rubber shoes 000 pairs 700 700 1,202 1,172 1271 789 1,125 1,198 1,673 Oxygen 000 m3 1,700 1,870 2,323 2,901 3,081 174 184 203 251 255 paint» Tons 259 336 302 363 p 500 508 576 1,027 la»tic* Tons 1,127 1,150 1,175 732 829 283 574 535 1,012 Food manufacturing Vegetable oil Tons 10,300 11,926 12,600 14,148 Olive oil Tons 15,148 15,648 16,022 20,833 26,852 12,370 7,392 14,585 27,714 Margarine Tons 10,100 18,621 20,447 15,093 25,511 2,464 2,552 2,260 2,700 s««ar Tons 3,000 3.300 2,885 2,081 4,418 50,391 44,598 56,667 61,064 Conserves Tons 69,631 /1,720 76,876 83,234 78,341 2,600 2,345 2,580 2,682 Chocolates Ton» 2,982 .,000 3,308 3,703 3,746 291 350 410 777 800 B'»c«it« Ton» 820 840 925 579 510 481 495 821 Alcoholic beverage».. 000 litre» 821 .Ì21 869 1,415 913 1,754 3,256 3,622 3,101 Macaroni Ton» 3,275 3,¿00 4,313 4268 4,686 1,487 1,620 1,680 2,139 2,139 2,1.19 1,868 2,373 2,462 J ladwtrial situation ia IN Arab countries IM

Tab!« SI Production of the principal industriel, 19M-1M4 (continuei)

Type »f inénitry Unit 19Í6 »ST USI It» i960 1961 Mi Mi tU4

Mining and quarrying Natural aiphait Tons 43,031 20,858 29,323 20,691 21,462 27,516 11,543 10,732 10,354 Tobacco and tombac . Tons 3,123 2,947 2,908 3,231 3,500 3,969 3,992 4,344 4,470 OU refining Benzine 000 tot» 50 126 131 117 127 159 Kerosene Tons 40 89 93 106 106 105 Gas oil Ton» 57 175 192 207 252 329 Fuel oil Tons 93 276 313 328 334 260 Asphalt Tons 3 17 27 21 26 28 Butane gas Tons — 0.6 3.6 4.6 7.3 9.3 Crude oil, refined Tons 265 696 770 794 878 1,014 Engineering industries Electric washing machines Piece 2,300 7,200 9,300 10,300 10,810 12,570 Electric refrigerators Piece 1,120 1,680 4,210 4,100 4,500 4,500 Gas cooking stoves Piece — — — — 650 6,650 Plywood If* 8,039 9,603 9,459 2,721 1,958 4,669 Cables Km — — — — 14,707 13,524 000 Tin containers pieces 2,132 3,267 3,264 7,339 7,727 — 000 Metallic threads M» 72 92 66 97 103 131

• Groz = 5,000 sticks.

Projects for industry duction in order to reduce costs, improve quality, increase returns and raise the productivity of labour; Following the adoption of the socialist measures which brought the ownership of the principal means (d) Organization of the public sector in aspects of production in Syria under the control of the State, related to inter-establishments relationships, type of it became necessary for the authorities to pay special controlling authorities and their relationship with the attention to the industrial sector. State policy in this ministries and planning machinery to ensure compa- field aims at providing support and encouragement to tibility with the general development plan and economic industry and raising the standard of productivity within policy; the following general framework: (e) Development of the application of the demo- (a) Development and expansion of the public sector cratic system of administration in public establishments. through the establishment of new and complementary In the light of the above, the section dealing with industries; in the process, all available resources are the development of industry, mining and petroleum in to be used in a manner compatible with the require- the second five-year plan, 1966-1970, provides for the ments of the economic development plan in order to expenditure of about LS 1,059 million, or $265 million, achieve, as far as is feasible, a state of self-sufficiency, of which 26 per cent is in local currency and the paying due attention to the possibility of increasing balance in foreign exchange. and promoting exports; The increase in income that will result from these (b) Accurate definition, on the basis of research, investments is estimated at LS 255 million, or about of the limits of the public sector in all fields of activity ; $64 million, i.e. an investment of LS 1 million will (c) Re-organization and co-ordination of the public lead to an increase of LS 250,000 ($62,500) in income; sector through the amalgamation of small-scale pro- this figure is low in view of the fact that most of the duction units and larger ones with a view to benefiting projects are long-term. The increase in employment is from the advantages peculiar to modern industry and estimated at about 12,800 persons. This figure is also large-scale production; and through the up-dating of low, owing to the fact that some important projects, production methods, renewal of machinery and equip- such as those in the field of petroleum and fertilizers, ment, and introduction of all modern means of pro- are capital intensive. 114 Industrial development in tin Arab countries

