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The impact of the international transfer of technology on the development of indigenous technology in Saudi Arabia

Chlach, Talal Ramadan, Ph.D.

The American University, 1989

Copyright ©1989 by Chlach, Talal Ramadan. All rights reserved.

300 N. Zeeb Rd. Ann Arbor, MI 48106

THE IMPACT OF THE INTERNATIONAL TRANSFER OF

TECHNOLOGY ON THE DEVELOPMENT OF INDIGENOUS

TECHNOLOGY IN SAUDI ARABIA

by

Talal Ramadan Chlach

submitted to the

Faculty of the School of International Service

of The American University

in Partial Fulfillment of

The Requirements for the Degree

of

Doctor of Philosophy

in

International Relations

Signatures of Committee:

Chair:

jjrw * iOQ-trz)^ ------Dean of the College or School

0 ~ O ______Date

1989

The American University 70^

Washington, DC 20016

THE AMERICAN UNIVERSITY LIBRARY © COPYRIGHT

by

TALAL RAMADAN CHLACH

1989

ALL RIGHTS RESERVED DEDICATION

To my mother, father, wife, and daughter THE IMPACT OF THE INTERNATIONAL TRANSFER OF

TECHNOLOGY ON THE DEVELOPMENT OF INDIGENOUS

TECHNOLOGY IN SAUDI ARABIA

by

Talal Ramadan Chlach

ABSTRACT

This dissertation explores the impact of the inter­ national transfer of technology on the development of indigenous technology in Saudi Arabia since 1970. The essential question investigated is whether a transfer of technology had occurred. If such a transfer had occurred:

1. To what extent did it occur and what sector or sec­ tors of the Saudi economy did it affect?

2. Did this transfer induce other forms of indigenous technologies?

3. How much impact, if any, did the transferred tech­ nology have on the development of indigenous human resources?

4. What was the impact of this transfer, if any, on the social and political institutions in Saudi Arabia?

The general conclusion of this study is that a broad and systematic transfer of technology had not occurred in accordance with the definition offered in this research.

ii After reaching this conclusion, the study then attempted to determine why this transfer had not happened. Two case studies are utilized to further investigate this problem.

Finally, the study seeks to identify the conditions neces­ sary for a transfer of technology to take place.

This study examines two major and separate hypotheses:

(1) international transfer of technology will result in the development of indigenous technology in developing coun­ tries; and (2) the development of an appropriate indigenous technology is dependent upon the development of indigenous human resources. The study uses both primary and secondary sources. Primary data were collected through open-ended interviews with officials from the government and the pri­ vate sectors, and survey questionnaires. Secondary sources are the various government and nongovernment publications, development plans, development policies, annual statistics, and other relevant publications. ACKNOWLEDGMENTS

I would like to thank God for enabling me to success­ fully conclude this research. My deepest appreciation and gratitude is extended to my Ph.D. dissertation committee members— Dr. Abdul Aziz Said, Dr. Robert Boynton, and Dr.

Edmund Ghareeb— the faculty of the School of International

Service, and the American University, Washington, D.C., who played a major role in directing and enriching my academic program during the period in which I obtained my B.S.T.M.,

M.A., and Ph.D. My thanks also goes to all those who helped me in my research at the Center for Mediterranean Studies at the American. University, most particularly Ms. Francine

Marcus.

I would like to thank Dr. Nabeel Abdul Aziz at the

Jeddah Chamber of Commerce and Industry Information Center and officials at those companies in Saudi Arabia who either granted me an interview or graciously responded to my long questionnaire. My thanks also goes to all the officials at the various Saudi government ministries and agencies who granted me interviews and provided me with a wealth of information related to my research. I would like to extend a special thanks to the officials at both Saudi Arabian Air­ lines and Saudi Cable Company who spent time with me during

iv the period I was conducting the research for the case studies.

Finally, and most especially, my deepest and long- lasting appreciation and gratitude goes to my wife,

Katherine L. Knight, without whose help, understanding, sup port, patience, sacrifice, and encouragement I would not have been able to finish this work. Also, my love goes to my daughter, Jennah, whose involvement in my work began prenatally and who spent the first six weeks of her life beside me, keeping me company night after night, during the writing of the final chapters. She continued to provide me with the impetus needed to carry on until the final signa­ tures were affixed.

v TABLE OF CONTENTS

ABSTRACT ...... ii

ACKNOWLEDGMENTS ...... iv

LIST OF TABLES ...... viii

Chapter

I. THE RESEARCH OBJECTIVES, DESIGN, AND METHODOLOGY ...... 1

Objectives ...... 1 The Research Problem ...... 2 Research Design and Data Collection ...... 5 Limitations and Research Methodology.... 9 Definition of T e r m s ...... 10

II. REVIEW OF THE LITERATURE ...... 18

III. HISTORICAL AND CONTEMPORARY SAUDI ARABIA . . . 41

Historical Background ...... 41 History of the Arabian Peninsula ...... 41 Development of the Kingdom of Saudi Arabia . 44 The Rise of Al-Saud ...... 44 The Political system ...... 47 Economic conditions ...... 49 Geography and population ...... 50 Educational system ...... 51 Health care services ...... 52 Contemporary Saudi Arabia ...... 53 Political system ...... 53 Educational system ...... 56 Health services ...... 59

IV. DEVELOPMENT POLICIES OF THE KINGDOM OF SAUDI ARABIA ...... 62 Summary of the Development Plans ...... 62 Achievements of the Development Plans.... 72 Development of Industrial Infrastructure . . 81

V. INDUSTRIAL DEVELOPMENT POLICIES, PROJECTS, AND INSTITUTIONS ...... 90

vi Historical Background ...... 90 Industrial Development Policies ...... 94 Industrial Development Institutions ...... 101 Action-oriented institutions ...... 101 Support-oriented institutions ...... 110 Financial support-oriented institutions . . 112 S u m m a r y ...... 114

VI. MANPOWER DEVELOPMENT ...... 120

Public Corporations and Agencies ...... 134

VII. ANALYSIS OF THE S U R V E Y ...... 148

Preliminary Interviews ...... 148 Analysis of Sample Survey D a t a ...... 155 Technological Involvement ...... 159 M a n p o w e r ...... 173 M arketing...... 178 T r a i n i n g ...... 179 Technical...... 180

VIII. SAUDI ARABIAN AIRLINES: CASE STUDY ...... 183

Historical Development of Saudi Arabian A i r l i n e s ...... 185

IX. SAUDI CABLE COMPANY: CASE STUDY ...... 210

Historical Development ...... 210 Manpower Development ...... 215 Saudi Cable's Technical Achievements .... 226

X. FINDINGS, RECOMMENDATIONS, AND CONCLUSIONS . . 232

Recommendations ...... 240 Conclusions...... 248

APPENDIX ...... 252

BIBLIOGRAPHY ...... 268

vii LIST OF TABLES

1. Health Facilities ...... 60

2. Gross Domestic Product by Oil and Nonoil Sectors, and Kind of Economic Activity, in Producers' Values ...... 64

3. Government Revenues and Expenditures (Actual) . . 79

4. Merchandise Exports by Major Commodity Groups . . 82

5. Industrial Licenses and Operating Factories . . . 83

6. Nationality Composition ofthe Civilian Labor Force: 1399/1400-1404/05...... 116

7. Import-Export...... 117

8. Development in Education (Males and Females) . . 121

9. Graduates at All Levels of Education (Male and Female) ...... 122

10. Technical Education ...... 124

11. Vocational Training ...... 125

12. Cross-Tabulation of Company Location by Industrial Category ...... 156

13. Year Founded ...... 157

14. Industrial Category ...... 158

15. Ownership Nature ...... 160

16. Receipt of Government Benefits ...... 160

17. Receipt of Low-Cost L a n d ...... 161

18. Receipt of Financial A i d ...... 161

19. Receipt of Low-Cost Capital Finance ...... 162

viii Receipt of Low-Cost Utilities ...... 162

Receipt of Government Protection ...... 163

Opinion on Government Protection ...... 163

Nature of Technology ...... 165

Companies Utilizing Highly Sophisticated Technology ...... 165

Companies Utilizing Sophisticated Machinery . . . 166

Companies Utilizing Average Machinery ...... 167

Industrial Intensiveness ...... 171

Technology Nationality ...... 172

Paid Capital ...... 174

Invested Capital ...... 175

Average Annual Revenue ...... 176

Average Profit ...... 177

Middle East Airlines: Key Facts, 1987 ...... 189

Saudi Cable Company Manpower Distribution by Saudis and Non-Saudis ...... 217

Saudi Cable Company Manpower Distribution by Nationality ...... 220

ix CHAPTER I

THE RESEARCH OBJECTIVES, DESIGN, AND METHODOLOGY

Objectives

This dissertation explores the impact of the interna­ tional transfer of technology on the development of indige­ nous technology in Saudi Arabia since 1970. The essential question investigated is whether a transfer of technology has occurred. If such a transfer has occurred:

1. To what extent did it occur and what sector or sectors of the Saudi economy did it most affect?

2. Did this transfer induce other forms of indigenous technologies?

3. How much impact, if any, did the transferred tech­ nology have on the development of indigenous human resources?

4. What was the impact of this transfer, if any, on the social and political institutions in Saudi Arabia?

The general conclusion of this study is that a broad and systematic transfer of technology has not occurred in accordance with the definition offered in this research (see

Chapter 7, Analysis of Sample Survey Data). After reaching this conclusion, the study then attempted to determine why this transfer has not happened. Two case studies are

1 2 utilized to further investigate this problem. Finally, the study seeks ought to identify the conditions necessary for a transfer of technology to take place (see Chapter 10, Recom­ mendations ).

This study examines two major and separable hypotheses: (1) that international transfer of technology will result in the development of indigenous technology in developing countries; and (2) that the development of an appropriate indigenous technology is dependent upon the development of indigenous human resources. The first hypothesis was found to be partially incorrect, with its success depending mainly on the willingness and persistence of the receiver of the technology in the developing country to pay the right price (see Chapter 7) and commit the right efforts and resources as well as being able to take some risks. The results of the two case studies suggest that the second hypothesis is correct (see Chapters 8 and 9). Thus, the presupposition implicit in this work is that human resource development is the first and most essential element in the process of technological transfer and development.

Hence, successful technological development is dependent both on transfer strategies and cultural predispositions.

The Research Problem

Technology is a human-centered, rather than a machine- centered, activity. In order for a technology to be trans­ ferred and adopted by the indigenous population, it is necessary for the indigenous population to be fully capable of handling, maintaining, and further developing this technology into a more efficient and locally productive activity. Contrary to the suggestion found in some of the

literature on development and technology transfer, the pri­ mary problem in the development of Third World countries is not simply the lack of capital investment. Lack of capital investment often may be a stumbling block in the development process in many Third World countries; however, the Western practice of utilizing capital-intensive technology, which underpins the presumed supremacy of large-scale capital investment, should not be the single criterion for achieving

industrialization and development.

This analysis is an attempt to prove that development and technology transfer are not matters of the ability to acquire and utilize modern technologies but of the appro­ priateness of the new technologies, the adaptation and smooth transfer of these technologies by, and to, the indigenous population.

Unlike most developing countries, Saudi Arabia is financially rich1 and, therefore, can acquire the most expensive capital intensive and technologically advanced

10ften surplus wealth is used by developing nations to diversify and to develop other technologies and industries. However, in spite of the sudden presence of surplus wealth in Saudi Arabia, this strategy is not applicable since sur­ plus wealth was not a product of a domestic industry or a genuine industrial base. 4

industries. In that sense Saudi Arabia can be described as

a country with unique problems. The uniqueness of the prob­

lems can be attributed to demographical, historical, envi­

ronmental, and economical factors. First, prior to 1950 the

Saudi population was mostly nomadic and lacked literacy and

vocational education (see Chapter 3). By Western standards

Saudi Arabian society can be described as a traditional

society that lacks the needed social mobility, presumed to

be an essential part of the industrialization process.

Second, Saudi Arabia is a country with a single-sector econ­

omy. The primary source of its wealth is the oil-exporting

industry, a factor that in this case discouraged the devel­

opment of diversified indigenous technologies. Third, the

oil-producing and -exporting technologies in Saudi Arabia

are mostly operated by foreigners who were not Arabic

speakers. This language barrier makes it difficult for

knowledge and skills to be transferred to indigenous

workers.

Clearly, these factors demonstrate that there are many

problems related to the development process in Saudi Arabia.

However, it is the contention of this research that the

solutions to these problems cannot be made through massive

spending and a short five-year planning period. These prob­

lems should be approached with long-term planning objectives that take into account the holistic needs of Saudi Arabia, 5

and specifically address the need to develop human resources

first.

Research Design and Data Collection

A general survey of the industrial and nonindustrial sectors of the Kingdom of Saudi Arabia was conducted, using primary and secondary sources such as interviews, question­ naires, and publications of the Ministry of Commerce,

Chamber of Commerce, Ministry of Industry, Ministry of Plan­ ning, Ministry of Finance, and other institutions. The purpose of this survey was to identify a representative and viable sector of the Saudi economy from which a data sample was collected (see Chapter 7, Analysis of Sample Survey

Data).

As the research reached this stage, it became evident that a case-study approach to the issues of technology transfer and its impact on the development of indigenous technology in Saudi Arabia is a must in order to arrive at conclusive results. Thus preliminary research was conducted utilizing local and international books and publications as well as interviews and surveys in order to identify an appropriate case study. Two case studies in technology transfer were chosen, the first from the private sector and the second from the semigovernment sector.2 It was also

2The term semigovernment is used in this research to represent those entities that were founded by the government as commercial enterprises, but were operated by an appointed board of directors from both the government and the private 6 decided that the data collected from each of these case studies must be analyzed and compared in order to identify which of these sectors provides the best environment for international technology to be transferred and an indigenous technology to develop. In this respect it was decided that the comparison will evaluate the capabilities of each sector and measure its capability and interest against the success and failure of the transfer process. Among the many impor­ tant aspects of the case study given special attention in the evaluation phase were management, labor, training pro­ gram, machinery, research and development, marketing, and production quality and process.

The process of identifying the case study from the public sector was lengthy and difficult, as most of the government-owned enterprises involved in technology transfer

(such as SABIC companies) were considered by many of their officials to be top secret. More than a security clearance and more than one approval from a number of top officials was needed, but no signed permission to grant interviews or access to primary data was granted. Although a number of these officials were approached, none came through. Saudi

Arabian Airlines, which is a 100 percent owned and operated public enterprise, was the only one that responded sector. In some cases those entities are 51 percent owned by the government and the remaining shares are sold to the public on a limited free-market basis; for example, they are not allowed to buy and sell their stock in the exchange market. positively, thus it was chosen. Saudi Arabian Airlines is an independent government agency, run partly by government employees and partly by a nongovernment board of directors.

Most of the nongovernment board members are prominent Saudi businessmen.

Saudi Arabian Airlines officials showed a great level of understanding and positive contribution to the nature and objectives of this research. After an initial interview with its public relations officials, an escort was assigned to meet this researcher and set up a visiting program. The visitation program was designed to introduce me to officials of most of the airline's important divisions, particularly those who are directly involved in technology transfer efforts. After a few days of introductory visits and orientation in the designated departments, I was allowed to proceed with my research and interviews on my own.

Choosing a case study from the private sector was also difficult and lengthy. In order to ensure the integrity of the research, a survey questionnaire was developed in order to gather information about industrialization and develop­ ment in the private sector and also to identify a represen­ tative case study from the private sector. As a result of this survey, Saudi Cable Company, a leading cable manufac­ turer in the Middle East and the tenth largest cable manufacturer in the world, was chosen because of its experi­ ence with technology transfer and quest for indigenization 8

of its staff. Saudi Cable Company was established, as any

typical case study of technology transfer, as a joint

venture between a group of private Saudi businessmen, led by

a major Saudi company called Xenel Industries, with 60 per­

cent share, and an American cable manufacturer called

ANACONDA, taking the remaining 40 percent share.

The second unit of analysis was the local individual working on various levels within the organizational struc­

ture of each of these case studies. An examination was made

of the individual's level of participation in the decision­ making process, the design and planning of the company's activities, and other essential roles. The two units of

analysis described here (the dependent variable) enabled me to determine if an indigenous technology had evolved in

Saudi Arabia, and what role the transfer of technology had played in either encouraging or discouraging its evolution.

During the examination and analysis of the research data, quantitative and qualitative data analysis techniques were utilized, depending on the nature of the activity represented by the data. Open-ended and predetermined

interview techniques were utilized at various stages of the study to investigate the opinions and views of the partici­ pants in technology transfer. A thorough review and exam­ ination of each case study's literature, training manuals, and human resource development policies was also conducted.

Thus, an insider evaluation of the effectiveness of the process and the level of adaptation of the indigenous popu­ lation to the transferred technology was obtained.

Limitations and Research Methodology

This study is limited to the private and semigovern­ ment industrial sectors of the Saudi economy. Since there was no officially stated Saudi policy, with clearly defined parameters, for the development of indigenous technologies through the transfer of technology by foreign firms or otherwise, this study attempted to draw one from the various official Saudi development plans (see Chapter 4). An evaluation research methodology is utilized to conduct most of the research analysis. However, other research meth­ odologies also are utilized when appropriate to the analy­ sis. The rationale for utilizing the evaluation method is that it is the most suitable and widely used research method in development studies; its purpose is to examine cause and effect relationships between the development program and the intended results.

Evaluation research is an empirically oriented method used to assess the impact of social action programs by gathering evidence and assigning and analyzing values. In other words, evaluation research is concerned with the full range of operational procedures involved in the systematic empirical examination of hypotheses regarding the impact of social action programs.3 The main focus of evaluation research is the examination of the impact hypotheses.

Impact hypotheses suggest that there is a relationship between the social action program, or some aspect of it, and a measure or indicator of some behavior or condition.4 In this setting the independent variable (it may be the multi­ national firm that provides and builds the transferred tech­ nology or the program that was designed to achieve such transfer) may be the entire social action program or any aspect of it, such as the program strategy.3 The dependent

(impact) variable (which may be the development of indige­ nous technology or part of it) may be an indicator of goal achievement, or a corollary result of it. However, a com­ prehensive evaluation research will attempt to investigate several independent and dependent variables; that is the method used in this study.

Definition of Terms

The issue of the relationship between the interna­ tional transfer of technology and development has received the attention of a large number of scholars and practi­ tioners from a multiplicity of backgrounds and disciplines, with varying professional agendas. The result has been the

3Francis W. Hoole, Evaluation Research and Development Activities. Sage Library of Social Research Series in Social Research, vol. 68 (Beverly Hills, CA: Sage, 1978), 29.

4Ibid., 20. 3Ibid., 30. 11 introduction of new terms into the literature, as well as the inappropriate use of old terms, particularly as applied to Third World development efforts. Given this environment of linguistic uncertainty, it is necessary to begin with a definition of major key words as they will be used in this research. Although these definitions may sound like many of the popular offerings throughout the literature, it will become clear that there are major differences in the concepts used here.

Technology. The term "technology" is often identified with the industrial hardware part of the production process

(knowledge of machines). However this researcher believes that technology is better defined as the collective knowl­ edge (know-how) and efforts (entrepreneurship) of a given group of people or a firm that enables them to mobilize and utilize their available resources (human, natural, finan­ cial, and machinery) in order to enhance their productivity and to achieve economic growth, development, and well-being.