Table 84. Major industrial projects included in the aecond Ive-year plan, 1MC-197I

Allocations Authority Quantity or vain* Date of conerrnté of expected pro- Expected commencing Project LS million 1 million • duction employment production

Public Autho- Nitrogenous 71.9 18.0 148,500 tons of nitro- 400 Early 1966 rity for the fertilizer genous fertilizers Execution of plant per year Industrial Projects Idem Dry celli 2.3 0.6 16 million dry cells 130 Mid-1966 factory per year Idem Salt mine 7.9 2.0 3,000 tons of salt 52 per year Idem Exploitation 61.8 15.5 75,000 tons of super- 380 1969 of phosphate phosphates per year to reach, within four years, full capacity of 102,000 tons per year Idem Iron ban 26 6.5 75,000 tons per year in 280 1970 factory the first stage ; 121,000 tons per year in the second stage Idem Onion dehy- 0.025 0.006 3,400 tons of dehydrated 1,640 drating onions per year factory (a study of the project) Public Autho- Projects of 28.2 7.1 LS 335 million per year 1,551 rity for the the spinning Public Indus- and weaving trial Sector industry Idem Projects of 16.0 4.0 LS 56 million per year 548 the chemical industries Idem Food manufac- 106.9 36.7 LS 433 million per year 920 turing indus- tries Idem Metal in- 4.1 1.0 LS 22 million per year 261 dustries Idem Wood, paper, 3.5 0.9 • LS 23 million per year 314 leather, plastic and rubber indus- tries Administration Electric meters 0.62 0.2 50,000 meters per year 82 of Defence factory Early 1917 Factories

Idem Hydrometers 1.1 0.3 5,000 meters per year 30 factory Idem Agricultural 24 6.0 2,000 tractors 150-200 tractors per year factory Nair Television Miscellaneous 4.2 1.1 150,000 TV sets 350 Company projects per year in addi- tion to other products Ministry of Damascus milk 0.48 0.12 30 tons of milk 70 Mid-1966 Agricul- pasteurisation per day ture factory Idem Aleppo milk 0.36 0.09 20 tons of milk 70 Mid-1966 pasteurization per day factory Idem Modern olive- 10 2.5 300 workers oil press for three months U. 75 workers Industrial situation in the Arab countries 1S3

Table 34. Major industrial projects included in the second five-year plan , 1966-1970 (continuée)

Allocations Quantity or vainc Date of of expected pro- Ì concerned Project LS million t million • auction en ploxmcnt production

General Petro- Karatchuk- 254.5 63.6 Carry 5 million leum Autho- Tartous tons per year, rity pipeline capable of being raised to 7 million tons per year Idem Well-drilling 101.3 25.3 and develop- ment of oil fields • 1,000 Idem Developing and 110.0 27.5 RefiiK 1 8 million expanding the tons of crude petro- oil refinery leum per year Idem Seismic 15 3.8 — surveys Idem Exploratory 65 16.3 drilling and other projects Ministry of Mechanical 13.9 3.5 200 tons per day in 200 1966 Supply mills Damascus. 100 tons per day each in Hanta, Idlib, Latakia and Hasakah Cotton Ginning Miscellaneous 20 5 2720 and Marketing projects : new Authority projects and renewal of old ones Tobacco and Miscellaneous 19.4 4.9 Tombac Mono- projects: ware- poly houses, factory buildings and others

• Converted at the average rate of $1 = LS 4.0.

It is clear from table 34 that most of the proposed to take the place of imports with large export poten- industrial projects in the second five-year plan, 1966- tialities. 1970, aim at producing goods for local consumption

7. The Indastrial sittutfkm hi Ye«

Communication presented by Yemen

HlSTOftlCAL REVIEW confronting their development was the absence of a good road network connecting the different regions of The development of the industrial sector, as of every the country. The available roads were very primitive, other sector during recent years, could be divided with the exception of the highway linking Sana' to into two stages : prior to the revolution of 26 September Hodeida, which was completed at the end of the stage 1962 and since that date. The difference between these to which we refer. two stages lies in the possibilities for the development of the national economy. During the period prior to the revolution, handi- The country led a completely closed economic life crafts existed to meet the needs of the people. Such before the revolution of 26 September 1962. The policy handicrafts produced hats in the national style, turbans, of isolation from the external world and the lack of belts, knives, nargil pipes, pottery and other objects imports into the country held up the development of for personal use. The development of shoe-making handicrafts, industry and the application ot modern was at a primitive stage and shoemakers produced methods of land cultivation. The development of handi- simple and fight shoes, such as sandals. In every region, crafts lagged because of insufficient materials or trained the people produced rugs and other objects to meet workers. What handicrafts existed were at the level their individual needs. Some wove rugs for the market. of domestic production, in accordance with local tradi- In the region of Tilama, the people embroidered cloaks tions and without a big market. A great difficulty and sold them in other regions of the country. IM Industrial development in the Arab countries