Technology also can be described as the needed skills, knowledge, and procedures for making, using, and doing useful things. Technology also lends itself to the specific aspects of economic processes, which include the methods used in marketed and nonmarketed activities of the produc­ tion process. Technology provides the appropriate guide­ lines for the specifications of that production, including techniques for design, research and development, managerial 12 administration, and services. Finally, technology can best be described as the perfect harmony that connects the vari­ ous phases of the production process.®

Small-scale technology. The term "small-scale tech­ nology" (or small-scale enterprise) refers to a form of technology that is distinguished by the comparatively limited scale of its resources and activities. Small-scale technology is a relatively limited, local enterprise that engages in limited or specific business or economic activities in the marketplace. Primary characteristics of this technology are its ability to emphasize local resource efficiency, limited environmental impact, potential for com­ munity control, and local labor, rather than the capital intensiveness inherent in large-scale technology. Small- scale technology has the potential to allow the workers to use the technology in order to closely monitor production and quality control and to involve themselves in management and development efforts. The normative position behind this approach to industrial development is to ensure greater interaction between the human and machine elements of the technology, and to ensure the complete adaptation of the technology by the indigenous population. The absolute size of the work force and the level of production output are not the most important factors in the nature of this enterprise.

®John V. Granger, Technology and International Rela­ tions (San Francisco: W. H. Freeman, 1979), 10. 13

The important element is the utilization of technology

(enterprises of less complex machinery) in the production

process in order to facilitate the ability of the workers to

operate, maintain and further develop this technology.

Although the specification of the size and nature of

the small-scale technology to be used is important, it is

impossible to define the specific parameters of the term.

Inherent is the need to consider the characteristics of the

country, i.e., capitals, type of skilled labor available,

level of technology, level of interaction between workers

and machines, etc. In the case of Saudi Arabia, the Minis­ try of Industry and Electricity has defined small-scale technology to be a technology in which the capital cost of the technology utilized in the process does not exceed one million Saudi riyals (approximately $265,000 US). For a country like Saudi Arabia, this definition should be expanded to include the relatively high cost of technology

(generally imported from the West); production capacity and

share of the market; and the ability of local workers to adapt, operate, and maintain the technology. A sector policy paper published in by the World Bank in February 1978 reported similar difficulties in arriving at a standard definition:

(Small-Scale Enterprises (SSEs)] comprise a wide variety of undertakings. They can be categorized in diverse ways depending on a country's pattern and stage of development, policy, aims, and administrative setup. The Georgia Institute of Technology has found at least 50 different definitions used in 75 countries. 14

Definitions may relate to the capital invested (with maximum ranging from about $25,000 to $2 million) or employment (maximum from 15 to 500) or both, or to other criteria. Some countries have no official definition of SSE; others use two or more for different purposes.7

One major advantage of small-scale technology is that because of its limited size it could flourish in rural and urban areas alike, without forced migration of labor or unemployment. Observers such as the British economist E. F.

Schumacher noted that when an advanced, large-scale, capital-intensive technology is introduced into developing nations, it often creates as many social and economic prob­ lems as it solves. What is needed, Schumacher suggests, is an intermediate technology that is far more productive than traditional methods, but is still more labor-intensive than the sophisticated, large-scale technologies of the indus­ trial world.®

Large-scale technology. The term "large-scale tech­ nology" refers to the kind of technology developed in the

West over the last three hundred years. This type of tech­ nology evolved through continuous efforts, trial and error, heavy expenditures in research and development, and urbani­ zation. This type of technology is a highly mechanized, and as of late, computerized, enterprise, which is very dif­ ficult for a newly developing country to adapt and maintain.

7World Bank, Employment and Development of Small Enterprises (Washington, DC: World Bank, 1978), 18-19.

8E. F. Schumacher, Small Is Beautiful: Economics As If People Mattered (New York: Harper & Row, 1973), 10-25. For a newly developing country this type of technology may increase unemployment and cause a displacement of the rural labor force through massive migration to urban centers.

This unemployment and displacement occurs when rural labor is enticed by the promise of secure jobs in the industrial sector and attracted to the life style of the city. Indus­ trial opportunities become limited by the supply and demand nature of large-scale ente -prises and market behavior, and consequently cannot absorb the influx of workers. As a result, urban migration complicates the already abundant problems of cities. The result is often the creation of urban ghettos.9

The introduction of imported large-scale technology into a newly developing country may cause other problems.

Because of its sophistication and Western design, it increases demand for foreign expertise and labor. Among other things that these foreign laborers bring with them is their social and cultural values, which may be inconsistent with those of the host country. Such inconsistency may have an adverse impact on the local cultural and social values, and may disrupt social stability and increase demand on government institutions, thereby jeopardizing the stability of the state. This kind of technology requires a highly

9Krishna Kumar, "Social and Cultural Impact of Trans­ national Enterprises: An Overview," chap. in Transnational Enterprises: Their Impact on the Third World Societies and Cultures (Boulder, CO: Westview Press, 1980), 5-6. 16

developed infrastructure that may encompass scientific research facilities, large supply and demand markets, marketing research, and the existence of training facilities to provide a continuing supply of skilled labor and other human resources. Hugh financial resources are required to support such activities.

Appropriate technology. The term "appropriate tech­ nology" refers to technology designed with the capabilities of the indigenous resources in mind. It is a technology that can produce the same quality product at a competitive cost by using a labor-intensive manufacturing process, com­ pared with that of large-scale industry, which uses a capital-intensive manufacturing process. Charles Weiss, a

World Bank specialist on science and technology, has defined appropriate technology as a technology that is smaller in scale, more labor-intensive, more subject to local mastery, repair, control, and more in ecological and cultural harmony with its surroundings than the technology that would likely be used in an analogous situation in the North.10 He recog­ nized that obstacles to the development and use of such technology are as much social and political as technologi­ cal.11 The important point to the concept of "appropriate technology" is that it is technology suitable to the

1£JCharles Weiss Jr., Guiding Technological Change (Washington, DC: World Bank, 1981), 1-6.

i:LIbid. 17 conditions of the environment. For example, small-scale technology should be used if appropriate to the needs of a country or industry. In certain cases, large-scale technol­ ogy may be appropriate.

Technology transfer. Technology transfer is the process by which machinery, know-how, and supporting organi­ zational and institutional arrangements are imported and are adapted and utilized locally. Successful technology trans­ fer is dependent heavily upon available human resources.

The second most important element in this process are the support institutions, such as the scientific research cen­ ters and laboratories and other complex organizations that are required for successful adaptation, operation, and development. CHAPTER II

REVIEW OF THE LITERATURE

The purpose of this literature review is to identify

the current and historical concepts that deal with the subject of the international transfer of technology and its

impact on the development of indigenous technology, and to examine the major debates that have taken place between scholars and practitioners active in the disciplines con­ cerned with these questions.

Literature concerning the transfer of technology to

Saudi Arabia, or the development of indigenous technology in

Saudi Arabia, is virtually nonexistent. In the broader con­ text of Middle Eastern affairs, several works have focused on development issues concerning questions such as indus­ trialization, trade, and political development, but the lit­ erature concerning the specific question under study is scarce.1

^-This research identified only one publication, a three-volume proceedings of a conference on technology and development in Saudi Arabia (Kingdom of Saudi Arabia, Minis­ try of Planning, National Center for Science and Technology, Proceedings of a Conference on Technology and Development in the Kingdom [Riyadh: National Center for Science and Tech­ nology, 1984]). The publication consists of speeches and papers that are mainly descriptive and treated the issue in a journalistic fashion that praised the achievements of Saudi Arabia in using modern technology in its development

18 By and large, research on Middle East economies and technological development has been the by-product of insti­ tutional reports or conference proceedings commissioned by the United Nations, the World Bank, the Organization of

American States, or by private research centers that are sponsored by US multinational companies. The focus of most of these efforts has been on questions that deal with issues such as the role of science and technology in development, technology transfer and its impact on the recipient coun­ try's economic and cultural values, appropriate technology, and the role of the multinational corporations (MNCs) in technology transfer and the regulation of this transfer. It is also important to mention that most of the literature published has taken the form of articles in scientific jour­ nals or as part of edited books, papers, or reports and case studies. Beyond these very limited works focusing on the

Middle East it is necessary to move to the more general lit­ eratures grounded in the fields of international and eco­ nomic development to find works that are concerned with issues germane to this research.

The 16th-century industrial revolution is one of humankind's major contributions to the continuous and efforts. One paper in volume 1 was an exception to this rule. The paper was presented by Dr. Mohamed Safer, from King Saud University, and mainly dealt with the issue of how best to utilize education in preparing Saudi youth to become technologically inclined and thus able to take active part in the technology transfer process. 20 evolutionary process of modernization and development. How­ ever, with the interjection of capitalism, technology became an "end" product specifically for the large, rich companies, rather than a "means" to achieve economic growth and pros­ perity for humankind in general. With the evolution of the nation state, the creation, utilization, and implementation of technology became an extension of the state's political, economic, and social power.

With the rise of the independence movements in the

Third World, the acquisition, utilization, and manipulation of technology on behalf of the industrialized world became a major grievance and point of resentment of Third World coun­ tries to their former colonizers as they faced mounting problems of economic growth, uneven balance of payments, slow-paced modernization and development, and depletion of natural resources by multinational corporations. Third

World countries have become dissatisfied with the current world economic order. Today, more than ever before, they feel the need to acquire and utilize technologies to modernize their economies to break the cycle of poverty and backwardness, and to achieve a reasonable level of self- reliance and technological independence.

Following the end of World War II, the term "transfer of technology" became a buzzword throughout the developing world and was equated with the notions of development and modernization. The 1947 Annual Report of the UN Secretary General on the work of the organization emphasized that development is one of the UN's major international concerns.

The report also acknowledged the importance of, and the responsibility of, member states' extending to each other every possible form of technical assistance.2 Thus the UN became both a stage and a vehicle for the advocation and implementation of technical assistance to needy member coun­ tries. During the 2nd session of the UN Conference on Trade and Development, a group of the developing countries identi­ fied the importance of trade, finance, and technology as the major pillars for development.3

The UN's interest in the issue of technology transfer, as reflected in its activity, emphasized the relationship between the transfer of technology and a host of development issues. UN activities since 1948 covered a wide range of programs and projects aimed at providing and developing technical skills, technical resources, facilities, and ser­ vices. As the number of Third World countries increased, the United Nations' concern with technology transfer went off in different directions through several different policy positions, such as industrialization, agricultural develop­ ment, infrastructural development, and appropriate

2United Nations, General Assembly, Annual Report on the Work of the Organization, 1947, 24.

3United Nations, UNCTAD, Proceedings of the United Nations Conference on Trade and Development, Second Session, New Delhi, 1 February-29 March, 1968, vol. 1, Reports and Annexes, 1968. technology. The UN's efforts also dealt with the issue of rules of conduct to regulate fair technology transfer policies and agreements, to ensure that the transferred technology is appropriate to the particular needs and capa­ bilities of the developing countries, as well as the lessen­ ing of its impact on cultural values and traditions.

John Agnew suggests that most of the theories of development contain either explicit or implicit positions on the role of technology in development.4 Beginning in 1950, a host of theoretical works dealing with various issues on development began to appear. The vast majority of these works focused on issues ranging from sociological theories of development, cultural and psychological aspects of development, stages of growth, and evolutionary universals to structural-functional analysis of development. Among the major scholars who con­ tributed to these areas were Marion Levy, Walt Rostow, James

Coleman, Gabriel Almond, G. Bingham Powell, and Talcott

Parsons.5

4John A. Agnew, "Technology Transfer and Theories of Development: Conceptual Issues in the South Asian Context," in Politics, Technology and Bureaucracy in South Asia, ed. Yogendra K. Malik Leiden, The Netherlands: K. J. Brill, 1983), 16-31.

sMarion J. Levy, Modernization and the Structure of Society (Princeton, NJ: Princeton University Press, 1966); Walt W. Rostow, Stages of Economic Growth (Cambridge, England: Cambridge University Press, 1960); Gabriel Almond and James Coleman, eds., The Politics of the Developing Areas (Princeton, NJ: Princeton University Press, 1960); Gabriel Almond and G. Bingham Powell, Comparative Politics: A Development Approach (Boston: Little, Brown, 1966); Tal­ cott Parsons, "Evolutionary Universals in Society," in 23

As the study of international relations became a major

theme among the scholarly community, the development litera­

ture became more diversified and touched on other issues,

including works on westernization of underdeveloped coun­

tries, dependency, culture, communications, etc. Con­

sequently, the process of technology transfer was viewed

from more than one angle. One view was that technology

plays a major role in helping developing countries to prog­

ress and to achieve economic growth and prosperity. Tech­ nology was also viewed as a positive element in the develop­ ment and utilization of the developing countries7 national

and human resources.

Other authors took the opposite view on the issue of

the impact of technology upon developing countries. Most of these views came from the dependencia movement involving

Latin American writers who introduced the term "development of underdevelopment.1,6 Their view stems from the belief

that the early methods of transforming technology through the MNCs from the developed capitalist world to the develop­

ing world strengthens the ties, and control of wealth between the periphery elites (developing world) with that of

Sociological Theory and Modern Society, ed. Talcott Parsons (New York: Free Press, 1967), 490-520.

6James Caporaso, "Dependence and Dependency in the Global System," International Organization 32 (Winter 1979): 1-12. 24 the center.-7 Thus, the developing countries' economy will be incorporated with that of the developed capitalist econ­ omy. Such incorporation will continue the state of colonial ties under a new cover that is based on economic dependency that will continue to weaken the social and political inde­ pendence of developing countries.®

Other theoretical views on development identify the impact of technological development on the people, socie­ ties, and culture. They were the first to point out that technological development should not be viewed only in terms of its impact on economic factors, but also in terms of its impact on human values and cultural traits.

The UN's 1950 resolution, calling for intensification of scientific research to promote economic and social prog­ ress of mankind, was the first official UN declaration link­ ing science to technology and identifying them as essential elements for development and progress.9 This view was later propagated through the various publications, conferences and

^Immanuel Wallerstein, Modern World System; Capitalist Agriculture and the Origin of the World Economy in the Six­ teenth Century (New York: Academic Press, 1974).

®James Caporaso, "Dependency Theory: Continuities and Discontinuities in Development Studies," International Orga­ nization 34 (Autumn 1980): 605-8.

9United Nations, General Assembly, Resolution 402(4): Development of Arid Land 20 (November 1950), 312th Plenary. 25 symposia prepared or sponsored by UNESCO.10

The UN's efforts to promote science and technology as a vehicle for development in the developing world continued to be the prime mover and central issue on the UN agenda.

In 1963 the UN called for another major conference dedicated to the role of science and technology for the development of less-developed countries. The conference's main focus was on the importance of science and technology for mankind's economic and social welfare.11 The conference also empha­ sized the importance of science and technology for the development of the developing countries, describing it as a prerequisite for development.12 This view is also expressed in the writing of Amir Jamal (former Minister of Communica­ tion and Transportation in Tanzania), who states that

"today's development is hardly possible without technol­ ogy."13 A host of scholars and practitioners share these

10"Science and Technology for Development," Science Policy Studies and Development (UNESCO, Paris) 47 (1981): 24.

1;LUnited Nations, General Assembly, Report of the Economic and Social Council: 4 August, 1982-Auqust, 1963, Office Records of the General Assembly (XVIII), Supplement No. 3, Section I, Chapter VII, 296.

12,,Pugwash Conference on Science and World Affairs: Draft Code Of Conduct on Transfer of Technology," World Development 2 (April/May 1974): 77-82.

13Amir Jamal, "The Consequences of Technological Dependence in the Least-Developed Countries, in Mobilizing Technology for World Development, ed. Jairam Ramesh and Charles Weiss, Jr. (New York: Praeger, 1979), 58-65. 26 same views. Keith Griffin describes science and technology as the motor that drives forward the development process.1'1

Others, such as Ramesh and Weiss, and Robert Cohen also express similar opinions.15

As the number of newly independent countries joining the UN increased, UN activities to promote the use of science and technology in development expanded. In 1979 a conference on science and technology was held in Vienna,

Austria.16 The Vienna conference's agenda was designed to introduce and encourage members to utilize different ways and means of harnessing science and technology in develop­ ment.1-7 The net result of this conference was the formula­ tion in 1980 of the UN Intergovernmental Committee on

Science and Technology for Development.18 The new commit­ tee, which is composed of all UN member states, identified eight major programs as elements of an operational plan to be undertaken. An advisory board of 28 experts was to

1'1Keith Griffin, "The International Transmission of Inequality," World Development 2 (March 1974): 3-15.

lsCharles Weiss, Jr., and Jairam Ramesh, "A New Approach to the North-South Technological Agenda," in Mobilizing Technology for World Development, ed. Jairam Ramesh and Charles Weiss, Jr. (New York: Praeger, 1979), 8- 1 2 .

16Hiroko Morita-Lou, ed., Science and Technology Indicators For Development (Boulder, CO: Westview, 1985), xi.

1-7 Ibid. lsIbid. 27

refine and implement these programs.1® The programs

identified were policies and plans, infrastructures and

choice, acquisition and transfer of technology, human

resources, financing, information systems, research and

development linkage to production systems, and cooperation

among member countries.20

During the same era, other UN agencies put on their

agenda the issue of development and technology transfer.

Among the most active agencies was the UN Conference on

Trade and Development (UNCTAD). UNCTAD was founded as a result of an earlier conference that first met in Geneva between March 23 and June 16, 1964.21 UNCTAD identified the link between trade and development in an effort to encourage the flow (through trade) of technology and other forms of technical assistance (in the form of foreign aid) for devel­ opment from the developed to the developing countries.22

The issue of technology transfer for development remained on the priority list of all UNCTAD conference meetings. The

UNCTAD conferences recognized the critical role that devel­ oped countries can play in facilitating a proper technology transfer process. The role of the developed countries was

19Ibid., xii. 2°Ibid.

21Robert E. Driscoll and Harvey W. Wallender II, eds., Technology Transfer and Development: An Historical and Geographic Perspective (New York: Fund for Multinational Management Education and the Council of the Americas, 1974), 8 .

22Ibid., 8-11. 28 seen as facilitating the transfer of patented and unpatented licenses, know-how on reasonable terms, and no restrictions on the use of transferred technology.23 The conference also recognized the need of other international bodies to estab­ lish general legislation covering the transfer of technol­ ogy. Thus the conference recommended that (1) the UN should facilitate the exchange of information on problems concerned with technology transfer; and (2) the UN's specialized agen­ cies should help in setting up transfer centers, drawing model transfer agreements, and helping the developing coun­ tries to acquire the latest technology.24

As the literature and activities of the UN and other international organizations became more articulated on the issue of the need of technology transfer as a vehicle for the development of the developing countries, the issues of the impact of transferred technology on cultural and human values became a central issue of debate among scholars and international organizations. The debate also focused on the appropriateness of the technology transferred to the needs and capabilities of the developing countries. At the heart of these concerns are the issues of cost-effective analysis, scientific and technological considerations, environmental concerns, depletion of natural resources, and the develop­ ment of human resources and cultural and human values. Par­ ticipants also debated the issue of the role of MNCs as a

23Ibid., 17-26. 24Ibid. 29 major cause of introducing inappropriate technologies to developing countries. However, most of the literature that deals with these issues comes from scholars from both the developed and developing worlds, following in the steps of those from Latin America and other international development scholars.

As far as the appropriate technology issue is con­ cerned, the critics, like a World Bank paper titled Appro­ priate Technology and World Bank Assistance to the Poor, focus mainly on the issues of objectives and circumstances under which the technology is needed. The World Bank paper also suggested that the level of appropriateness or inappro­ priateness of the technology is merely a matter of socio­ economic reality that should be viewed within the context of a particular project.25 The paper, on the other hand, sug­ gested that the systematic adoption of appropriate, rather than advanced, industrial technology in the modern manufac­ turing sector of less-developed countries could increase output and employment by substantial amounts. The paper also suggested that what constitutes an appropriate technol­ ogy is not mainly the acquisition of machinery, but also the acquisition of the knowledge and skills needed to success­ fully implement technological reforms.26 In other words,

2SWorld Bank, Appropriate Technology and World Bank Assistance to the Poor (Washington, DC: World Bank, 1979), 9.

26Ibid., 40. 30

the paper suggested that there are no set criteria to

identify what is an appropriate or inappropriate technology

in general, but what constitutes an appropriate technology

for a particular developing country may be different from

another, based on the availabilities of skills and knowl­

edge .

Other World Bank scholars, such as Charles Weiss,

Mario Kamenetzky, and Jairam Ramesh, also identified with this idea in their writing, which focuses on the issues of

local capacities to absorb and master the transferred tech­ nology. Charles Weiss suggests that what seemed to be tech­

nological obstacles to development in some developing coun­ tries were in fact policy failures.27 What Weiss is in fact suggesting is that developing countries must first initiate

an integrated package of policy and institutional changes in order to achieve the desired developmental and technological advances.28

Weiss also argues that policy makers in developing countries must shift their emphasis away from the develop­ ment of technological capacity that is found in the indus­ trialized countries and more toward the development of tech­ nology and technological capacity appropriate for the needs of small farmers, small entrepreneurs, and the urban and

27Charles Weiss, "Mobilizing Technology for Developing Countries," Science 203 (16 March 1979): 1.

2sIbid. 31 rural poor.29 Sanjaya Lall agrees with Weiss's views and asserts that small countries must not try to emulate the patterns of heavy industrialization that are used by the developed countries.30 Lall also suggests that the enhance­ ment of indigenous capability requires protection and enhancement of local learning by subsidizing R&D activities, protecting the market from foreign imports, and restricting foreign technological competition through foreign companies in order to prevent dependence on imported technologies.

The author pointed out that this kind of protection may be costly, but it is worth it. However, he also pointed out that this policy should exempt from protection some forms of technology that cannot be mastered locally. Thus the exemp­ tion of this kind of technology will enable local industries to keep pace with its development and consequently the development of technology at large. The author cited the early Japanese approach to developing technological capabil­ ities as a good example of such policies.31

Kim Hyung-Ki also shares the same views, proposing that developing countries should invest in the development of the needed scientific and technological manpower along

29ibid., 5.

3°Sanjaya Lall, "Indian Technology Exports and Tech­ nological Development," Annals of the American Academy of Political and Social Science 458 (November 1981): 161.

33-Ibid., 161-2. 32 with infrastructure.32 In the same article, he also sug­ gested that some developing countries have misdirected their resources to develop elements of science and technology with no value other than their prestige.33 Weiss, Kamenetzky, and Ramesh also share these views.34 They content that technology transfer policies must consider a broad analysis of the country's overall developmental strategy and economic situation. They describe this approach as requiring a shift of focus from short-term economic and financial planning to more in-depth exploration of long-term structural problem­ solving planning.

On the issue of the impact of technology transfer on cultural, social, and human values, Jacques Ellul notes that technology has become the central function in modern society. He also argues that technology is a self-enclosed, totalitarian system in which true human values are lost and technology becomes an autonomous force guided by internal values that bear no necessary relations to the needs of humanity. Ellul indicated that technology has become a dom­ inant force in the Western system, where means have become ends, and every aspect of the society, the individual, the

32Kim Hyung-Ki, Building Scientific and Technological Infrastructure in Developing Countries (Washington, DC: World Bank, 1984), 1.

33Ibid., 2.

34Charles Weiss, Mario Kamenetzky, and Jairam Ramesh, "Technological Capacity: An Element of Development Strategy," Interciencia 5 (March 1980): 98-99. 33

family, and the state have become subservient to the

system.35

Denis Goulet asserts that there are four basic values

embedded in contemporary western technology: rationality,

efficiency, problem solving, and the exaggerated Promethean view of the universe.35 He also comments that the global

diffusion of modern technology tends to standardize the

"existing rationality" of all societies around specifically

Western notions of efficiency, rationality, and problem

solving.3-7 Thus, when Western technology is transferred to

a traditional society, a challenge to that society's native values is presented. These challenges take the form of

doing things differently, such as planting crops, educating children, or practicing hygiene. Therefore, Goulet describes technology as a two-edged sword that acts as a vehicle to bring new values and to destroy traditional ones.

Goulet argues that technology is not static but is a dynamic force, constantly evaluating and interacting with broader

forces of social change.35

Another author who shares these views is Emmanuel G.

Mesthene. Mesthene suggests that technology has two ways to

35Jacques Ellul, The Technological Society (New York: Knopf, 1965), 420-34.

35Denis Goulet, The Uncertain Promise: Value Conflicts in Technology Transfer (Washington, DC: Overseas Development Council, 1977), 16-20.

3VIbid., 16. 35Ibid., 30. 34 induce social change: it creates new opportunities and also generates new problems for individuals and societies. How­ ever, Mesthene observed that by making the right choice in technology transfer, we can reduce the danger of such unwanted change in traditional societies.3®

Bichara Khader is yet another scholar who shares these views. He contends that science and technology must be con­ sidered as a social process because they emerge from social needs. Thus, they cannot be isolated from the uses to which they are put.40 Therefore, we should view technology trans­ fer with social and human reference in mind. He also proposes that when technology is transplanted into a social structure that is sufficiently flexible to absorb this tech­ nology, then it becomes dependent on the source of the tech­ nology for the necessary social structure to complete the venture; such a transplantation could cause many social con­ sequences, such as depopulated villages, wild urbanization, growing slums in industrial cities, and other lateral effects.41 The author suggests that the proper planning for technology transfer should be based on need-orientation,

3®Emmanuel G. Mesthene, Technological Change: Its Impact on Man and Society (Cambridge, MA: Harvard University Press, 1970), 228.

4°Bichara Khader, "The Social Impact of the Transfer of Technology to the Arab World," Arab Studies Quarterly 4 (November 1982): 228.

41Ibid., 228-32. endogenousness, self-reliant, ecologically sound, and based

on structural transformations.42

There are other critics who are highly critical of the

negative role that MNCs played during the transfer of most

of the technologies to the developing countries. At the

center of their concerns is the absence of an internation­

ally accepted and enforced system that regulates the flow of

technology from the MNCs to the developing countries. They claim that this unregulated method of technology transfer

created new problems beyond the means of most developing countries. Some of these problems were attributed to the

capital-intensive nature of the technology transferred.

Such transfers are viewed as an instrument for boosting

Western economies and benefiting the MNCs and local elites who usually take on the role of agents for these MNCs. They

also say that most of the types of technologies that MNCs transfer to the developing countries do very little to

create local jobs or to develop local human resources.

Others who share these views argue that most of the technol­

ogy transferred was selected by the MNCs to be adopted only

by a subsidiary enterprise.43 Debra Lynn Miller indicated that of the 650 major MNCs in the world, 638 have their

42Ibid., 232.

43Debra Lynn Miller, "Panacea or Problem? The Pro­ posed International Code of Conduct for Technology Trans­ fer," Journal of International Affairs 33 (Spring/Summer 1979): 43-62. 36 headquarters in North America, Western Europe, or Japan.

She also indicated that most of the Southern firms that

import technology are owned in whole or in part by multina­ tional corporations.44 The Club of Rome, a major critic of the MNCs, summarized these views by reporting that MNCs based in advanced industrial countries dominate the world economic order.4s

During the 1970s, these aspects of the technology transfer debate became known as the North-South debate. As the use of technology is a key factor in industrialization, this debate has become the battle ground for opposing views.

Essentially two distinct schools of thought have evolved.

One is vigorously voiced by the developing world, while the second is voiced by the developed world.

The Southern world view. The Third World's most articulated grievance against the present system of tech­ nological transfer is that it fosters dependence on the developed countries. This criticism stems from the fact that technology is produced, owned, and controlled by

MNCs.46 Third World countries also believe that due to the competitive and commercial nature of MNCs and the absence of any state control, multinationals manage to set their own

44Ibid.

4SJan Tinbergen, Reshaping the International Order: A Report to the Club of Rome (New York: Dutton, 1976), 39.

46Frances Stewart, Technology and Underdevelopment (London: MacMillan, 1978), 116. 37 terms, conditions, and prices and determine the nature of the transferred technologies. They also believe that the oligopolistic domination of the multinationals of the market contributes to the weakening of the position of developing countries in the bargaining process.4-7 Most of the adherents of this school of thought also believe that MNCs, through the establishment of subsidiary companies in the

Third World, continue to control the arts and means of R&D centers, which keeps the technology out of the reach of local resources. Helleiner states that as far as the pres­ ent system of technological development and diffusion is concerned, the principal point is that most technology that is made available to less-developed countries (LDCs) is not so much transferred as sold.4®

Another criticism of the MNCs7 position is that the use of subsidiaries by MNCs as a vehicle to transfer tech­ nology to Third World countries is intended to minimize the cost of its operations by utilizing currently available technologies without getting into the trouble of adaptation and adjustment of these technologies to the needs and

4-7Alejandro Nadal Egea, "Multinational Corporations in the Operation and Ideology of International Transfer of Technology," Studies in Comparative International Develop­ ment 10 (Spring 1975): 11-29, and Stewart, 117.

4SG. K. Helleiner, "International Technological Issues: Southern Needs and Northern Responses," in The New International Economic Order: The North-South Debate, ed. J. N. Bhagwatti (Cambridge, MA: MIT Press, 1978), 296-97. capabilities of the recipient Third World country.4®

Constantine V. Vaitsos also argues that the multinationals' technologies, designed in the industrialized world, are mainly geared to the needs of high-income countries, rather than the Third World countries' basic needs of health, nutrition, and housing requirements.30 Scholars such as

Lall and Streeten add that the multinationals' technologies are inappropriate to the local economics and social needs of the LDC. They attribute this to the fact that the highly sophisticated nature of multinationals' technologies creates an economic dualism whereby their production techniques dis­ courage the local capabilities to innovate appropriate tech­ nologies. 31

The Northern world view. The developed world bases its position on the idea that the MNCs' method of transfer­ ring technology through their subsidiaries is an effective instrument for transferring technologies to Third World countries. This view is articulated by Franklin Root, a major supporter of the role of multinational corporations'

4®Colin Norman, Soft Technologies, Hard Choices, Worldwatch Paper 21 (New York: Worldwatch Institute, 1978); Harry G. Johnson, Technology and Economic Interdependence (New York: St. Martin's, 1976).

5°Constantine V. Vaitsos, "Foreign Investment and Pro­ ductive Knowledge," in Beyond Dependence, ed. Guy F. Erb and Valeriana Kallab (New York: Praeger, 1975), 48-90

3:LSanjaya Lall and Paul Streeten, Foreign Investment, Transnationals and Developing Countries (London: MacMillan, 1977). 39 role in Third World development. Root argues that most

Third World countries lack local management and technical skills as well as infrastructure. They also consider these deficiencies to be major obstacles to the transfer and growth of innovation.52

Other voices, such as James Quinn, argue that since most Third World countries lag behind in their development efforts, a well-managed multinational can make substantial and unique contributions to the host country's growth, and thus can bargain for more favorable and flexible treat­ ment.33 In this same line of thinking, Root (whose work was cited earlier) and Mason both suggest that pending highly innovative management and abundant technical skills, Third

World countries will have to continue relying on the import of technology from advanced countries.34

Behrman and Wallender also believe that multi­ nationals are the best equipped entities to handle technol­ ogy transfer because they own the R&D centers and well organized and tested logistics and training programs. They note that the multinationals possess highly sophisticated

32Franklin R. Root, "The Role of International Busi­ ness in the Diffusion of Technological Innovation," Economic and Business Bulletin 21 (Summer 1968): 17-25.

33James B. Quinn, "Technology Transfer by Multina­ tional Companies," Harvard Business Review 47 (November- December 1969): 147-61.

34Root, 17-25, and Hal R. Mason, "The Multinational Firm and the Cost of Technology Transfer to Developing Coun­ tries," California Management Review 15 (Summer 1973): 5-13. 40 marketing and financial skills, not only to transfer tech­ nology but to install it, operate it, and even adapt it to the changing needs of the recipient countries.ss Mason and

Quinn argue that restrictions and controls (such as import- substitution, foreign exchange, local training, and purchas­ ing requirements) to regulate the transfer of technology by the LDC are generally harmful to these countries' economies and progress. They also predict that these measures will result in higher cost of technology transfer and loss of competitiveness in the export market.ss

S5Jack N. Behrman and H. W. Wallender, Transfer of Manufacturing Technology within Multinational Enterprises (Cambridge, MA: Ballinger, 1977).

seMason and Quinn. CHAPTER III

HISTORICAL AND CONTEMPORARY SAUDI ARABIA

Historical Background

History of the Arabian Peninsula

The purpose of this chapter is (1) to present a clear picture of Saudi Arabia in the past and the present; (2) to provide an explanation of why would a developing country such as Saudi Arabia strove to import the kind of technology that it presently is utilizing; and (3) to present a picture of the historical, demographical, political, economical, geographical, and climatic conditions; the natural resources, past and present; as well as an idea of the country's religious importance. All of these have contrib­ uted to the country's lack of traditional technological capabilities.

Historically, the Arabian Peninsula long has been the stage for controversial and influential events impacting the history of humankind. To too many people, Islam is thought to be the most important event that took place in the

Arabian Peninsula; in fact, most Muslim religious scholars believe that Arabia (in particular Mount Arafat near Mecca) was the site of the descent of Adam and Eve. Ibrahim, believed by Muslims to be God's first messenger, began his

41 42

religious journey from Mecca. The Quran indicates that

Mecca was the site from which God ordered Ibrahim to build

the Kaba. The Quran also says that the Kaba was the first

house on earth built by Ibrahim and his son Ismail to wor­

ship God. Since that time Mecca has become a holy site for

all the people of Arabia and for all Muslims.

For the past three thousand years, Arabia has been

inhabited by Semitic people, who are believed to be the

descendants of Noah's son, Sami. As time passed and their

number increased, they developed a tribal system that scat­

tered around the Arabian peninsula, leading a nomadic and

seminomadic life style. Because of its religious impor­

tance, the Kaba attracted a number of these tribes to settle

around Mecca. Thus Mecca became the first town to be

founded in Arabia. Until A.D. 616, the affairs of the

Arabian peninsula remained of local concern. In that same

year Prophet Muhammad was commanded by his creator to start

a campaign to call people to relinquish worshiping idols and

to adopt Islam. Prophet Muhammad proclaimed that Islam was

a continuation of God's messages, which started with Ibrahim

and ended with Jesus. As a descendant of Ibrahim, Muham­ mad's family was the care-taker of the Kaba. Within seven

years (A.D. 622) Muhammad was able to gain a number of fol­

lowers from Mecca, and later from other parts of Arabia.

With the spread of Islam throughout the Arabian

Peninsula, Arabia was united as one nation under the 43

leadership of Prophet Muhammad. After the death of the

Prophet (A.D. 632), the leadership of the nation went to four

successors chosen by Muhammad before his death. Muhammad's

successors were called the Caliphs. Starting with the second

Khalifah, Muslims were sent outside the Arabian Peninsula to

spread the new message in the name of God. Only forty years

later, with the death of the fourth Khalifa, this era of

expansionism was followed by the creation of the first

Islamic dynasty (the Omayyad dynasty, A.D. 672-750) in

Damascus, Syria, outside the Arabian Peninsula. With the

establishment of the Abbasid dynasty (A.D. 750-908), the

second Islamic dynasty in Iraq, science and technical knowl­

edge began to progress through translations of Greek and the

literatures of other ancient civilizations, so that by A.D.

908 Islamic science and industrial achievements reached such

distinct level that their contributions are still present to

this day. Thus the medieval golden age of the Arab/Islamic

civilization occurred outside the Arabian Peninsula.

The decline of the importance of the Arabian

Peninsula, with the exception of the two holy cities of

Mecca and Medina, continued throughout the Abbasid dynasty of Baghdad (A.D. 750-908), the Fatimid dynasty of Egypt

(A.D. 908-1450),x and reached its nadir during the period of

the Ottoman Empire (A.D. 1517-1919). Despite its Islamic

^Bernard Lewis, The Arabs in History (New York: Harper & Row, 1966), 111. 44 character, in which all citizens have equal rights, during the second half of the period of Ottoman domination only

Turks were allowed to assume important political positions.

Thus the Arab citizens of the Empire were alienated. Toward the end of the Ottoman Empire, many Arabs left the cities and returned to their traditional social structure, the tribe. Those who remained in the cities were subjected to harsh treatment by Turkish officials, such as tax collectors and military rulers. Like most other declining empires, the centralization of power and authority in Constantinople and the appointment of Turkish officials to rule over Arab ter­ ritories created a state of colonization and social and political injustice. The worst came toward the very end of the Ottoman Empire period, when the Young Turk movement

(1908) pursued a policy of Turkification of the Empire.2

Development of the Kingdom of Saudi Arabia

The Rise of Al-Saud

The continuous neglect of the rural areas; the prac­ tice of economic, social, and political injustice against

Arab citizens by the Turkish authorities; the religious dis­ pleasure of the local religious and political leaders with the rise of paganism among some of the tribes of Arabia; and the ganglike wars that were launched by some of the more powerful tribes against the weak ones all contributed to the

2Ibid., 174. 45

rise of many independence movements throughout the Arab world.3 In the Arabian Peninsula, the most important move­ ment was the alliance between Wahhabism and the Al-Saud family. The historic alliance of Al-Saud, the ruling family of Saudi Arabia, with the Wahhabi movement dates back to the eighteenth century during the days of the founders of Wah­ habism (Muhammad bin Abd al-Wahhab) and Muhammad bin Saud

(the founder of the Al-Saud dynasty). Muhammad bin Abd al-

Wahhab, a Muslim philosopher and a native of the Nejdi town

Uyinah, founded his movement as a religious doctrine and sought the purification of Islam as it was established by the Quran and the Hadith (the sayings of the Prophet Muham­ mad) in accordance with the principles set by the legal school of Ahmed bin Hanbil. Ibn Hanbil was the founder of the most conservative of the four orthodox schools of

Islamic law.4

Muhammad bin Saud, the leader of a petty dynasty in a small town in the central part of Nejd called Diryah, accepted Wahhabism as the philosophical foundation for his ruling traditions. By the middle of the eighteenth century, bin Saud and bin Abd al-Wahhab formed a religious and political alliance. Together they were able to mobilize an army from among the dissatisfied and disenchanted bedouin

3Ibid., 162.

4Richard Bayly Winder, Saudi Arabia in the Nineteenth Century (New York: St. Martin's, 1965), 1-15. 46

tribes of Arabia. They called their army the Al-Ikhwan (the brotherhood). As the Al-Ikhwan grew stronger and larger, they expanded their area of struggle and launched a holy war that was able to expel the Turks from the holy cities of

Mecca and Medina. Their movement gained support from other tribesmen, allowing them to reach the gates of Damascus to

Baghdad in the north and Yemen to Hadramaut in the south.5

During the reign of Sultan Muhammad II (1808-1839), under the leadership of Ibrahim Pasha, the son of Muhammad Ali the ruler of Egypt, the Turks were able to regain the holy cities of Mecca and Medina. After seven years of struggle, he was able to force Abdullah bin Saud, then the leader of the Al-Saud dynasty, to surrender his capital, Diryah.