We see, therefore, that a well-developed handicraft share of the manufacturing sector in some production industry did not exist in the country and that expe- indexes. Unfortunately, we do not have enough rience in that field was very poor. The handicrafts statistical data on the present economic situation. The were not specialized by workshop or region and were data available are collected from different departments not guided by the Government. without co-ordination or classification. They do not Although certain natural conditions exist which are reflect the exact situation of the economy because they conducive to the development of some branches of do not cover all activities and areas in the country. industry, we had only one completed textile factory, Yemen is now trying to organize a statistical survey located in the town of Bagil. It had been built by the and to plan its development with the help of some Government, in co-operation with a Syrian national foreign experts and the United Nations. and equipped with modern French machines. The On the basis of available data, we can see that the location of the factory was very convenient, because manufacturing industry in Yemen contributes a very it wns near the cotton plantations. The factory is now small share to the economic life of the country. The government-owned, but has not so far started oper- share of manufacturing, mining and quarrying was ations. In the opinion of some experts, only $50,000 1.3 per cent of the gross national product in 1964. are required to put it into operation. The share of electricity and water services was less Resides this textile factory, th;re was a weaving than 2 per cent of the gross national product during workshop in the city of Sana'. This workshop made the same period. This means that manufacturing and clothes to meet the needs of the Government. After industrial production contribute about 3 per cent of the revolution, production stopped and the building the gross national product, and do not play an was occupied by the Ministry of Internal Affairs. important role in the economic life of the country. At During the period mentioned, the internal system of the same time, the contribution of manufacturing, transportation and communication was underdeveloped. mining and quarrying in Yemen's export trade was Electricity was limited to the royal palaces, and by about 6.6 per cent during the same period. This shows the end of the old regime only a few cities were lit by that an increase in industrial production will enable electricity. Since the revolution, electricity has been Yemen to expand exports and foreign currency deposits. introduced in many cities and towns. But these electric The number of persons employed in the manufac- power-genciating stations are not able to ensure turing sector is so small that it does not play an electricity for industrial purposes. That is why the important role in the lives of the people. The manu- textile factory in Bagil has its own generator and facturing sector is now expected to play an increasing every new project should have its own electric power- role in the country's life by breaking down traditional generating unit. methods of production and showing the way to development. Yemen's relations with other countries were initiated under the old regime and have continued and greatly FRESENT STRUCTURE OF THE MANUFACTURING improved since the revolution. As a result of the foreign INDUSTRY relations established by the old regime, the textile factory in Bagil, the sea port in Hodeida and the road In this part of the report we shall discuss questions between Sana' and Hodeida were built. Moreover, related to all Yemen's industrial enterprises, because certain agreements signed by the old regime are now it is very difficult to isolate manufacturing industry being implemented by the Government. The Govern- from other branches of industry, and because some ment has also established relations with many other small-scale manufacturing enterprises exist on whose countries. All this has created great possibilities for share in the over-all industrial production data are drawing on foreign experience in economic and social not available. development and obtaining assistance in different In discussing the structure of Yemen's industry, we fields. cannot use data on the share of each branch in total industrial production, output, employment, exports, IMPORTANCE OF THE MANUFACTURING INDUSTRY IN imports, etc. because such data are not available. We THE NATIONAL ECONOMY can, however, indicate the number of the enterprises The manufacturing industry plays an important role in every industrial branch and their present activities. in the national economy of every country. It ensures The following industrial enterprises exist at present : the use of local raw materials, provides employment, A textile factory in the town of Bagil, which is not in supplies the population with goods locally produced operation ; and increases exports of domestic products rather than An aluminium factory manufacturing household of raw materials which can be used by indigenous appliances in the city of Taiz which uses imported industrial enterprises. The development of manufac- raw materials ; it was built after the revolution and turing provides the country with a relative inde- is privately owned ; pendence. For these reasons, every developing country has instituted a programme to accelerate industrial A small tannery in the city of Hodeida which processes development. raw leather in a primitive way for internal needs; In the Yemen Arab Republic, no such programme Two carpenters' workshops which use imported timber, exists for the development of industry. Any enterprises one in the city of Sana' and the other in the city of which exist or are to be established are the result of Hodeida ; agreements between Yemen and other countries or of the action of individuals. A small factory for mosaic tiles in the city of Sana'; this factory is very important for the building and The importance of manufacturing in the national construction industry ; its expansion would be possible economy