Later, the Al-Saud family was expelled to Kuwait.® In 1902

Abd al-Aziz Al-Saud (1880-1953), the son of the leader of the Al-Saud family in exile, returned to Arabia with a hand­ ful of loyal men to reestablish the Saudi dynasty. Again, with the help of devoted Wahhabis, Abd al-Aziz was able to regain control of the central part of Arabia. The struggle of Al-Saud and the Wahhabis to control the Arabian Peninsula continued until 1927, when King Abd al-Aziz Al-Saud was able to unify the Arabian Peninsula, with the exception of the coastal gulf area, the Yemens, and the Sultanate of Oman.

Thus King Abd al-Aziz continued the tradition of his

5Ibid. 6Ibid. grandfather's adherence to Wahhabism as the philosophical basis of government and legislation.7 Keeping with the spirit of Al-Saud and Al-alshaykh alliances (the descendant of Muhammad bin Abdulwahhab became known as the Al-alshaykh in reference to their grandfather, sheikh Muhammad bin

Abdulwahhab; sheikh in Arabic means religious scholar), the

Al-alshaykh family continued to provide Saudi Arabia with the needed religious guidance and leadership.

The Political System

Four hundred years of Turkish domination and depriva­ tion prevented the evolution of political and social institutions in Saudi Arabia and left the country without continuity and experience. The administration of the King­ dom of Saudi Arabia was centralized and operated from Riyadh by King Abd al-Aziz and a handful of advisers. Due to the large area of Saudi Arabia, and because of the lack of, or in many cases the absence of, any modern form of transporta­ tion or communications, the system of governing took on a new structure. As the reign of Abd al-Aziz in the central area of Nejd became stronger and loyalty to the King became more apparent among the various tribes and other political groups in Saudi Arabia. Amirs (rulers) were appointed and were delegated some form of executive authority from the

7Richard F. Nyrop, ed., Saudi Arabia; A Country Study (Washington, DC: The American University, Area Studies Divi­ sion, 1984), 203. 48

King to rule over the provinces of Hijaz. This western region incorporated the holy cities of Mecca and Medina, the city port of Jeddah, Asir, the southwest part of Saudi

Arabia bordering the Yemens and Oman, and the eastern area, which included the oil-producing regions on the Gulf and the agriculturally rich area of Hasa. Indeed, this strategy was considered to be a very "savvy" move that placed the trust of these authorities in the hands of the traditional local sheikhs (tribal leaders), who became loyal and personal allies of King Abd al-Aziz. Thus the central authority of the government was limited. Local officials of the pro­ vinces were subordinate to the Amir rather than the King.8

Islamic law (shariah) was the primary source of gov­ erning. Thus, unlike other forms of monarchy, Saudi Arabia was founded as neither an absolute monarchy nor a constitu­ tional democracy. The interpretation and application of

Islamic laws and traditions throughout the various bureau­ cratic institutions of Saudi Arabia were implemented by the

Ulama (Islamic scholars). The courts were also run by tra­ ditional religious judges who rendered decisions in accor­ dance with the Quran, Sunna, and precedents.® Religious leaders controlled all of the major institutions such as education and collection of zakat (religious tax), and acted as chief of the Committee for the Enforcement of Goodness

8Ibid., 205. 9Ibid., 192. 49 and the Suppression of Evil (Al amer bel mauruf wa al nahee aen al munker).

Economic Conditions

Prior to the establishment of the Kingdom of Saudi

Arabia, economic conditions were poor. These poor economic conditions can be attributed to the hasty and weak political structure that was instituted by the Turks. The peninsula was divided into three regions, each ruled by autonomous and somewhat hostile rulers. These hostilities were strongly encouraged by the Turks as a systematic technique to destabilize and prevent collective Arab opposition to their rule. This system resulted in great isolation allowing, little or no economic exchange between these regions.10 In fact it was not until the late 1940s and early 1950s that

Saudi Arabia had any paved roads or highways, with the exception of a forty-five-mile road between Jeddah (Saudi

Arabia's largest seaport) and the Holy city of Mecca, and the roads that were built by the oil company to serve its operation in the eastern province.11 Thus the Kingdom of

Saudi Arabia was, by Western standards, one of the world's most underdeveloped and poorest countries.

10H. St. John Philby, Arabia (New York: C. Scribner's & Sons, 1930).

ia-R. Mikesell and H. G. Chenery, Arabian Oil: Amer­ ica's Stake in the Middle East (Chapel Hill: University of North Carolina Press, 1949), 74. 50

Geography and Population

The land size of Saudi Arabia is about 600,000 square miles. Saudi Arabia's population prior to the discovery of oil was estimated to be between 3.2 and 5.7 million.12 Due to its harsh climate and mostly unarable land, prior to the

1950s half of the population lived in the small towns situated around small oases or caravan routes, in the coas­ tal cities of Dammam and Jeddah, the city of Riyadh, and the holy cities of Mecca and Medina.13

The other half of the population lived a nomadic or seminomadic life.14 It has been estimated that about three- fourths of the population led a pastoral or peasant life, engaging in subsistence farming. There are no rivers, and with an average rainfall of less than four inches annually, only 0.2 to 0.3 percent of the total land area can be farmed.15 The peasant population, which represented about

25 percent of the total population, lived and farmed in small villages scattered around small towns and cities.16

12Edmund Y. Asfour, Saudi Arabia: Long-Term Projec­ tions of Supply and Demand for Agricultural Products (Beirut: The American University of Beirut Press, 1965), 17.

13Mikesell and Chenery, 73-74.

14Nyrop, 436.

15Kingdom of Saudi Arabia, Ministry of Planning, Second Development Plan: 1975-1980 (Riyadh: Ministry of Planning, 1975), 119.

16Nyrop, 436. 51

The bedouin population, which comprises another 25 percent of the total population, wandered around the vast and scat­

tered area of Saudi Arabia with their herds looking for

pasture and water.17

These three distinct social structures of Saudi

Arabia's population represent a network of interdependent economic activities. The small towns served as centers providing trade and handicrafts to the peasants and the bedouins, who in turn provided these towns with grain, dates, vegetables and fruits, and livestock.13 Due to the

Haj season (pilgrimmage to Mecca), which lasts for three to four months every year, the major cities, with the exception of Riyadh, the capital, were relatively more prosperous and somewhat economically independent from the rest of Saudi

Arabia's economic system.

Educational System

Education was also a scarce commodity in the Arabian

Peninsula. Due to the neglect of the Turkish authorities, the illiteracy rate was well over 95 percent. Although there were several Islamic teaching institutions that had been in existence from the seventh century, they had little impact on the modernization process as their emphasis was on the teaching of the Quran and religious traditions. In 1925 the first modern non-Islamic school for boys was opened.

17Ibid. 1BPhilby, 20. 52

Two years later the first secondary school for boys was

founded. By 1930 schools had been founded in the major

cities and were able to host about 2,300 students. By 1949,

due to poor economic conditions and the lack of educators,

these schools were able to host no more than 20,000 stu­

dents. The Faculty of Shariah, the first institution for

higher education, was founded in 1949-50.19

Health Care Services

Due to poor economic conditions and the rural nature

of the geography, health care services were scarce and pro­

vided limited services when available. By 1951 there were

sixteen government hospitals. Ten were in the major cities

(three in Mecca, two in Jeddah, two in Riyadh, two in Taif,

and one in Abha). The remaining facilities were scattered

in various parts of the country.20 The bed capacity of

these hospitals was estimated to be about 1,170. In addi­

tion to government hospitals, there were several private

hospitals, the most modern and largest of which was the

Aramco Hospital. The oil company completed this facility in

1968. It employed about 42 doctors (of whom eleven were

American, eleven were Indian, four were Dutch, four were

Italian, and twelve were Palestinian), 142 nurses, and 4

19Nyrop, 120.

2°Karl Saben Twichell, Saudi Arabia: With an Account of the Development of Its Natural Resources (Princeton, NJ: Princeton University Press, 1953), 183. 53

dentists. There were also two private hospitals in Jeddah;

however, no data are available on these facilities.21

Contemporary Saudi Arabia

Political System

The creation of the Kingdom of Saudi Arabia in 1932 by

King Abd al-Aziz Al-Saud was the beginning of a new era in the history of the Arabian Peninsula and the Arab World. In

fact, Saudi Arabia was the first Arab State to be estab­

lished and ruled by Arab rulers since the Ottoman occupation of the Arab World in 1517.

Until the death of King Abd al-Aziz in 1953, the King­ dom of Saudi Arabia's political system was run according to the traditional tribal style and was greatly influenced by the personality of Abd al-Aziz and that of his religious allies. Shortly before his death in 1953, King Abd al-Aziz created the Council of Ministers, which marked the beginning of Saudi Arabia's modern political era.22 This step fur­ thered the process of the delegation of authority that the

King started years before when authority was delegated to the governors of Saudi Arabia's three regions.23

Although the Council of Ministers did not represent complete separation from the King's (who acted as a Prime

Minister) authority, it grew to handle the major day-to-day

21Ibid. 22Nyrop, 206.

23Ibid., 205. 54 executive chores of governing. With the development of

Saudi Arabia by 1975 (seven months after the death of King

Faisal), the Council of Ministers grew in number from 19 to

25. In addition to the King and the Crown Prince, who also acted as the first deputy prime minister, there were three royal advisers who acted as ministers of the state without portfolio, and 20 active ministers, each heading a minis­ try.24

The composition of today's Council of Ministers reflects Saudi Arabia's political growth and development.

In addition to the traditional six royal family ministers and three ministers from the Al-alshaykh family, the Council reflects Saudi Arabia's diversity in terms of education, religious sects (Sunni and Shiite), and geographical loca­ tions.

Beginning in the seventies, the increase in oil revenues was reflected in the government's activities and expansion of its services and structure. New institutions in the form of independent and autonomous agencies were developed to undertake the new responsibilities that occurred during this period. An example of the independent agencies was the Civil Service Board. Its major responsi­ bilities were to review the grade classification, wages and salaries, recruitment and manpower development, and person­ nel evaluation of employees of all ministries, government

24Ibid., 206. 55 organizations, and the independent and autonomous agencies.

In the early 1980s there were about 66 autonomous agencies that operated under various ministries. Most of these autonomous agencies had their own separate budgets and offices, and some of the heads of these autonomous agencies held the rank of minister and were considered as important and influential as the ministers to whom they theoretically reported. Due to the functional responsibilities of some of these autonomous agencies, such as the Saudi Arabian Mone­ tary Agency (SAMA) and the General Petroleum and Mineral

Organization (Petromin), their size and the level of their operations were bigger than their mother organization.23

By 1960 the system of regional amirs was replaced and a new system of local and regional amirs was formalized.

The number of amirs was increased to fourteen. This move reflected the increase of Saudi Arabia's population and its infrastructural development. Although the size and popula­ tion of these amirates varies from one to another, their importance as political entities was of equal weight. The responsibilities and duties of the amirs as representatives of the King and the central government were reduced. This was due in large part to the standardization of the adminis­ tration of these localities through the opening of branches of all ministries in these local areas. However, duties of the new amirs were not reduced in importance. The new

25Ibid., 207. 56 amirs' duties including acting as the liaison between the central government and the local people, commanding local police and national guards, convening a regular Majlis ses­ sions (an old bedouin tradition in which the tribal leader receives his fellow tribesmen to listen to their petitions and to solve their problems) in his house or government headquarters, and supervising the work of the central government agencies and municipal officials within their amirates.2s

By 1970 the office of the grand mufti (the chief reli­ gious scholar, who was a member of the Al-alshaykh family), which oversaw the implementation and execution of the judi­ cial system, was replaced by the establishment of the Minis­ try of Justice. A minister of justice and a body of twenty senior ulama (religious scholars), called the Supreme Judi­ cial Council, were appointed. The administration of the sharia throughout the country expanded at a rapid rate, and the number of sharia courts grew to over 300. The new system also incorporated two Courts of Appeal and the Board of Grievances.

Educational System

In the early 1950s Saudi Arabia began to formalize its educational system based on the model used in other Arab countries. Benefiting from the increase in government

26Ibid., 213-15. 57 revenues from oil exports and the availability of educators from other Arab countries (such as Syria and Egypt), a formal educational program was founded. The new program consisted of three stages: six years of primary education starting at the age of six, followed by three years at the intermediate stage, and finally a three-year program in secondary school. By the 1980s this program was able to achieve a 50 percent literacy rate among Saudis.2-7

The achievement of such rapid growth in the educa­ tional sector can be attributed in part to the strategies articulated in the national development plans. A thirty- five-fold increase of annual government spending on educa­ tion was accomplished during the first and second develop­ ment plans, 1970-75 and 1975-80. The third and fourth development plans also devoted a large amount of funds to educational spending. A one-third increase in the educa­ tional budget was earmarked in each of these plans. This increase represents a substantial amount of money, consider­ ing that most of the educational infrastructure had already been accomplished. Current spending can, therefore, be directed toward the development of educational software and human resources.28

Throughout the development era of the Kingdom of Saudi

Arabia, educational institutions continued to grow in number and in areas of specialization. This growth gave a greater

2-7Ibid., 121. 2SIbid. 58

opportunity for the Saudi male youth to specialize in more

diverse and advanced fields of study. Technical education was divided into three major areas— industrial, commercial,

and agricultural training. Vocational training's main focus

was on providing those interested in pursuing an early

career in the industrial sector with basic skills and an

opportunity to enter the job market. Women's general educa­ tional institutions were also given a great deal of atten­ tion. Female student enrollment at the various levels of education grew from 8 percent in 1960-61 to 37 percent by

1980-81.29

Higher education is extensively subsidized by the government of Saudi Arabia. Students enrolled in domestic institutions, as well as those who are on study abroad pro­ grams, receive free room and board, books and tuition, and a stipend of about US $300 to $750 respectively. The number of higher educational institutions grew from two in 1957 to seven universities, ten colleges for women, and a number of teacher's institutes in 1983. There were over 70,000 students enrolled in these institutions and 12,000 studying abroad. The vast majority of the study abroad students were doing graduate work in the area of social sciences, engi­ neering, science, medicine, commerce, and administration.

One of the major objectives of the higher educational pro­ grams is to enable Saudi Arabia to meet the demands of

29Ibid., 122-26. 59

teaching personnel in the various educational institutions,

as well as the needed personnel for government ministries

and agencies.30

Health Services

Despite its high standards and expensive equipment,

health services are provided to all citizens and residents

free, or at a nominal fee. By 1970 government spending on

public health service facilities grew by more than twenty­

fold. This resulted in the founding of 47 public and 19

private hospitals, 187 dispensaries, 332 health centers,

8,109 beds, and the employment of 951 physicians and 2,915

nurses.31 The government's efforts to modernize and to

increase the number of health service facilities continued to grow over the next ten years. By 1980 the number of hos­

pitals increased to 67 public and 22 private, thus increas­

ing the number of beds to 14,451, physicians to 4,549, and

nurses to 8,528. Dispensaries grew to 654, thus the number

of health centers was reduced to 224.32 Health services continued to grow over the years, so that by 1985 the number

of government health services had almost doubled (see table

1 ). By all standards, this brief history indicates that the Kingdom of Saudi Arabia is a new arrival to modern times

3°Ibid., 119-26. 31Ibid., 310-11.

32Ibid., 310-12. TABLE 1

HEALTH FACILITIES

Medical & para-medical personnel a c I— JI ^ U l j t* * ) ! , -i a v i ,i»H ^o^U ^JI o L .L lt... II jji •LJ.XI 1 j — tf I oit-** os#-* (aJuIaaJI itUj u# L^| i j —Jl

Total Other technicians Technical assistants Nursing staff Physicians Number of Number of Number of hospitals, (including pharmacists) hospital beds hospitals dispensaries & health centers

4,494 542 910 2,253 789 7,165 47 566 1390 a 4,627 614 928 2,268 817 7.942 49 570 1391 5.823 733 1.047 2.982 1.081 8.132 51 584 1392 6,592 918 1,227 3,179 1.268 8,870 54 620 1393 8,804 1.063 1,607 4,234 1,900 9.070 58 667 1394 9,919 1.186 1,737 4,721 2.275 9,250 62 693 1395 11,678 1.373 1.943 5.666 2,696 9.450 64 785 1396 11.982 1.408 2,014 5.740 2,820 10.182 64 812 1397 13,033 1,381 2,359 6,081 3,212 10,412 67 860 1398 13,664 1,317 2.633 6.306 3,408 10,978 67 891 1399 14,946 1,366 2,928 6,859 3,793 11,968 69 958 1400 18.532 1,421 3,454 9,039 4.618 13,066 70 1,005 1401 20.662 1.597 4.003 9,939 5.123 14,333 72 1,045 1402 23,315 1,640 4,520 10,702 6.453 15,387 78 1,162 1403 29.717 1.246 6,062 14,919 7,490 17,961 86 1,205 1404 33,543 1,594 7,264 16.443 8,242 20,463 104 1,403 *1405

Note : The above statement does not cover facilities offered by the ^ U J I £U*JI o L L J I :

private sector end Government agencies other than the * j ** Ministry of Health. Source: Ministry of Health. • aHere and on ensuing tables, years follow Hijra calendar 1390—1405, which corresponds to 1970-1985. o and development and lacks historical foundations of indus­ trialization and mobility. It is also apparent that until the arrival of the Whabi movement, the country also lacked the needed educated elites that could provide leadership toward progress and urbanization. Due to its vast area and lack of natural resources, as well as the Haj season, the country never felt the need to develop any kind of indus­ tries other than those of a self-sustaining nature. Thus one can say that 1927 was the year that Saudi Arabia began entering the stage of shaping some form of nationhood.

The next chapter will examine in detail the process of development and modernization that the government of Saudi

Arabia undertook to bring the country into modern times.

Chapter IV will also review, examine, and evaluate the government's initial informal development plans and its four formal five-year major development plans, which started in

1970. CHAPTER IV

DEVELOPMENT POLICIES OF THE KINGDOM OF SAUDI ARABIA

Summary of the Development Plans

Faced with a multiplicity of goals and a desire to condense the time frame for development, the Saudi Arabian government sought to maximize the reinvestable surplus gen­ erated from its oil export revenues. The dramatic increase

in government revenues from oil exports in the late forties prompted the Saudi government to initiate a massive program of modernization and development. The first, and most viable, option pursued by Saudi Arabia was to provide the basic services and facilities for industrialization. It was expected that industrialization would achieve both economic development and future prosperity, and would utilize the most abundant natural resource of the country— oil. It was not until the late 1960s that these efforts were established in a formal national policy.

Prior to 1970, government developmental efforts were focused on health, education, and physical infrastructure.1

However the first development plan identified the main

^•Kingdom of Saudi Arabia, Ministry of Planning, The First Five Year Development Plan, 1970-1975 (Riyadh: Minis­ try of Planning, 1970), 21.

62 63 characteristics of the pre-1970 Saudi economy to be domi­ nated by its dependence on oil revenues, its commitment to a free economy, its manpower shortage problems, and its rapid progress in all sectors over the last decade.2 In order to increase this rapid growth and progress, and to reduce dependence on oil revenues, the government sought to enhance and develop (in isolation from the oil sector) the agricul­ tural and mining and manufacturing sectors.3 By 1985, gross domestic products of the nonoil sector of the economy almost doubled that of the oil sector (see table 2). The Saudi government sought to implement such efforts through intensi­ fied efforts to raise the productivity of its manpower resources throughout the economy, thus the importation of highly trained and educated foreign manpower was initiated.4

The potential for development in Saudi Arabia was based on the following: (1) high foreign exchange earnings of oil, which ensured unconstrained access to foreign man­ agement skills, trained manpower, technology, raw materials, equipment and machinery, and consumer goods; (2) locally produced petroleum and gas offered cheap sources of power for industry and transportation, as well as raw material for the establishment of petrochemical and nitrogenous fertiliz­ ers; (3) minerals located around the coastal area of Saudi

Arabia were considered a base to initiate other industries;

2Ibid. 3Ibid.

4Ibid., 22. TABLE 2

GROSS DOMESTIC PRODUCT BY OIL AND NONOIL SECTORS, AND KIND OF ECONOMIC ACTIVITY, IN PRODUCERS' VALUES

tin current prices) y-*) - Million Saudi Riyalv-

1404/05* 1403/04 1402/03 1401/02 1400/01 1399/00 1398/99 1397/98 1396/97 1395/96 1394/95 1393/94 1392/93 1391/92 1390/91 1389/90 Non-oil Sectors iUJI

Agiiculture, forestry JL-KI wlUJI, uljuJt' & fishing 9,961 9.371 0,725 6,740 5.571 4,648 4.195 3,908 * 1,866 1,506 1.392 1,242 1,139 1.059 1.016 984 Mining & quarrying ^ 1,688 1.740 1.705 1,969 1.696 1,361 1.120 1,025 823 535 264 147 91 58 51 47 Manufacturing ^ 11,817 12,007 10,686 9.124 7,721 6,467 5.173 4.066 3,063 2.211 1.599 729 617 543 484 431 Electricity, gas and water 2,025 946 -8 5 0 -4 2 9 399 271 248 204 144 151 195 320 319 302 298 273 a*ji, jUJi, v***1

Construction ^ 44.605 50,119 54,703 56,885 48,631 40,449 32,920 30.088 23.984 14,806 7.080 2.002 1,220 874 734 715 *UJI Transport, storage & communication 23.492 24.180 21,409 19,871 17,123 15,749 12.765 9,960 6,774 4.077 2,310 2.718 2.121 1,567 1.479 1,243 J iiJ l

Other services 109,843 111.270 108,899 90,132 78,112 61,939 50.817 40.632 31.039 23.957 15.283 8,264 5.896 4,780 4,191 3.894 ,Jj» 1 w if i* Sub-Total 203.431 209,633 205.437 184.292 157,253 130,884 107,238 89,883 67,693 47,323 28,123 15.430 11.403 9.183 8,253 7,687 „ £ > Jl Jl Oil Sector v A iS J ' £*W»

Mining of crude oil j k jt j 1 and natural gas 115,431 143,172 192,874 323,328 340,997 237.219 131.098 126,156 128,466 109,560 104,696 78.345 26.284 16,932 12,581 8,106

Petroleum refining 15,539 14.714 13.287 13,260 10.027 12,828. 7.442 5.908 8,221 5.962 5,766 4,347 1^11 1.442 1,474 1,241 >w>li Construction associated thereof 95 t03 200 1,296 1,717 2,659 1.844 1.871 1.562 1,048 639 718 589 300 273 219 w l'L J It Sub-Total 131,065 157,909 206.361 337.884 360.741 252,706 140,384 133.935 136,249 116,570 111.101 63,410 28,684 18,674 14,328 9,566 w «>)l Summation _>JJI

Gross domestic product ~~ ...... JU.1I ^ u > in producers'values 334.496 367.622 411.798 522.176 517.994 383.590 247,622 223.818 203.942 163.893 139.224 98.840 40.087 27.857 22.581 17.153 Importduties 4.724 3.624 3.43' 2.542 2.595 2.217 1.917 1,582 1,114 633 376 475 464 400 340 246 wbjipr fy-j Gross domestic product JL»1I ^U Ji piUi in purchasers' values 339,220 371,246 415,231 524./. . '1589 385.807 249.539 225.400 205,056 164.526 139.600 99,315 40.551 20.257 22.921 17.399

Source Central Department ot Statistics. • uU I w l'W ifl 'wilin Notes: 1} Excluding mining ol oil and natural gas • ^ U i l J I jUII, ^UJI g lj » i » lI m (\) w lW li* 2) Excluding petroleum refining • jejS- (T) 3) Excluding construction associated thereof. . o l ‘U iH l-k* (r) The estimates for the period begining 1394/95 are not strictly comparable with those of earlier years. The estimates for Agriculture, forestry and fishing for the wI>mJI £• ii*ixll U*ttfj i v>* I**- *>JI m U JI period begining 1397/98 are also discontinuous with the test of the series. ••1T4A/4V o* » r * U oK—**! W U JI U1 .*i,t_JI

G\ 4* 65

(4) additional land and subterranean water resources could be used to increase the output of crops and irrigation; and(5) growing demand, particularly in African and Asian markets, on petroleum products, petrochemicals and fertiliz­ ers, and mineral production.5

In 1970 Saudi Arabia initiated a five-year development plan to mark the beginning of 30 years of long-term develop­ ment vision with the goal of formalizing the development planning process (4plan XIII). To date the country has articulated four such development plans, each covering a five-year period: 1970-75, 1975-80, 1980-85, 1985-90.

These plans have had mixed success. A brief review of the goals, objectives and strategies of these plans will reveal the development environment of the country and provide explanation of the technology transfer process to the King­ dom of Saudi Arabia and its impact on the country's indus­ trialization efforts.

The general objectives of the Saudi development plan­ ning policy were identified in the first five-year plan, which emphasized the following major areas: (1) increasing the rate of growth of the gross national domestic product;

(2) developing human resources; (3) diversifying sources of the national income and reducing dependence on oil through the other productive sectors of the economy.6

sIbid. 6Ibid., 23. 66

The architect and the moving force behind all four plans is the minister of planning (1975-87), Hisham M.

Nazir. As result of the resignation of the minister of oil,

Mr. Nazir was made minister of oil and acting minister of planning. Before becoming minister of planning, Mr. Nazir was president of the Central Planning Organization from 1964 to 1975, and became minister of planning in 1975 as the result of governmental reorganization to facilitate national development. Despite the fact that the Ministry of Planning is the central authority that establishes the major guide­ lines and objectives of these plans, each ministry and government agency is responsible for providing its own detailed and technical plan. Once the ministries finalize their plans, they submit a copy of them to the Ministry of

Planning for final revision and approval. A summary of these plans is then put together by the Ministry of Planning in an official publication known as the National Five-Year

Development Plan.-7

The first five-year plan (1970-75) was relatively limited in its budget and accomplishments, allocating about

SR80 billion (21.3 billion US dollars)® to be spent on developing basic infrastructure (particularly public utili­ ties ), improving government services, and initiating

^Kingdom of Saudi Arabia, Ministry of Planning, Second Five-Year Development Plan, xiii.

sThere are 3.75 Saudi riyals to the US dollar. 67 manpower development.®

The second five-year plan (1975-80) allocated about

SR700 billion (a ninefold increase). The plan's emphasis was on enhancing the role of the government as the leading motivator in development and as the major source of capital formation. The plan also emphasized infrastructural devel­ opment and other associated activities of the construction industry.10

The second plan was more advanced, covering wider areas of development and also reflecting the country's fun­ damental values and policies like the first one did. Its goals were oriented toward articulating the country's cul­ ture, history, and political philosophy. In addition to maintaining the religious and moral values of Islam and assuring the defense and internal security of the country, the goals of the plan were (1) to achieve a high rate of economic growth by developing economic resources, maximizing earnings from oil over the long term, and conserving depletable resources; (2) to reduce economic dependence on oil exports; (3) to develop human resources by education, training, and raising health standards; (4) to increase the well-being of all groups within the society and to foster social stability under circumstances of rapid social change;

®Kingdom of Saudi Arabia, Ministry of Planning, The Fourth Five-Year Development Plan, 1985-1990 (Riyadh: Minis­ try of Planning, 1985), 3.

10Ibid. 68 and (5) to develop the physical infrastructure necessary to achieve the above goals.11 It is also important to point out that during the second development plan (1975-80), the core of the goals, objectives (as listed above), and strategies (as listed below) of the development plans was crystallized.

Perhaps the most important aspects of the plan were stated in the first and second goals of the plan. Thus, the plan's strategy for achieving these goals was to emphasize the efficient use of human and natural resources in order to reduce the country's dependence on the single depletable resource, oil. The other most important aim of the plan was to diversify the economy by encouraging the private sector to expand its activities to the agricultural, industrial, mining, and petrochemical industries, since these sectors enjoy comparative advantage in the international market.12

The development of human resources was thought to be achievable by providing all the people of Saudi Arabia access to educational and training facilities at all levels, as well as access to health services. The plan emphasized the role of the government in providing these services and facilities free of charge. Further, the aim was to con­ tinually expand and improve the quality of these services.

“ Kingdom of Saudi Arabia, Ministry of Planning, Second Five-Year Plan, 4.

“ Ibid. 69

Ultimately, the plan hoped to achieve zero illiteracy, to promote learning of new skills, to stimulate research and the use of production and distribution techniques, and to promote the spirit of honest hard work.13

The second plan also emphasized the importance of the social well-being of its inhabitants through the development of social service programs. The programs' aim was to pro­ vide every group and individual an adequate, dignified mini­ mum standard of living by providing essential goods, such as food, at stable and reasonable prices, even if government subsidy was required. The issue of free education and health care was reemphasized as a priority item of the plan.

Housing, through government agencies, was to be available to those with limited income through subsidized interest-free loans. Social security and other benefits were to be extended to the people of Saudi Arabia with special assis­ tance programs for the needy and the disadvantaged. Final­ ly, the second development plan established Governmental

Banks that provided interest-free credit to those with limited income and those who had temporary financial dif­ ficulties.14 The plan's emphasis on infrastructure was directed toward transportation, communications, and hous­ ing.15

13Ibid., 5. 14Ibid.

15Ibid. 70

The third plan (1980-85) continued to focus on the completion of infrastructural facilities. An emphasis on the need for output-oriented public sector investment was given a major priority. The plan also sought to increase output from the producing sectors and to continue manpower development.16 The second half of this period was greatly affected by the international oil market, which altered the flow of high revenues and, therefore, the major source of capital formation. The decline of oil revenues was sub­ sequently reflected in lower levels of government investment and a decline in economic growth.1-7

The third development plan also continued to define objectives according to the ethical principles of Islam and the cultural values of Saudi society. The plan identified the same five goals from the previous plans as the vehicle to achieve these objectives (see Chapter 4).ia The plan stressed the long-term goals of Saudi Arabia's development, but it also introduced new strategies for implementation.

For example, the first and second plans allowed the importa­ tion of skilled foreign labor in order to increase the rate of economic growth. The third plan's new strategy sought to

16Kingdom of Saudi Arabia, Ministry of Planning, Fourth Five-Year Plan, 5.

1-7 Ibid.

^Kingdom of Saudi Arabia, Ministry of Planning, The Third Five-Year Development Plan, 1980-1985 (Riyadh: Minis­ try of Planning, 1980), 3. 71

reduce the importation of foreign labor. This change in

strategy resulted from a reexamination of the approach to

development that emphasized growth. The new strategy was

reflected by a desire to maximize the utilization of

domestic and foreign labor through the introduction of a

capital-intensive approach to development, particularly in

the hydrocarbon, agriculture, mining, and manufacturing

industries.1®

The fourth, and current, development plan (1985-90),

was formulated to ensure continuity with the strategy

utilized during the third plan. The emphasis is on the

efficient use of resources and development of the producing

sectors and human resources. In addition to the five basic

goals of development that were emphasized throughout the

previous plans, the fourth development plan introduced four

more goals. The new goals emphasize (1) rising cultural

standards to keep pace with Saudi Arabia's development; (2)

continuing with real structural changes in Saudi Arabia's

economy to produce a diversified economic base with due

emphasis on industry and agriculture; (3) concentrating on qualitative development through improving the performance of

the utilities and facilities already established during the three previous plans; and (4) achieving economic and social

1®Ibid., 16. 72

integration between the Arab Gulf Cooperation Council (GCC)

countries.20

The fourth development plan also identified major

structural changes that are going to take place in the Saudi

economy on both public and private level. Due to budgetary

changes, all private sectors dependent primarily on govern­ ment programs, such as construction, distributive trade, transportation, and communication, will have to face a rela­ tive decline or even in some cases become obsolete.23- The plan anticipated that the production sectors (manufacturing, agriculture, financial and business services) will become the new champion of economic growth.22

The fourth plan also anticipated structural changes in the public sector. Thus the fourth plan allocated substan­ tial government financial support to encourage the private sector's production activities to participate in larger volume in the development process.23 As result of these changes, the plan anticipated that the private sector (which depends heavily on the public sector for most of its busi­ ness) will go through three distinct areas of structural change:

2°Kingdom of Saudi Arabia, Ministry of Planning, Fourth Five-Year Plan, 41.

23-Ibid. 22Ibid.

23Ibid., 42. 73

1. New linkages. The fourth development plan fore­ sees the development of the public sector as a facilitator for the expansion of the private sector, particularly in the area of infrastructure, which links Saudi Arabia by a mas­ sive network of paved roads and communications system. Such achievements are thought of as essential elements for the expansion of private business activities throughout Saudi

Arabia. Consequently, the financial and service industries and knowledge-based services will follow suit.24

2. New opportunities and expanded market. The expan­ sion of the producing private sector will be reinforced by close links to the GCC, other Arab countries, the Islamic nations, and the Third World at large.25

3. New responsibilities and difficulties. Due to new opportunities, the private sector will have to assume new functions and responsibilities, involving more complex con­ tracts and manufacturing agreements, new forms of standards and procedures, and applying new technologies. The dif­ ficulties to be expected are those which will force the private sector to expect longer periods for their return on invested capital and to develop new and more complex pat­ terns of organization and new structures of management and control.26

24Ibid. 2SIbid.

26Ibid., 43. 74

Thus the fourth development plan was designated as the takeoff stage of the long-term development policy. The plan based this policy on three essential principles:

1. Industry. Based on the latest trends in the oil markets (fluctuating prices and new technological innova­ tions that effect energy consumption and consequently lower demand), the Saudi government recognized the dual character of oil wealth— it can be a source of wealth when demand is high and a source of weakness when demand is low. Thus, the government called for the expansion of oil-related indus­ tries, such as refineries and petrochemicals, and other producing sectors of the economy.27

2. Technology. Utilized as an instrument in Saudi

Arabia's development efforts in the area of petrochemical products, and in the expansion of water resources and harnessing the potential energy of the sun.28

3. Free economy. Used as a vehicle to ensure the private sector's participation in Saudi Arabia's development process.29

Achievements of the Development Plans

The thrust of Saudi development planning policy for the last fifteen years can be described as a diversified effort directed at the development of both the public and

27Ibid., 8. 28Ibid.

29Ibid. 75

private sectors of the economy. Although the Saudi govern­

ment was the sole provider of development funds, it became

clear during the first and second planning periods that the

government had set the economic, social, and institutional

stage for progress by developing the country's basic infra­

structure and services, allowing the private sector to take

more active participation in the development process.30

Although fifteen years is a short time frame in which

to evaluate the level of success or failure of development

efforts in the Third World, Saudi Arabia has achieved a

great deal of success in modernizing the desert Kingdom.

The development plans have been successful in one way or

another. Some of the major achievements of the plans can be

felt in the area of infrastructure and social activities,

which were highlighted in the fourth development plan.

Among the major infrastructural achievements of the develop­

ment plans were expansion of the network of paved roads from

about 8,000 km to more than 30,000 km, increase in port

capacity from two million tons to about fifty million,

increase in telephone lines from 29,00 to 903,000, and

increase in the number of air passengers from 1.6 million to

24 million. Housing projects also have had a great share of development. There were more than 550,000 housing units built and financed (government loans) during the same period. There has been a dramatic increase in the number of

3°Ibid., 3-4. 76 doctors (1,127 to 14,267) and hospital beds (from 7,000 to

26,410), reflecting the high quality and efficiency of free health care services.31 Electricity and water services increased by a record number, from 418 megawatts to 14,578 and 19,600 cubic meters per day to 1.44 million. Education was given priority. The number of students increased from

597.000 to more than 2,000,000, including 86,185 enrolled in seven new universities. The number of male university grad­ uates rose from 808 to 6,098. The number of female univer­ sity graduates increased from 27 to 3,284.32

Achievements were also made in the production sector of the economy. The production of wheat grew from 130,000 tons to 1.3 million tons per year. In the industrial sector, massive increases in the construction industry were achieved. Cement production increased from 700,00 tons to

8.0 million tons. The production of fertilizer rose from

24.000 tons to more than 850,000 tons.33 Other forms of achievements can be cited that are related mainly to intense governmental efforts and industrialization policies, coupled with generous governmental capital financing and low-cost land and utilities, which resulted in attracting the private sector to play a significant role in the development of the industrial complex. Thus the number of industrial manufac­ turers reached a level of 3,000 licenses, in addition to

31Ibid., 5-6. 32Ibid.

33Ibid. 77

thousands of small (according to policies of the ministries

of Commerce and Industry, any firm or establishment employ­

ing less than ten persons and with a paid up capital of less than one million Saudi riyals does not need a license and

thus it is very hard to obtain accurate statistics on these

companies) and medium-sized nonlicensed firms, and hundreds

of joint ventures with foreign partners.34

Over the past fifteen years of development planning

(1970-85), a number of important developments have taken place in the Kingdom of Saudi Arabia. In order to under­

stand the government's efforts to diversify the economy, it

is important to review the data (which is directly related to this research) that represent these efforts. Most of these items relate to diversification of the economy and the development of industrial capabilities such as the ratio of government expenditures to revenues, expenditures on projects, gross domestic product, the growth of the non-oil- producing sector, export-import, infrastructure and related matters, and the number of industrial licenses and operating factories, as well as statistics on manpower allocation and utilization.

During the major period of development, government revenues increased from SR 5.74 billion in 1970 to a peak of

SR 358.006 billion in 1982. Due to the decline of oil pro­ duction, oil prices, and income from nonoil sources (such as

34Ibid., 9. 78 investment income), government revenues started to fall sharply from, SR 358.006 billion in 1982 to SR 246.182 bil­ lion in 1983, SR 206.419 billion in 1984, and SR 171.509 billion in 1985. As expenditure were tied to revenues, the rate of government spending also began to decline, although not proportionately to the decline in revenue, which was due to government's use of its reserves. In 1970, government expenditures were SR 6.028 billion, which represented an excess of SR 0.287 billion over the government's revenues for the same year. In 1982 they peaked at SR 283.258 bil­ lion. In 1983 government revenues declined by 33 percent, although government expenditures declined by only 13.5 per­ cent, to SR 244.912 billion. During 1984 and 1985, the decline of expenditures was minor compared to that of government revenues— expenditures were SR 230.186 billion and SR 216.363 billion, respectively. While government revenues during that period were SR 206.119 billion in 1984 and SR 171.509 billion in 1985, expenditures outpaced revenues by SR 23.767 billion and SR 44.854 billion 1984 and

1985, respectively. It is important to point out that expenditures on projects constitute the majority of govern­ mental expenditures (see table 3).