of Yemen at present may be seen from the upon the production of cement locally; Industrial situation in the Arab countries 1S7 A big salt-mine in the town of Salef, north of Hodeida, The country's foreign trade lias been increasing very which is a government enterprise and working for rapidly during the last three years. The slow rate of export ; increase in industrial production and primitive land Small private flour mills driven by Diesel engines or cultivation cannot satisfy the needs of a rapidly growing animal power ; they are very primitive and insufficient population. All these factors have resulted in a tre- to meet the needs of the population; mendous increase in imports. Many quarries for cutting stones required for building. Imports play a very important role in Yemen's economic life because nio.st of its food, clothing, house- The increased import of goods has encouraged the hold goods, machines and materials u.sed in the development of some handicrafts and caused the decline manufacturing industry have to lie imported from of others because producers and consumers find im- abroad. At the same time, exports have remained ported goods and materials clieajier. almost stationary. Among the new handicrafts which have started to Agricultural products account for alxnit 88.3 per develop quickly are tailoring, smithing, tin-smithing, cent of Yemeni exports. This means that Yemen goldsmithing, technical workshops and shoe repairing. exports mainly raw materials, in which the si.are of Old handicrafts which have declined are those that labour is less than in industrial products, and imports produce local clothing. mainly manufactured goods. Thus it imports goods The development of those industries and handicrafts involving a good deal of laliour, and has to pay for was spontaneous because there was no industrial foreign labour while the number of unemployed is development plan or any stabilization of the economic large at home. Yemen's foreign trade, therefore, is not life of the country. The Government did not have balanced and the development of industrial production enough experience in these matters and was therefore must therefore be accelerated, using foreign loans and unable to follow the right direction of development assistance to create enterprises to satisfy the country's after the revolution. It continued to make use of old needs and to produce goods for export to neighlxwring agreements and concluded new ones with many friendly countries, as a start. The process will of course I« a countries regarding a number of projects. Co-ordination long one, but this should be the line to be followed in in implementing these projects is still lacking. development. For these reasons, no production relationship exists In order to obtain good results from economic and between established enterprises and handicrafts. Other social development, it is necessary to have an adequate reasons for this is the lack of a mining industry, on and organized transport system and sufficient electric the basis of which a manufacturing industry and handi- power for lighting as well as to meet the requirements crafts can be established. of the manufacturing sector. The available road network There are no foreign-owned factories in the country, is not adequate for the future development of the but the United Arab Republic has a 49 per cent manufacturing sector envisaged in the projxjsed participation in the salt mine. projects. It is possible to obtain transport services between Hodeida and Sana' and l)etween Sana', Taiz The geographical distribution of manufacturing enter- and Mocha, where there are comparatively good prises is not based on government policy regarding highways. regional planning or location of raw materials. It is The first prerequisite for industrial development is dependent upon the wishes of the owners and on the availability of a big power network which will be private feasibility studies carried on prior to the establishment of the enterprises concerned. The owners able to supply the enterprises with enough energy. were concerned with profits from their enterprises in At present there are some electric power stations which provide the cities and towns with energy for lighting. the present, without paying much attention to future Their capacities are too small to l>e used for industrial expansion. Some of these enterprises will lag behind purposes. The capacity of the electric power station those which are to be built in accordance with the new in the city of Sana' will be increased by an additional plans. 1,800 kw, but will remain insufficient. Diesel generators Methods of industrial financing differ. All established are in operation at these electric power stations, with enterprises now in operation, with the exception of the result that the cost of electric power is too high. the salt mine, are small and privately owned. They In order to ensure electric power for manufacturing are financed from private capital without any govern- enterprises, it is necessary to build a network of electric ment participation. Under the agreements with other power stations utilizing steam boilers. countries, the implementation of new projects will be carried out by the Government, the Yemen Bank for INDUSTRIAL PROGRAMMES AND MAJOR PROJECTS Reconstruction and Development, or other big com- So far, Yemen has not had an official programme panies. Most of the projects will be financed by means or plan for the economic and social development of of long-term foreign credit. Some will be built by the the country. Realizing the necessity of planned develop- bank, in which the Government has a 51 per cent share, ment in all aspects of the country's economic and social or by other companies wishing to do so. Using foreign life, the Government has called upon some foreign credit and assistance. Yemen will be able to develop experts to handle these questions. By formulating a its industry, as it lacks the resources to increase its development plan (for two or five years), we shall industrial production on its own. Loans will normally have completed the main task in the development