Gross domestic product has been greatly influenced by government revenues and expenditures. Gross domestic product in purchaser's values increased from SR 17.399 bil­ lion in 1970 to a peak of SR 524.718 billion in 1982, then TABLE 3

GOVERNMENT REVENUES AND EXPENDITURES (ACTUAL)

- Million Saudi R iy a ls-______— —

•1404/05 1403/04 1402/03 1401/02 1400/01 1399/00 1398/99 1397/98 1396/97 1395/96 1394/95 1393/94 1392/93 1391/92 1390/91 1389/90

A. Revenues w t j lj ____ / i \ _

Oil royal lias 24.595 30.452 39.518 73.860 73.323 44,752 27.952 26.182 28,512 23.090 23,134 9.538 3.008 2,208 1.841 1.385

Income tax on oil & JU JiuJI other companies 77,212 94.299 141.568 250.930 239.496 146.353 88.924 89.230 93.390 70,783 61,484 27.956 10,661 7,737 5.103 3.551 • 1 wU^SlIj Mypl

Others 69,702 81,668 65.096 43.216 35.300 20.091 14.629 16.829 14,055 9,511 15,485 3.104 1.657 1.171 1.010 805

Total (Revenues) 171,509 206.419 246.182 388.006 348.119 211.196 131.505 132.241 135.957 103.384 100.103 40,597 15.326 11.116 7,954 5.741 (i.UI^I) yJL.1

B. Expenditures ol — ts r ~.11 _ w

Salaries ap p lies & services 79.659 76,359 67.389 57.824 43.067 31.661 22.955 19.670 12.548 9.058 6.238 4.429 3.252 2,704 2.349 2,197 w L xiJI, l-jlyillj wUSljjJI

T ransfers, a bsidies etc. 42.037 47.693 34.859 54.420 40,503 64.566 58.816 50.809 39.537 29.422 8.969 4.041 2.403 2.052 1.640 1,656 {Jl . . , cUUTIj

81.771 Total recurring 121.696 124.052 102^48 112,244 83.570 96.227 70.479 52,085 38.480 15.207 8.470 5 8 5 5 4.756 3.989 3.853 SjjSsaJI o Iu JI ^Jl«>l

Project 94.667 106.134 142.664 171.014 146.846 89,497 64.484 66.631 54.652 43.304 19.832 10.125 4,503 3.374 2.304 2.175

Total (Expenditures) 216.363 230,186 244.912 283.258 230,416 185.724 146,255 137.110 106,737 81.784 35.039 18,595 10.158 8.130 6.293 6.028 ( - V ij j - J I )

C. Balance ->-- --

Revenues minus (w_1) -Uj^JI.olul^VI expenditures (A-8) -44.854 - 23.767 1,270 84.748 117,703 25.472 - 14.750 -4.869 29,220 21800 65,064 22.002 5,168 2.986 1,661 - 2 8 7 i^toJI oLLoJI _ ^J.,11 jUJVIj i»JU I ijljj : j x ^ J I Source: Ministry of Finance and National Economy. Closing Accounts. Note:- Transfers to General Organisations are consolidated with • -»U•!/{•• flc Uj-UJ i.UI uuL#l— ce-* i»lfcll w l— *^11 w ^ ^ » sJ I uux*ul : General Government Accounts with effect from 14(XV1401 AH.

Memo Item ^ iU I Xw

~>JI cljlj,! Oil revenues 119.000 145,123 186.006 328,594 319.305 189.295 115.078 114.042 121.191 93.481 94,190 39.516 13.480 9.685 7.122 5,119

Source: SAMA • a LJI i — V ;

VO declined to SR 415.231 billion in 1983, SR 371.246 billion in 1984, and SR 339,220 billion in 1985. The nonoil sector

(which includes agriculture, forestry, fishing, mining and quarrying, manufacturing, electricity, gas and water, con­ struction, transport, storage and communication, and other services) accounted for SR 7,587 billion in 1970, peaking in

1984 at SR 209.633 billion, and declining to SR 204,431 bil­ lion in 1985 (see table 2). Comparing these numbers to government expenditures on projects, the past three years of the non-oil-producing economy's activities demonstrated a positive strength and independence.

The period between 1970 and 1982 can be described as the infrastructural building era. By 1983 the non-oil- producing sector continued to increase, doubling in value when compared to government expenditures. These variations between government expenditure on projects and the per­ formance of the non-oil-producing sector indicate that the development plans contributed to developing a diversified economy in Saudi Arabia.

During the years from 1970 to 1985, export figures also indicated that the non-oil-producing sector demon­ strated an average percentage growth rate of 43.9 at the fob

(free on board) value in current prices. Meanwhile, exports of crude petroleum and petroleum products have also demonstrated an annual percentage growth rate of 23.2 and

18.2, respectively. The high average percentage rate 81

increase of nonoil merchandise exports is also a positive

sign of the development of a diversified economic structure

(see table 4).

According to published government figures, such growth

can be greatly attributed to the government's pursuing poli­

cies aimed at diversifying the Saudi economy. Thus during

the 1970-1985 development era the number of industrial

licenses and operating factories in Saudi Arabia increased by at least fifteen- and eightfold, respectively. The number of industrial licenses and operating factories

increased from 207 and 207 in 1970 to 3,409 and 1,804, respectively, in 1985. The total capital of industrial

licenses increased from SR 2,379 million in 1970 to SR

134,848 million in 1985. The total capital of operating factories increased from SR 2,379 million in 1970 to SR

55,668 million in 1985. The amount of total manpower also increased from 9,012 in 1970 to 194,881 in 1985 (industrial licenses) and from 9,012 in 1970 to 117,997 in 1985 (operat­ ing factories) to fulfill the needs of these two areas (see table 5).

Development of Industrial Infrastructure

Development planning efforts have given great impor­ tance to building the infrastructural facilities and other related matters. The government allocated great sums of funds for the development of social, physical, and TABLE 4

MERCHANDISE EXPORTS BY MAJOR COMMODITY GROUPS

(fob value in current prices) (Vjb-J> v»y «*yJl)

Average 1984* 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970

Million Saudi Riyals J lv j CrjvGUv

Crude Petroleum 114.568 142,154 251,429 384.471 342.979 200.225 130.212 145,338 126.862 96618 119,031 30,736 20,608 15,067 9.080 rliJI ^,>11

Petroleum Products 13.292 12,725 16,377 18,040 16,886 11.019 6.900 7327 7,833 6.756 6.908 2.461 2,093 1.998 1,799 ifi^ r jl c,l»t ■■ II

Other 1,934 3,565 3,284 2,970 3,021 1,939 1,130 544 457 738 284 112 60 27 28 U p - *

Total 129,794 158,444 271,090 405,481 382686 213,183 138,242 153609 135.152 104,412 126623 33,309 22,761 17,092 10.907 fa**-"

Annual Percentage Growth Rates 11 )»Sl1 -~-V *— 1 ‘ ~j‘ ~ 11 ■ —‘.It

Crude Petroleum 23.2 - 19.4 - 4 3 .5 - 34 .6 12.1 71.3 53.8 - 10.4 14.6 30.9 - 18.6 287.3 49.1 36.8 65.9 131 flAJI c^^yjl

Petroleum Products 18.2 4.5 - 2 2 .3 - 9 . 2 6.8 53.2 59.7 - 5 . 8 -6.5 15.9 -2.2 180.7 17.6 4.8 11.1 97.0 w tw t '-11

Other 43.9 -45.8 8.6 10.6 - 1.7 55.8 71.6 107.7 19.0 -38.1 159.9 153.6 88.7 I2Z 2 - 3 . 6 3 3 3

Overall 22.9 - 18.1 - 4 1 .6 - 3 3 .1 11.7 70.2 54.2 -9.8 13.4 29.4 - 17.3 278.9 46.3 33.2 56.7 21.7 fa**"11

Indices (1975 - 100) ( 1 - • = MYo) W

Crude Petroleum 118.2 146.7 259.4 396.7 353.9 206.6 134.4 150.0 130.9 100 122.8 31.7 21.3 15.5 9 4 f U JI *iy>JI

Petroleum Products 196.7 188.4 242.4 267.0 249.9 1611 102.1 108.5 115.9 100 102.2 36.4 31.0 29.6 26.6 tfljjifJI wbtusjl

Other 262.1 483.1 445.0 402.4 409.3 262.7 153.1 73.7 61.9 100 38.5 15.2 8.1 3.7 3.8

Overall 124.3 " 151.7...... 259.6" 388.3" 347.6 204.2 132.4 146.7 129.4 100 120.9 31.9 21.8 16.4 10.4

Source: Central Department of Statistics. - *.UI1 c.t*U^>.'7l 82 TABLE 5

INDUSTRIAL LICENSES AND OPERATING FACTORIES

(Accumulated figure)

J l . ^ \ * > \ JL-JI ^ L » t • J L J l ^ JL aJ * i-i.ti «.i-«.ii »1>JI J4C J-UJ1 « LfLweJI i_____ L.UI ^L-JI I o > 4 j \ > { ) 0)

Total manpower of Total manpower of Total capital of Total capital of .Number of Number of operating factories industrial licences operating factories industrial licences operating factories industrial licences ' SR. Millions SR. Millions

9 .0 )2 9.012 2.379 2.379 207 207 1390

10,739 10,739 2.617 2.617 239 239 1391

13246 13.246 3.226 3.226 278 278 1392

14.789 14.789 3,471 3.471 305 305 1393

20.639 21,010 5,108 5.160 366 369 1394

25,199 2 6295 6,132 6.681 479 492 1395

33.750 36.405 8.822 10,696 646 681 1396

44.353 54,987 12,045 18,04) 837 977 1397

76,096 8 4 3 0 3 23.195 28.349 1012 1183 1398 86.218 101283 30.647 38,548 1182 1478 1399

9 5 3 0 4 128,945 35,934 63.577 1348 1907 1400

101331 150.726 37.270 97.566 1469 f 2306 1401

104.738 163.023 38.270 111,687 1543 2598 1402

106.790 178.360 38.662 121.766 1581 2932 1403 117360 186.384 55.431 128,355 1785 3203 1404

117.997 194.881 55,668 134.848 1804 3409 1405

( 4tWII jl J1 U.UJI ) £.1—Jl (1) : ik»u. Note: 1/ Includes ail licenced factories (operating, under construction or planned)

Source: Ministry of Industry and Electricity. • kfcL-eJl *jljj 84 institutional infrastructure.35 By the end of the third development plan, Saudi Arabia achieved great advances in the area of roads, highways, port capacity, post and telecommunications system, housing, public health care facilities, power and water supply, educational institu­ tions, industrial cities, and manpower development.

Under the administration of the Ministry of Industry and Electricity, the government allocated vast areas of land to be used as industrial cities in major cities and towns around Saudi Arabia. Although the name industrial city is self-explanatory, in this context the word has two meanings.

Originally the term was used to indicate the existence of a designated area on the outskirts of the major cities of

Saudi Arabia to facilitate the establishment of industrial projects and factories. These government-designated areas were part of the government's effort to provide the private sector with centralized industrial services and low-cost fuel and electricity. The terms also is used to identify a complete city that was designed and erected with full civic facilities as well as industrial sites to facilitate government-sponsored industrial petrochemical projects such as the case with the industrial cities of Jubail and Yanbu.

There are about eleven industrial cities of the first kind, varying in size and location. The smallest one,

3SKingdom of Saudi Arabia, Saudi Consulting House, A Guide to Industrial Investment, 7th ed. (Riyadh: Saudi Consulting House, 1986), 71. 85

760.000 square meters, is located in the holy city of

Mekkah. The largest, which occupies an area of 19,415,000 square meters, is located in the capital city of Saudi

Arabia, Riyadh. So far, the total allocated land and licensed factories to operate in these cities reached

67.182.000 square meters and 1323 licensed factories, respectively.36 Although most of these cities are still under construction as part of the fourth development plan, more than 32,833,000 square meters were developed with 1,143 licensed factories in operation. As part of the development plan and incentive policy to attract the private sector to participate in the development process, the government built and provided these cities with the needed facilities and then rented them for as little as SR 0.08 per square meter.

The government also provided low-cost fuel and electricity for these factories as part of the incentive deal.37 The government's basic criteria for allocating land and licens­ ing industrial factories are as follows: (1) industries proposed by the development plan, (2) branches of existing industries in the same line of manufacturing, (3) industries financed solely by local capital or joint ventures, (4) industries using new technology, (5) industries com­ plementary to other units, and (6) industries for which

3SIbid., 73. 37Ibid., 71. 86 feasibility has been established on the basis of appropriate studies.38

As for the second kind of industrial cities, the government constructed two more major industrial infrastruc­ tures in the form of wholly independent cities to host both public, semipublic, and private industries. In order to make these cities attractive to industry, the government eguipped them with complete facilities such as roads, parks, shopping centers, and other necessary services on the east and west coasts of Saudi Arabia. The one on the east coast was built near the oil fields of Dhahran and named Madinate

Al-Jubail Al-Sinaiyah ("the industrial city of Jubail," named after the old city of Jubail). The one on the west coast was built near the city of Yanbu and named Madinate

Yanbu Al-Sinaiyah ("the industrial city of Yanbu"). The administration of the two cities was entrusted in 1975 to a specially developed government agency called the Royal Com­ mission for Jubail and Yanbu. The establishment of these two major cities was part of a diversified economic develop­ ment strategy to develop basic industries that utilize Saudi

Arabia's abundant natural resource— oil. The objective of these industries is to mass produce high-value petrochemical products rather than just export crude oil.

From a technical point of view, the government commis­ sioned two national corporations— the General Petroleum and

38Ibid., 72. 87

Mineral Organization (Petromin, which was already in exis­ tence) and the Saudi Basic Industries Corporation (SABIC, which was formed for that purpose)— to form and supervise the companies needed to do the job. In addition to diver­

sification of the national economy, the major task of these entities, to be formed in the industrial cities, was the

introduction, absorption, maintenance, and development of modern technology. It was also hoped that these industrial cities would account for 3 percent of the GDP.39 It is expected that the production of petrochemicals in these two cities would meet 4 to 5 percent of world demand.40

Beginning in 1976, Petromin and SABIC initiated a number of petrochemical companies in the form of partner­ ships in joint ventures with foreign companies such as

Exxon. The objectives of these joint ventures were to establish what has been called the basic industries. The founding of these basic industries was meant to set the stage for the production of petrochemicals from crude oil.

Twenty basic industrial plants were to be constructed in the industrial city of Jubail, of which eight are now in opera­ tion. Another six similar basic industries were to be con­ structed in the industrial city of Yanbu, of which five are now in operation. Along with these industries, another 102

39Kingdom of Saudi Arabia, Ministry of Planning, Achievements of the Development Plans, 1970-1985: Facts and Figures (Riyadh: Ministry of Planning, 1986), 136.

4°Ibid. 88 additional secondary industries were to be constructed, of which 68 were to be founded in the industrial city of Jubail and 34 in the industrial city of Yanbu. The purpose of these secondary industries is to engage the private sector to utilize the petrochemical products from the basic indus­ tries to generate various industrial and consumer products for both international and local markets. The government also encourages the private sector to participate in the industrialization process by investing in the third kind of industries, called the supporting industries. The basic function of the supporting industries is to provide the basic and secondary industries with the needed basic work and services, particularly during the construction period.

There were to be 89 of these supporting industries, 70 at the industrial city of Jubail and 19 at the industrial city of Yanbu.41

By the year 2010, these cities are expected to create about 150,000 jobs with an estimated cost of SR 74 billion.

It is also projected that by the year 2010 these two cities will have a population of about 500,000 people. Although the cost of these industrial complexes is some what prohibi­ tive, by the year 2010 they are expected to use an estimated

US $4 billion worth of natural gas, which used to be flared off without any return to the economy.42

41Ibid. 42Ibid. 89

As result of this review of the development efforts of

Saudi Arabia, one major conclusion can be established. In spite of massive government expenditures, the development efforts of the country are only fifteen years old. This short period of time is not enough to enable a country like

Saudi Arabia, so vast in geographic area and so poor in nat­ ural resources except for oil and underdeveloped manpower, to accomplish all of its development needs, no matter how hard it tried and how much money it spent. In fact, Saudi

Arabia had to begin from scratch. Development efforts over the past fifteen years have been directed toward laying the foundations for development. Thus one can say that these efforts have made a successful beginning.

To complement these development efforts, industrial manpower development also was given great attention by the government's grand development plans. Thus the next chapter will discuss the government's overall industrial manpower development, planning goals and objectives, and the success and failure of their results. CHAPTER V

INDUSTRIAL DEVELOPMENT POLICIES,

PROJECTS, AND INSTITUTIONS

Historical Background

The development of the industrial sector in Saudi

Arabia can be dated to the late 1940s and the early 1950s.

Prior to the discovery of oil in 1938, Saudi Arabia's indus­ trial sector consisted mainly of cottage industries and small shops. Demographic and historical conditions pre­ vented Saudi Arabia's local industries from growing beyond a basic and primitive nature. Included among the industries were pottery, jewelry, daggers, swords, basic agricultural tools, leather products, carpentry, and small-scale boat building. Another major factor that contributed to the slow development of industrial capabilities was the Haj season, which lasts from three to six months a year. During the Haj season, Muslims from all over the Islamic world come to

Saudi Arabia to perform the Haj (pilgrimage), which is a religious duty required of all financially able Muslims at least once in their lifetime. As the pilgrims brought a variety of goods and products to trade with the local popu­ lation (as well as with each other), Saudis never felt the need to manufacture needed products; rather, they were more

90 91 concerned with trade as a business. This trading activity was a major tradition of the Haj ceremony.

Another reason for the lack of active development of the industrial sector in Saudi Arabia was the congregation of its major population around the coastal areas, and around the Empty Quarter. The location of the population in these areas was due to the harsh climate, lack of financial resources, and unarable land. This geographic condition, coupled with the fact that a substantial portion of the pop­ ulation led a nomadic or seminomadic life, contributed to the dependence of the people on importing goods from neigh­ boring countries (Jordan, Yemen, Iraq, Syria, and sea mer­ chants who traded with India and the Far East).

The advent of the oil economy marked the end of the old traditional industries and the evolution of a new one.

Government and the oil company became the major sources of wealth and, consequently, the major employers of the able working class. The availability of good-paying jobs with government institutions and the oil company had two sig­ nificant repercussions. First, artisans quit their lower- paid industrial jobs to join other professions that paid higher wages. This caused a sharp decrease in the quality of domestic products and increase in its prices. Second, higher wages encouraged consumers to buy cheaper imported goods, as well as more advanced technology and equipment.

The discovery of oil in 1938 in Saudi Arabia marked 92

the beginning of the modern industrial era. The oil com­

panies that moved into the country brought with them modern

machinery, equipment, and vehicles. To accommodate this

growth, a new breed of Saudi industry was founded to provide

these companies with basic needs and services. Initially

these services were introduced to Saudi Arabia through the

oil company, which created massive training programs to

teach Saudis the skills and professions needed to handle

these industries (see Chapter 6). Subsequently, some of the

graduates of these training programs, after a few years of

experience, started to operate (with the encouragement of

the government and the oil company) their own businesses and

to provide their services to the expatriates who came to

Saudi Arabia either with the oil company or who were

employed by the government or the private sector as a result

of this economic boom. Most of these new industries were

concentrated in the area of construction, repair shops, car­

pentry, and machine shops.

The oil boom also helped to found a new entrepreneur­

ial class of Saudis who assumed the role of local agents and

dealers of foreign exporters to Saudi Arabia's booming econ­

omy. By the 1950s a more sophisticated and more entrepre­

neurial class of Saudis began to introduce small-scale

industries that mainly dealt with cement plants, cement

blocks, and brick factories. The late 1950s and early 1960s witnessed the introduction of new industries such as paper 93 products and private shops, textiles and dairy products. As oil revenues continued to increase, so did government sur­ pluses. This increase of government surplus revenues allowed the government to increase its spending on develop­ ment of basic infrastructure such as roads, schools, hospi­ tals, and additional public-oriented services, all of which resulted in introducing relatively major industries to the country. These industries included refineries, chemical fertilizer plants, steel molding mills, and other smaller hydrocarbon plants and were built by the government of Saudi

Arabia through its various agencies such as Petromin, the government oil company.