field be repaid out of the proceeds of the established enter- for the near future and shall have the possibility of prise or the export of local raw materials. At the same implementing the projects planned. time, Yemen is trying to develop measures to encourage the investment of local capital in the industrial develop- In order to develop an industrial sector in the ment of the country. These are the only methods which country, it is necessary to develop all branches of the it can use to finance its industrial development. economy to ensure the supply of the raw materials, 1S8 Industrial development in the Arab cavatrici transport services, energy, sales, water etc. required A loan of 30 million rubles has been offered by the by industry. Soviet Union for the construction of the road between For textiles, food preserving, milling, leather and other Hodeida and Taiz; this road is under construction. industries using raw materials, it is necessary to carry Upon completion it will bridge the gap in the transport out certain measures for the development of agricultural of goods from the Hodeida sea port to Taiz. production. Two loans have been offered by the People's Republic We list below projects which have been submitted of China for constructing the road lietween Hodeida Iiy other countries. and Sana'; construction is under way. (a) The Soviet Union has promised the establish- A loan of 2 million marks has lieen offered by the ment of a big plantation in Wadi Surdut with an area German Democratic Republic for communications. of 10,000 hectares. The USSR will provide a loan Yugoslavia has offered a project for the construction for the project, which will cost about 16 million rubles. of a steam-turbine plant at Hodeida at a cost of The main crop will lie cotton. F.xjierimental work has $1,130,000 with a capacity of 113,000 kWh daily. It yielded very good results. It will lie the biggest modern will satisfy the needs of Hodeida, Hodeida sea port, farm in the country and will provide cotton and other the new factories, the cotton plantation in Tihama and crops for internal needs and for export. The project the towns of Marawa, Bagil etc. for electric energy. will take the form of a State farm, which will give The capacity of the generators will be 9,000 kW and the Government a [xissibility to play an important role will lie in two units. Calculations indicate that the cost in developing agriculture. of 1 kWh will lie about 4 bugshas at the outset. The (/') The German Federal Republic offered a loan project envisages the possible linking of the electric of 10 million marks for an agricultural farm in Marawa. power stations in Hodeida, Sana' and Taiz in a power Negotiations were stopped after diplomatic relations ring which would supply the areas between them with had 1)cen severed. Besides the suggested loan, the electricity. The project has never been negotiated, and German Federal Republic established three experimental no agreement has been signed. farms with equipment and building in Sana', Taiz and For the development of industry, it is necessary to Hodeida. The Germans introduced new kinds of trees, have enough water for industrial use. For this reason fruit-liearing trees, vegetables and chemical fertilizers. we have to establish an adequate water supply in the Farmers started to buy and transplant the products of big towns to meet the needs of the population and the farms, but these activities censed after diplomatic industrial enterprises. There are not many water relations had been severed. The cost of these experi- supply projects; nevertheless, the Government is paying mental farms is roughly estimated at about 25 million much attention to such projects, and the people them- marks. selves have shown willingness to participate in the (c) Under a previously signed credit agreement implementation of prospective projects. The only water with Yugoslavia, the latter offered a project for a cotton system in Yemen is the project built by the United plantation in Tihama with an area of 1,500 hectares. States of America in the city of Taiz with a capacity il The cost is $2,337,000. The project was discussed by of 1 million gallons fier dav. Its final cost will be Yugoslavian representatives and by the Yemen Bank $4,200,000, granted by the United States. for Reconstruction and Development, but they did not The main industrial projects under consideration are come to an agreement regarding the cost of the plan- listed lielow. tation. (a) A loan of 10 million rubles has been offered by (rf) An agreement was signed with Bulgaria pro- the Soviet Union for the construction of a large cement viding for a cotton plantation in the area of Tihama. factory in the town of Bagil. It will be a state enter- So far, however, no discussion of actual terms has prise, which will satisfy the country's needs for cement taken place. and will lead to an expansion in the construction and building activity and a lowering of costs. (r) The German Democratic Republic will spend 5 million marks in the form of a loan on two agricul- (b) A loan of 7 million rubles has been offered tural projects. One of them will lie in the highlands by the Soviet Union for the construction of a large- of the country and the other will be in the area of scale fish-cannery and fishery in the city of Hodeida. Tihama. The main crops of these two farms will be The Soviet Union will supply six ships. The capacity cotton, grain and lucerne. of the factory will be about 5 million cans per year and the enterprise will belong to the State. The implementation of these projects in the field of agricultural development will increase output, which (c) A loan has been offered by the People's Republic will provide the raw materials needed by the manu- of China for the construction of a large-scale textile facturing sector and will serve as an example to be factory in the city of Sana*, to lie completed by the imitated in cultivating the land. end of 1966. The capacity of the factory will be 6,100,000 metres of cotton clothes per vear. The factory Projects aimed at improving transport services for will include 360 looms and 10,000 spindles. It will be industrial development have been offered by friendly equipped with its own electric power station with a countries, and some of them are under construction. capacity of 2,300 kw. The factory will belong to the Assistance has been granted by the United States State and is expected to provide employment for some of America for the construction of a 226 mile road 1,300 persons. lietween Mocha and Sana' and the 35-mile road between (d) A loan of $598,926 has been offered by Taiz and Raheda. The Mocha-Sana' road has been Yugoslavia for the construction of a large-scale tannery. completed and the Taiz-Raheda road will be completed The capacity of the factory will be 2,000 kg of aalted in March 1966. These roads connect the main cities hides per eight-hour working day and 1,500 kg of dry and towns of the country. skins (sheep and goat) per eight-hour working day. MMtrtel attisât»»* ta tae Ara» The loan is for eight years; however, no agreement hospitals ami tlie supply of medicine*. foods, etc. Such has yet been reached. assistance includes the following : In addition to the afore-mentioned projects for the (a) United States of America development of the different branches of the economy, (i) A shipment of 50,000 metric tons of wlieat many agreements have been signed between Yemen and wheat flour valued ;it $10.352.000 during the and other countries for the investigation of the mineral period l()5<)J„ne 1%5 ; deposits of the country. (ii) 1H2 scholarships for 315 man years of (een offered training in Lebanon during the same (uriod ; by the Soviet Union for the investigation of the mineral (iii) 24M man-years for administration and road deposits of the country. To that end. a group of Soviet and water experts and technicians during the same experts is studying the geological structure of the land. period ; (/;) Under an agreement with the Romanian (b) Soviet Union Government, a team of experts visited the country in (i) A large hospital equipi >cd with doctors and the summer of 1965 and investigated the possibilities 100 beds; of petroleum drilling in the area of Tihama. The Government is awaiting their report. (ii) A clinic equip|>ed to handle 100 patients per day ; During the discussion of these projects, many problems were encountered regarding their operation, (iii) Three schools for 2,000 students; prices, establishment and effectiveness for the country's (iv) Several scholarships for education ami economy. The main problems relate to supplying training in the Soviet Union; industrial enterprises with raw materials and their (c) People's Republic of China relations with foreign trade companies. A large school (technical) in the city of Sana', INDUSTRIAL POLICIES (d) United Arab Republic £4,600,000 in the form of loans and assistance; The Government's industrial policy consists of (e) Hungary measures for the development of the industrial sector of the economy. The reason why the Government has (i) $300,000 for medicines, pharmaceutical pro- signed several agreements with other countries is that ducts, tents, clothes, hospital equi|>menl, school it wishes to develop the industrial sector in the country. equipment and furniture ; Local investment in large-scale enterprises is lacking. (ii) Establishment of a hospital; The Government's industrial policy is not based on a (iii) 45 scholarships for studying and training in long-term programme for development, but on sug- Hungary ; gested agreements and projects. (iv) A loan in kind of S 1.000,000; To encourage foreign and domestic companies to (f) Romania invest their capital in the country, the Government (i) A team for studying Yemen's agricultural, has prepared decrees on investment of foreign capital educational and health conditions, and on economic development, but neither are yet in (ii) Establishment of a technical school iu Sana'; force. (iii) An ex|>ert in health affairs; Government control over foreign trade is exercised through its customs policy, which is in the hands of (iv) 25 scholarships for Yemeni students in the Ministry of Economy and through the regulation higher education; of the establishment of foreign trade companies. (g) H »lijaría The Ministry of Economy is responsible for the (i) $400,000 as requested by the Yemen (ioverti country's industrial development as well as for the ment; development of all branches of the economy. (ii) Establishment of a school in Sana'; A development committee is to be formed in the (iii) Ten scholarships for study in Mulgaria ; Ministry of Economy in accordance with the decree (iv) Five Bulgarian experts tor two years in tlie on economic development. The committee is to be fields of statistics, planning, finance, agriculture, and responsible for evaluating exemption requests and taking the necessary decisions for approving such foreign trade; requests; for obtaining the consent of the Executive (h) Kuwait Council for approved exemptions and informing the (i) Eight schools, one hospital and four clinks interested parties of such decisions, and for registering to the cost of ¿404,.W9 during tlie first stage ; the organizations entitled to the benefits provided by (ii) Teachers' school, chest hospital, 3 clinks and law. 12 schools to the cost of i«'4H,l(« for the second In 1965, a technical bureau was organized, consisting stage, whkh is under construction; of some Yemeni and three foreign experts in the Ministry of Economy. The bureau deals with questions (i) India relating to statistics, planning and financing. It also 100 water pumps for agricultural fmrposes. investigates the economic situation and suggests Many other countries, including Syria, Iraq and measures for resolving problems of implementation. Algeria, help Yemen in different fields. CONCLUSIóN EXTERNAL ASSISTANCE In addition to the above-mentioned projects, the As a first step towards accelerating the country's country has received substantial assistance from abroad, rate of industrial development, a long term programnte directed towards the establishment of schools and for industrial devekipnient must 1* worked out. This Pf

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