By the middle of the 1970s a more elaborate level of industrial development began in the country. The sharp increase of oil revenues and the accumulation of wealth in the hands of the government, the business sector, and the consumer created a greater demand in industrial construc­ tion, agricultural, and consumer goods. This era was the beginning of a new generation of industries that were larger in size, more sophisticated in nature, and more capital intensive rather than labor intensive. During this era the government took the lead in introducing highly sophisticated chemical as well as petrochemical industries. This strategy marked an attempt to diversify the country's single-sector economy and to reduce the dependence on the country's most viable natural resource, oil. The government, through its 94

various agencies (the Ministry of Electricity and Industry

and the Saudi Industrial Development Fund), encouraged the

private sector to participate in the development of the

country's industrial sector.

Industrial Development Policies

As efforts to industrialize became more focused and as

the first development plan reached its conclusion, the Saudi

government sought to formally organize and regulate the

industrialization process. The purpose of this regulation

was to attract the private sector from within the country

and to provide an attractive and secure environment for

foreign investors to participate in the development process

through direct joint ventures with the government or the

private sector. Thus, in 1974 the government of Saudi

Arabia announced a set of principles (eleven points) that

constitute the country's industrial development policy.1

The first point expressed the government's intention to encourage the establishment and expansion of the manufac­ turing industries, including the agricultural sector. The purpose of this expansion was to increase the contribution of the manufacturing industries to the country's national

income, to raise standards of living, to generate employ­ ment, and to diversify the economy. The first point also

1Tihama for Advertising, Public Relations and Market­ ing, Industry and Electricity: Progress and Achievements (Jeddah: Tihama for Advertising, Public Relations and Marketing, 1986), Part 1, Ch. 2, passim. 95 indicated that the government aims to reduce the effect of outside economic disturbances on the country's economy and to improve the abilities and technical capabilities of the people of Saudi Arabia.2

The second point emphasized the willingness of the government of Saudi Arabia to support the efforts of the private business community to take an active role in the industrialization process, particularly in large industrial projects that the private sector could not undertake alone.

Government support was based on the realization that the private sector is limited in its managerial and financial resources; therefore, governmental efforts were directed toward establishing and participating in the management and financing of these large projects.3

The third point was a statement of clarification of point two. The government was eager to clarify that despite its willingness to support, finance, and extend managerial and professional help to the private sector, it believes that competition is the best and most viable method to serve the interests of local consumers, to influence industry to articulate manufacturing and market-oriented projects, and to encourage low-cost production and fair price fixing for both consumers and producers. The third point also empha­ sized the government's belief that its policy on competition

2Ibid. 3Ibid. 96 would not allow any kind of harmful foreign competition such as dumping to take place in the economy.4

The fourth point sought to ensure the ongoing private businesses that the government would provide them with information periodically about identification, implementa­ tion, and operation of feasible projects, as well as ser­ vices available in the area of management and technical fields.s

The fifth point articulated the government's incentive policy, which was designed to encourage businesses to invest in projects of importance to the national economy. These incentives included a host of services and subsidies such as low-cost industrial lands, which were made available in specially built and equipped industrial cities in various parts of the country. In many cases annual rent was as low as SR 0.08 per square meter. Also, low-cost utilities were provided by the government at a subsidized cost of SR 0.05 per KWH for electricity and SR 0.25 per cubic meter of water. Fuel was not included at that time because it was already provided at a cheap rate. Financial incentives included such measures as the exemption of duty for all goods imported for industry and the exclusion from taxation for Saudi companies engaged in either industrial or trade activities, with the exception of 2.5 percent on liquid assets in the form of a religious levy. Foreign companies,

4Ibid. slbid. 97 however, were taxed at the rate of 25-45 percent of their profit. Joint ventures with a minimum of 25 percent Saudi participation in capital were to be granted a ten-year tax holiday on their commercial operation. Loans were also extended up to 50 percent of the total project costs for a term of five to ten years, with a grace period of one to five years, by the Saudi industrial fund. Since charging interest is an anti-Islamic practice, these loans were interest free and assessed with an administrative fee of 2.5 percent only.®

Another major incentive to engage private businesses in government industrialization efforts was expressed in the form of a policy that gives preference for domestic products to be used in government projects, also referred to as the

"Buy Saudi" policy. The government instructed technical departments, public corporations, and consulting organiza­ tions working for the government to give priority to national products when laying down project specifications.

Due to this policy, today there are about 1,864 producing factories that the government advises contractors to use in fulfilling their contracts.7

Import protection was also an assurance that the government gave to private businesses as part of its incen­ tive policy. This policy was geared toward industries in their infancy that faced unfair competition from foreign

6Ibid. 7Ibid. 98 imports. The government enforced relatively high import duties on imported goods when similar Saudi-made products were available on the market. However, in order for a Saudi product to warrant government protection it must be produced in quantities that cover major parts of the domestic market, meet reasonable quality requirements, and be competitive.8

Point six refers to the need for regulating industri­ alization efforts through the licensing of industrial projects that exceed a specified size of invested capital and employment or production capacity. This regulation was an attempt to organize development and to provide an atmo­ sphere of security to industrial investors.®

Point seven clarified the government's position con­ cerning its participation in the industrialization process.

This point stated that the government is willing to help the private sector at the kick-off stage of industrialization by participating with the private sector in financing and orga­ nizing business when needed (acting as a partner). However, in order to assure the private sector that this policy's only aim was to help them start the business, the policy emphasized the government's willingness to sell back its shares to the public when and if this action will serve the public interest. The government also expressed its willing­ ness to temporarily intervene and take over the responsibil­ ity for the management of enterprises when the private

8Ibid. 9Ibid. 99 sector demonstrates its inability to do so. This policy of intervention was seen as a national duty of the government in order to correct the wrongdoing of private companies, yet to return control to the private sector as soon as such cor­ rections could be done.10

Point eight was mainly concerned with the government's position and its right to impose controls over quantity and price where the commodities were characterized, by their nature, as a monopoly. Otherwise, the government assured the private sector that it would not impose restrictions on the level of production or establish price controls. Thus the government guaranteed that the market place would be the judge. 11

Point nine was a statement of clarification on the government's position on the issue of labor management rela­ tions. The government believed that private business had the right to select, utilize, and manage its economic resources, including industrial workers, as long as these policies did not infringe forcefully on workers in order to raise the productivity of the industry to its maximum.12

Point ten clarified the government's position toward foreign investment and expertise. It was a statement of assurance for investors and expatriates over the issue of expatriation of revenues. The government's position was

xoIbid. 1:LIbid.

12Ibid. 100

based on two principles. The first one was based on the

respect of private ownership in Islamic law (Shariah). The

second was based on the beliefs that (1) efforts to indus­

trialize in Saudi Arabia need foreigners to participate in

industrial projects with Saudi businessmen and (2) potential

benefits can be gained from these foreign efforts on the

international market level.13

Point eleven expressed the government's intention to

provide the industrialization movement with public utilities

and to make whatever basic arrangements necessary for the

setting up of economically feasible industries. It also

assured the private sector that the government recognized

the importance of industrialization, and was therefore will­

ing to do its best to promote the growth of all economic

sectors in order to make available to the producers suitable

local resources in sufficient quantities. It also pledged to do its best to increase consumer purchasing power within the framework of an ever-growing national economy.14

This eleven-point agenda covered all the aspects of the needed preliminary stage of industrialization. This policy was the nucleus of the development strategy that took shape with the beginning of the second development plan

(1975-80). To implement this policy, and to fulfill its commitments, the government of Saudi Arabia underwent

13Ibid. 14Ibid. 101 massive reorganization and formed a number of governmental institutions designed to facilitate its industrial policies.

Industrial Development Institutions

Action-Oriented Institutions

In 1975 the government reorganized the Ministry of

Commerce and Industry, which had been founded in 1954. Two separate ministries were established, the Ministry of

Commerce and the Ministry of Industry and Electricity. The major functions of the new Ministry of Industry and Elec­ tricity were (1) to achieve a steady and balanced industrial development in the country; (2) to create a suitable atmo­ sphere for the protection and encouragement of domestic industries; (3) to design and implement policies to enable less-developed regions of the country to achieve industrial growth; and (4) to establish and supervise a number of autonomous organizations, such as (a) the Saudi Consulting

House, whose purpose was to provide necessary technical services and to prepare elaborate feasibility studies for potential industrial projects; (b) the Electricity Corpora­ tion, which was established to provide the needed electrical power for industry; and (c) the Saudi Basic Industries Cor­ poration, which was to establish joint ventures with foreign companies in an effort to bring to the country technologi­ cally advanced industries, particularly in the area of petrochemicals.

Other major responsibilities of the Ministry of 102

Electricity and Industry were entrusted to the Deputy of

Industrial Affairs, which was to establish and supervise a number of action-oriented departments. The first was the

Foreign Capital Investment Committee, which processed for­ eign investment applications and licensing. The second was the Industrial Protection and Encouragement Department, which granted privileges, franchises, exemptions, and sub­ sidies and recommended tariff protection for deserving national industries. The third was the Industrial Licenses

Department, which oversaw the examination and evaluation of applications submitted by potential investors for industrial licenses or expansion of existing ones. The fourth was the

Industrial Cities Department, which had the responsibility of supervising industrial cities and industrial parks.

Industrial cities are complete cities that were built from the ground up with full services and industrial facilities.

Industrial parks are special areas within major cities like

Riyadh and Jeddah, designated and serviced with electricity, water, sewage, and transportation services by the govern­ ment, to be used as sites for industrial projects and services. The fifth was the Projects and Engineering

Department, which was established to render engineering and technical services to the Ministry's various departments and projects in the industrial cities.15

15Kingdom of Saudi Arabia, Saudi Consulting House, Guide to Industrial Investment, 33-37. 103

In 1975, the Ministry of Planning replaced the Central

Planning Organization, which had been formed in 1964 to replace the Economic Development Committee, which was founded in 1958 as the first institutional entity that designed, implemented, and supervised the process of devel­ opment planning in the country.16 The basic task of the

Ministry of Planning was to assess resource potentials, to determine socioeconomic development priorities, and to set principles for utilizing these resources in order to achieve a maximum growth rate for the country. The major achieve­ ments of this ministry were designing and implementing the four five-year development plans of the Kingdom of Saudi

Arabia. The fourth development plan, covering the period

1985-90, is still being implemented (see Chapter 4).17

There were five other major organizations that played a major role in the process of founding and facilitating industrial development in Saudi Arabia. The basic objec­ tives of these organizations were to establish and facili­ tate state-owned companies founded to undertake the develop­ ment of the country's major national resource, petroleum, into a hydrocarbon-based and mineral-based industry, and to lead the effort to diversify the country's economy.

The first of these organizations is called the Royal

Commission for Jubail and Yanbu, which was established by a

16Ibid. 17Ibid., 37-38. 104 royal decree in 1975 to support and supervise the govern­ ment's investment in building two major industrial sites to provide the needed infrastructure for the establishment of

joint ventures in the form of basic petrochemical indus­ tries, secondary, supporting, and light industries. Thus in that same year the organization was commissioned to build from scratch two newly developed industrial sites (almost identical in their structures except for size). The first of these sites was built near the coastal city of Jubail in the eastern province, and the second one was built near the coastal city of Yanbu in the western region of the country.

The location of these two sites was based on the desire to serve the future manufacturing and marketing needs of the basic petrochemical industries. The purpose of building these two sites in an identical fashion was based on a marketing principle in order to have access to both of the world's petrochemical markets in the East and the West.

Thus, the western site's production will be shipped to Euro­ pean markets, while the Eastern site's production will be shipped to the Arab Gulf states and the Far Eastern coun­ tries.1® The Royal Commission was also responsible for initiating and supervising the development of civil services and training programs to prepare Saudi youth to take a

lsIbid., 42. 105 leading part in working in these industries (see Chapter

6 ) .19

In order to achieve the objectives of the first orga­ nization, a second organization was also established one year later. The newly developed organization was called the

Saudi Basic Industries Corporation (SABIC). It was estab­ lished in 1976 with a capital of SR 10 billion to invest in joint venture projects with technologically advanced petro­ chemical companies in the United States, Europe, and Japan.

Thus SABIC was in charge of designing and establishing in

Saudi Arabia basic petroleum industries utilizing local hydrocarbon and mineral resources in the industrial sites of

Jubail and Yanbu. Within a few years SABIC was able to establish thirteen industrial companies in these cities.

By 1986 all of these companies were supposed to be operational. In addition to these thirteen companies, two more new companies were to start operation by 1988.20 These massive ventures were also viewed as a vehicle to transfer

Western capital-intensive technologies. The premise behind these projects was the notion that since petroleum is a cheap and abundant resource in the country, the production of petrochemicals will ensure the comparative advantage needed to market these products in both the European and the

19Saudi Basic Industries Corporation, SABIC (Riyadh: SABIC, 1986), 9-11.

2°Kingdom of Saudi Arabia, Saudi Consulting House, Guide to Industrial Investment, 43. 106

Far Eastern markets.21 Among the potential petrochemical products that these projects were set to produce are methanol, ethylene, dichloride, raw industrial ethanol, styrene, caustic soda, high- and low-density polyethylene, ethylene glycol, oxygen, nitrogen and monopolyvinyl- chloride.22

Alongside these companies the government encouraged the private sector to establish or enter into joint ventures with foreign companies in the form of secondary industries in order to complement and support the basic ones by utiliz­ ing their products to manufacture finished industrial and consumer products, and to open the door for the private sector to invest and benefit from these massive industrial projects. This was also the purpose of the supporting light industries.

The General Petroleum and Minerals Organization was the third of these organizations, otherwise known as

Petromin. Because Petromin was the oldest governmental institution involved in introducing industrialization and technology to Saudi Arabia, it was already interested prior to the founding of the Royal Commission in finding the two industrial sites. However, among Petromin's former major accomplishments were the building of three major refineries

21Aramco, Facts and Figures, 1985 (Dammam: Aramco, 1985), 2.

22Ibid. 107 in Riyadh, Jeddah, and Yanbu for the production of petroleum by-products for local needs, a lubricating-oil refinery, and a number of small plants to produce the final products of lubricants. Petromin also constructed two major pipelines to transport crude oil and natural gas from the country's main oil fields in the eastern province to the newly estab­ lished industrial site at Yanbu. There were two major objectives for these pipelines: first, to supply crude oil to the Yanbu industrial site and second, to be used in the business of exporting crude oil to Europe. Petromin also manages the exploitation of newly discovered minerals, such as copper, zinc, silver, gold, and other precious mineral mines in various parts of the country.

The Arabian American Company (Aramco) is the fourth of these organizations. Although it is the oldest industrial organization in the country, it was not fully owned by the government of Saudi Arabia until 1975. Aramco was founded in 1933 as the California Arabian Standard Oil Company by a concession agreement with Standard Oil of California, which is now called Chevron. In 1936 another major American com­ pany, CASOC, now known as Texaco, joined this venture. In

1940 the California Arabian Standard Oil Company changed its name to the Arabian American Company. In 1948 two other major American oil companies joined in the ownership of 108

Aramco, Standard of New Jersey (Exxon) and Socony Vacuum

(Mobil).23

In 1938 oil was discovered and soon was produced and exported in commercial quantities. Exports were suspended because of World War II, to be resumed in 1943 at an average rate of 50,000 barrels per day. Following the war, demand for oil increased and Aramco production reached 500,000 bar­ rels per day by 1949. From 1956 to 1969 Aramco production rose at an annual rate of 9 percent. By the beginning of the 1970s, Aramco production started to increase sharply, climbing to 3,548,865 barrels per day in 1970. This massive increase in production continued throughout the seventies, reaching an average production of 9,631,366 barrels per day in 1980 and 1981. By 1982 this level of production started to decline, reaching 3,041,104 in 1985. This was due in large part to the increased availability of oil from the

North Sea and Mexico and a decline in oil consumption in the

United States and Europe.24

Aramco made several contributions to the industri­ alization process of the country. First was the massive generation of revenues, which provided the necessary funds for development. Second was the introduction of the concept of modern industrialization and mechanization of the

23Ibid., 2-3

24Kingdom of Saudi Arabia, Saudi Consulting House, Guide to Industrial Investment, 162-66. 109 economy. Third was the continuous effort to train and employ Saudis in both managerial and technical jobs (see

Chapter 6). Aramco's efforts also extended to the area of setting standards in the area of construction, education (by building over twenty schools), and the encouragement of

Saudis to engage in subcontracting and non-oil-related projects.

The fifth one of these organization was the General

Grain Silos and Flour Mills Organization. The Organization was founded by the Saudi government in 1972 as an autonomous organization to coordinate and operate the country's network of twelve grain silos, flour mills, and animal feed industries. The total silo capacity is about 1,480,000 tons. The flour mills' total production capacity is about

5,370 tons per day. Animal feed production is about 2,100 tons a day.25 The organization oversees the marketing of these products within and outside the country, formulates the stockpiling of wheat for emergency conditions, and coor­ dinates technical advice to farmers needed to produce good- quality wheat.26

25Kingdom of Saudi Arabia, King Abdulaziz City for Science and Technology, A Brochure (Riyadh: King Abdulaziz City for Science and Technology, 1985), 6.

26Kingdom of Saudi Arabia, Saudi Consulting House, Guide to Industrial Investment, 55. 110

Support-Oriented Institutions

To complement industrialization efforts, the govern­ ment of Saudi Arabia established a host of organizational, training, and financing support institutions. The major functions of these institutions is to provide counseling and technical support and recruit and prepare Saudi manpower for the private sector in order to enable it to take an active role in the industrial development of the country.

The first of the organizations founded for this pur­ pose was the King Abdulaziz City for Science and Technology

(KACST), which was previously known as the National Center for Science and Technology. The National Center was founded in 1977 to sponsor, support, encourage, and disseminate applied scientific research and to coordinate activities among the various scientific centers and institutions in the country. Due to reorganization and expansion of its activities, the organization was renamed King Abdulaziz City » > .. • ' for Science and Technology. Another major function of KACST was to ensure that those activities are consistent with the reguirements of the socioeconomic development of the country and to determine priorities and national policies in the fields of science and technology. KACST sought to facili­ tate communication between these research centers and institutions and the concerned authorities in order to establish a well-founded scientific and technological base capable of meeting the needs of developmental efforts in the Ill various industrial sectors of the country.2-7

The second of these organizations was the Saudi

Arabian Standards Organization, which was founded in 1972 as part of the Ministry of Commerce and is an autonomous gen­ eral directorate run by an executive officer and a board of directors. The organization has been entrusted with several major responsibilities: (1) the formulation and adoption of national standards for all commodities and products; (2) the publication and distribution of standards information as well as coordination of the various activities that relate to standards and measurements in the country; (3) the for­ mulation of necessary rules for issuing certificates of quality marks; and (4) the representation of the country in regional and international conferences relating to standards and measurements.2S

The third of these organizations was the Council of

Saudi Chambers of Commerce and Industry. The major function of the Council was to support the regional chambers of com­ merce and other institutions founded to provide organiza­ tional and managerial training and to conduct research deal­ ing with the development of the country's industrial and commercial capabilities. The Council was also commissioned

2-7Ibid., 47.

2SKingdom of Saudi Arabia, Ministry of Finance and National Economy, Saudi Industrial Development Fund, Annual Report 1982-83 (Riyadh: Saudi Industrial Development Fund, 1983), 10. 112 to publish a monthly periodical to disseminate useful information and to highlight investment opportunities in the commercial, industrial, and agricultural areas. Another major function of the Council was to manage various public activities such as permanent exhibitions to promote the growth of the national economy.29

Financial Support-Oriented Institutions

In order to complement the process of industrializa­ tion and development, the Saudi government established a number of specialized financial institutions to provide low- service-charge loans to eligible companies and entities operating in the various sectors of the economy. Four such institutions were established, each concerned with one of the country's vital major industrial and developmental sectors of the economy.

The Saudi Industrial Development Fund is the most important of these organizations. It was founded in 1974 as an autonomous organization with SR 8 billion lending capital for industrial development and SR 14 billion for the specific purpose of financing the electrification of the country. The electrification funds were earmarked to pro­ vide interest-free loans to the country's various electric companies. The industrial funds were to be given in the form of medium- to long-term loans to finance sound private-

29Kingdom of Saudi Arabia, Saudi Consulting House, Guide to Industrial Investment, 60. 113 sector industrial projects. The fund's policy is to finance up to 50 percent of the total project cost to both Saudi firms and joint ventures with at least 30 percent Saudi par­ ticipation in the venture's equity. A service fee of 2.5 percent is assessed on all loans; however the application of such fees may not start until the project is commercially operational.30

The second financial institution is the Public Invest­ ment Fund, which was established in 1971 to finance the government's commercial projects and the projects in which the government participates, whether on the national or international level. Financial assistance to these projects can take the form of loans, guarantees, or direct allocation of funds, depending on the viability of the projects to the national economy and the enhancement of industrial develop­ ment .31

The third of these financial institutions was the Real

Estate Development Fund, which was established in 1974 with a lending capital of SR 62.4 billion. The mandate of this fund is to grant loans to individuals or organizations that seek the establishment of real-estate projects for private or commercial use. These loans are on a medium- or long­ term loan basis and cover up to 70 percent of the cost of a private house with maximum of SR 300,000. On commercial loans (such as building a hotel or shopping center), the

3°Ibid., 60. 31Ibid., 61. 114

fund will lend up to 50 percent of the construction cost with a maximum of SR 10 million. The fund also may partici­ pate with, or contract with, the private sector to build residential units or any other form of urban development and improvement pro j ects.3 2

The fourth of these financial institutions was the

Saudi Arabian Agricultural Bank, which was established in

1962 to finance loans and credits for the private sector to improve or develop viable agricultural projects. By 1984-85 the bank's capital was SR 12,949 billion and provided short­ term, medium-term, and long-term loans. The bank also extends indirect agricultural subsidies to firms based on factors of production to cover agricultural equipment, water pumps, agricultural engines, animal feed, poultry, and dairy production equipment.

Summary

Having reviewed and examined the history, development, and responsibilities of the industrial development policies, projects, and institutions, one can conclude that the process of industrialization in Saudi Arabia can be charac­ terized as a totally new phenomenon that emerged without any domestic base. Historically, industrial development policies date back to the 1960s and 1970s, experiencing a massive take-off stage in 1974-75. Consequently, it remains

32Ibid., 62. 115

in its infancy when compared to that of any developed coun­ try, and even in comparison to a great number of developing countries.

In economic terms, the development process in Saudi

Arabia can be described as an import-substitution oriented industry, and is dependent on the importation of raw materials, with the exception of the state-owned hydrocarbon industries. Moreover, it is totally dependent on the importation of equipment and labor (see tables 6 and 7).

From the technology transfer point of view, the Saudi experiment cannot under any circumstances be called a healthy phenomenon. Since industry in Saudi Arabia utilizes capital-intensive technologies, it requires less manpower with high levels of skills and experience. This kind of manpower is not available at the present time among Saudi nationals and, therefore, it employs very few Saudis, mostly in clerical or semiskilled jobs. Thus it will take a number of years before Saudis can develop the necessary skills and experience. Therefore, the process of industrialization that Saudi Arabia adopted, based on capital-intensive tech­ nologies, did not meet the needs of the country. Smaller scaled, less complicated, and less sophisticated industries would have been more suitable to local conditions and would have served Saudi Arabia's industrial and manpower develop­ ment objectives. 116

TABLE 6

NATIONALITY COMPOSITION OF THE CIVILIAN LABOR FORCE 1399/1400-1404/05

Labor Force Labor Force Growth

Average Annual 1399/1400 1404/05 Increase Rate (%)

Saudi 1,493,200 1,786,000 292,800 3.7

Non-Saudi 1,532,800 2,660,000 1,127,200 11.7

Total 3,026,000 4,446,000 1,420,000 CO o

Source: Fourth Development Plan, 36. TABLE 7

IMPORT-EXPORT

1399/1400* 1400/01 1401/02 1402/03 1403/04 1405/05

Foreign Trade and Gross Domestic Product*3 (Billion SR, Current Prices)

GDP 385.8 520.6 524.7 414.4 383.2 361.0

Exports 258.5 368.4 354.9 219.4 168.6 151.8

Imports 132.4 157.5 187.8 181.3 178.7 156.2

Balance of trade 126.1 210.9 167.1 38.1 -10.1 -4.4

Current account balance 87.1 151.9 120.8 5.5 -61.4 -75.0

Share of Foreign Trade in GDP (Percent)

Exports 67.0 70.8 67.6 52.9 44.0 42.0

Imports 34.3 30.3 35.8 43.8 46.6 43.3

*Last year of Second Plan. toGDP includes import duties; exports and imports include services. 118

The research finding also identified the private sector as the major participant in the industrialization process. It also was the greatest benefactor of the finan­ cial and logistical support provided by the government. By their virtue of being profit-oriented institutions, the opportunity they offered for employing Saudi labor was extremely low to nonexistent. Although opportunities for employing Saudis in industry were possible through voca­ tional, technical, and other job-training programs, most of the private sector companies were unwilling to do so.

Despite the fact that the government had made tremen­ dous efforts to train Saudis through its vocational and technical training centers and willingness to subsidize their on-the-job training needs, private sector companies were reluctant to employ the vast majority of those Saudi graduates. The research finding also concluded that a great number of the respondents to the survey, and the partici­ pants interviewed from the private sector, indicated that the major reasons for not hiring Saudis in technical and even some managerial or administrative jobs are (1) the com­ petitive nature of their industries, which would not allow the business to absorb the financial cost and time necessary for on-the-job training of Saudis; (2) Saudis usually demand higher salaries and fringe benefits than their non-Saudi counterparts; (3) Saudis are not accustomed to a harsh work environment such as that found in industrial factories; (4) 119

Saudis demand to be promoted to the levels of manager, or general manager, in short periods of time whether they deserve it or not, regardless of whether they have the necessary experience and qualifications; (5) Saudis have a great rate of absenteeism due to family commitments that require them to be off during regular working hours (this makes them unreliable for jobs in industry, which requires teamwork); (6) Saudis don't like to work the long and demanding hours that are common in private business (48 working hours spread over six days per week) compared to governmental and semigovernmental organizations (40 working hours spread over five days per week); (7) Saudis don't like to work late or to work changing shifts, which is required in private industry to maintain an ongoing factory that operates 24 hours per day.

The research also concluded that a careful reading of the history of the process of industrial development in

Saudi Arabia indicates that industrialization resulted not from a natural development process but from the convergence of several artificial factors: (1) a massive and sudden increase of income, (2) growth of urbanization, (3) demand for construction materials and consumer goods, and (4) availability of low-cost government funds for financing. CHAPTER VI

MANPOWER DEVELOPMENT

The issue of manpower development was of critical con­ cern to those involved in early development efforts of the government of Saudi Arabia. Although general education dates back to the 1920s, when the first formal public school was opened, vocational, technical, and professional training did not take place until 1949, when the first industrial school opened in Jeddah. The school started its activities by offering a three-year program at the elementary level. A few years later the school initiated a more advanced five- year program following the primary school, which was designed to award its graduates an industrial secondary school diploma.1 (See tables 8 and 9, which show the educa­ tional development in the country and the increased number of graduates between 1970 and 1984.)

Because of the need for Saudis to fill government technical jobs, the government contracted with German experts as part of a technical cooperation agreement between

^•Kingdom of Saudi Arabia, General Organization for Technical Education and Vocational Training, Technical Edu­ cation and Vocational Training: The Road to the Future and the Successful Campaign (Riyadh: Kingdom of Saudi Arabia, 1985), 19.

120 TABLE 8

DEVELOPMENT IN EDUCATION (MALES AND FEMALES)

Number of Students (Thousand) i^k Jl

r> -U ; £ J - J | fa -W.J1 1___ U ^JI t>»™*1—11 ------^ ji, y^ JU II * r ^ d ! j u l ? ( j . s , V )

Total Other Adult Technical Teacher Training Higher Secondary Intermediate Elementary Pre-school Number of teachers Number of education education training abroad education education education education (full time) schools

547 5 43 1 11 2 7 16 61 397 4 23,118 3,107 1389-90. 597 5 43 1 14 2 8 20 70 428 6 23,856 3.283 1390-91 668 6 46 1 15 2 9 23 84 475 7 27.627 3.659 1391-92 747 8 55 1 14 2 11 27 100 521 B 31,907 4,254 1392-93 853 10 72 2 14 3 15 33 116 578 10 37,942 4 £97 1393-94 983 14 100 3 15 5 19 42 137 634 14 43,777 5.634 1334-95 1,066 12 95 4 15 8 26 49 155 686 16 51.176 6,536 1395-96 1.151 12 99 5 15 8 32 60 178 726 16 58,201 7.497 1396-97 1,228 9 106 5 20 9 41 70 197 753 18 63,557 8,695 1397-98 1,340 7 122 5 22 10 44 84 220 803 23 70,468 10,018 1398-99 1.461 9 142 6 22 10 48 93 245 862 24 78,309 11,070 1399-00 1J562 15 136 7 21 12 56 100 257 930 28 86.077 11.379 1400-01 1335 21 146 8 20 13 64 116 274 938 35 95,233 12,619 1401-02 1329 30 139 10 18 11 75 I X X I 1,074 41 104,733 13.449 1402-03 1,982 30 138 11 17 10 80 147 335 1.167 47 126,368 14,048 140344 2,149 30 159 11 17 10 94 158 373 1,242 55 138,499 15,268 •1404/05

Sourcs: Ministry of Education, Ministry of Higher Education, • w tgjX JIj u>)iJI ftU*iII 1«UJI 4 m * |J I < w l^ JI f t !■'■) 1«LJ1 < t i j U J I • uJLJI ftiaJI fjljj : j*-*-11 Directorate General for Girts Education and GOTEVT. Note: In the case of higher education faculties are counted as schools. . wUUI v~»>, ^UJI «JU ^ ; «b»^L TABLE 9

GRADUATES AT ALL LEVELS OF EDUCATION (MALES AND FEMALES)

r V jl r j ^ j i Higher education P*'"11 General education

0 > L ,U J I _ L.UJI r - l c U l i^*fa*JI jlir l i*llc oHay w J j - i l t-ijiU I VJ m JI j » l -- »JI wl ...U.JI3 C j I --- i J 1 o * Graduates Graduates from local Special Teacher Total from abroad universities Total Other education training Secondary Intermediate Elementary

8 0 8 8 0 8 48 ,8 6 5 2,205 61 2,122 2,806 12,538 29,133 1389/90

1.143 310 833 48,944 1,611 59 3,126 2 ,916 8 ,519 32,713 1390/91

1.451 306 1,145 61 ,2 5 2 2.615 102 4,642 3 ,5 2 9 12.248 38,116 1391/92

1,337 134 1,263 74,127 2,509 143 5,266 5 ,1 9 8 18.058 42,953 1392/93

2,400 404 1,996 91,342 2 ,6 6 7 116 4,753 5,874 22,839 55,093 1393/94

2,111 2 0 2 1,909 97,142 3 ,358 182 4,951 7,246 21.838 59,567 1394/95

2 .394 171 2 ,2 2 3 124.246 2,299 189 4,942 10,562 33,282 72,972 1 395/96

3 .396 186 3,210 144.047 2 ,657 193 3.575 14,190 38,650 84,782 1396/97

4 .124 249 3 ,875 153,880 2 ,689 194 4.578 14,216 42,428 89,775 1397/98

4.358 335 4,023 149,422 2 ,745 120 5,288 15,485 37.468 88,316 1398/99

5 .1 2 4 503 4,621 158,674 3,279 131 5,727 15,568 40,094 93,875 1399/00

6,590 639 5,951 178,91! 4,318 154 5,369 19,902 53,132 96,036 1400/01

8.575 2.120 6,455 81,380 5,292 185 6,565 21 ,0 0 8 48,330 - 1401/02

10.045 2 ,334 7,711 90.990 6,100 240 7,100 2 4 ,0 0 0 53,550 - 1402/03

12.280 2 ,645 9,635 99.215 6.517 108 3,524 28 ,6 9 3 60,373 - 1403/04

Source 1- Annual publication of Examination Results; Ministry of Education. • "jjUJl ijljj _ oLUi.HI ^ tol L ) i.H 0 lj ■■ 11' — ^ . j X t e l 1

2- Examination Results from universities. • o U U J I o L U t . l £j L s _ t 122 123

Saudi Arabia and Germany. According to this agreement, the

Germans will develop more advanced courses of study for these schools. Due to the success of the new program, the government of Saudi Arabia asked the Germans to help them expand it throughout the country.2 This cooperation resulted in the development of twelve technical books to cover three areas of study— electricity, auto mechanics, and motor repair.

Funding by the Ministry of Education in 1953 allowed the technical training program to be expanded to cover the industrial, commercial, and agricultural areas (see tables

10 and 11). By 1973 the number of these schools grew to nine. Thus, by 1980 the number of graduates of these indus­ trial schools reached 5,459. Due to continuous development and expansion of these industrial schools, these graduates represented twenty-six different specialties.3

Commercial education also was given a high priority.

By 1960 there were several elementary commercial schools that provided daytime and evening programs. Due to the increase in the number of applicants, and the higher number of educated Saudis in 1970, the school program was upgraded to provide a secondary commercial school diploma to its graduates. By 1975 there were eight of these secondary com­ mercial schools throughout the major cities of the country.

Thus the number of students that the program housed reached

2Ibid., 20. 3Ibid., 19-20. ] I

TABLE 10

TECHNICAL EDUCATION

Total ''1404-05 1403-04 1402-03 1401-02 1400-01 1399-00 1398-99 1397-98 139897 1395-96 1394-95 1393-94 1392-93 1391-92

Secondary Commercial Education

Number of school! u-j Ij JI J a c 26 26 20 20 16 16 15 14 14 11 11 8 3 3 3

Enrolment 44,846 6,192 6,479 5,828 4,936 4,468 4,288 3,516 2,981 2,306 1,643 1.170 584 321 134

Graduates 10,559 1,646 1,520 1,305 1.206 1,074 1,014 859 818 380 286 338 113 --

Higher Commercial Education A ,U cJI f-JasJI

Number of schools 3 3 3 4 4 4 . . . 4 3 3 2 1 jl-LfrJI Ja r

Enrolment 2,232 330 256 271 229 292 264 247 229 95 19 ----

Graduates 621 84 - 8 3 99 78 78 63 75 45 16 ----- OjeMjAJ1

Secondary Industrial Education (Sylall fit II

Number of schools 8 8 8 8 8 8 8 8 8 8 8 4 4 4 4 irjha^JI aaa

Enrolment 28,879 4,027 3,698 3,163 2,654 1.819 1.213 1,145 1,474 2,041 2,293 2,133 1.477 977 765 0 )1 * I« It

Graduates 6.584 1,112 739 534 363 321 266 391 627 687 634 345 226 187 152

Higher Industrial Education ^ L a J I

Number of schools 1 1 1 1 1 1 2 2 2 1 1 1 1 1 ^•jlaJI aaa

Enrolment 1,694 297 168 117 91 95 137 146 147 106 108 105 119 58 - UjaaCdall

Graduates 503 105 29 23 21 42 61 47 52 10 50 53 10 - -

Secondary Agricultural Education jjillJI fr II

Number ol schools 1 1 1 1 1 1 1 1 1 ^jl-aJI aar

Enrolment 1,605 153 145 148 190 246 322 265 136 ------QytocJUJl

Graduates 400 34 39 47 67 95 118 ------U>»V>JI

i^iJI f.N.11 4iUil t w ' j J I ; Source: General Organisation for Technical Education & Vocational Training. v e a l's 124 TABLE 11

VOCATIONAL TRAINING

Total *1404-05 1403-04 1402-03 1401-02 1400-01 1399-00 1398-99 1397-98 1396-97 1395 96 1394-95 1393-94 1392-93 1391-92 1390-91

Pro-Vocational Training

jfljJ I UJLC Number of Centers 8 8 8 8 6 6 6 6 3 3 3 3 ---

Trainees 8,024 1,233 1,247 1,221 966 886 753 618 303 298 259 240 ---

Graduates 6,818 1.099 1,107 1.122 854 756 615 455 240 191 185 194 -- - - asavr^O 1

Vocations) T rainina (Day time) (w-W)

Number of centers 21 21 21 21 20 20 18 15 11 9 8 6 4 4 4 4

Trainees 35.020 4,515 3,697 3.751 3,917 3,801 3,172 2.466 2,188 1.499 1.395 1.183 1,325 748 785 578

Graduates 21,146 2.579 2.970 2.808 2,455 2.024 1,498 1,275 889 1,144 695 876 582 552 382 417

Vocational Training (Evening) (VM Trainees 37,318 4,779 4,422 4,866 5,628 4,766 4,593 3,898 3,249 1.115

Graduates 27,606 3,815 3,487 3,948 4,509 3,607 3,317 2,531 1,746 646 ----

Instructors T raining Ct y j Ua JI ulorl

Trainees 621 72 64 63 61 59 47 35 53 36 66 65

Graduates 532 68 50 50 57 51 36 34 44 22 55 65

On-the-job Training J*JI ,j*1j ul* M yiJI

Trainees 579 108 158 97 171 6 7 21 11 --

Source: General Organisation for Technical E ducations Vocational Training . j ^ - l l .-u '-.llj p-i.-.li i-un s — »j_ II . i t - . u 126 about 2,306 students. By 1980 this number increased to

4,288. By that same year the number of graduates of these schools reached 3,071 students. The success of these com­ mercial schools led the government to open two higher educa­ tional institutes for financial and commercial sciences.

The first was opened in 1975 in Riyadh, and the second in

Jeddah in 1977. By 1980 these schools graduated 199 students.*

In 1955 the first agricultural school was opened under the supervision of the Ministry of Agriculture. By 1960 four more schools were opened in the major agricultural areas of the country. At this time these schools offered elementary-level education only. In 1977 the school program was put under the Ministry of Education's supervision, and it was upgraded to the secondary level. By 1980 a group of

188 students graduated.5

Vocational training was another avenue through which the government of Saudi Arabia sought to develop its human resources to facilitate the industrial development of the country (see table 10). In 1963 the first vocational train­ ing center was opened in Riyadh under the supervision of the

General Directorate for Technical Training in the Ministry of Social and Public Works. By 1980 there were eighteen of

*Ibid., 21-22. 5Ibid. 127 these centers located throughout the populated areas of the country.6

The function of these centers was to provide training to those Saudis with less academic abilities, and who were more inclined to learn basic technical skills. Thus the centers offered both day and evening programs to their pros­ pective students, particularly those who were older, who had menial daytime jobs, and who were looking for an opportunity to improve their income. These programs required no pre­ vious education and were particularly directed toward those who were illiterate. By 1980 those centers graduated 9,543 students from daytime programs. In 1980 alone these centers hosted about 3,172 students, and graduated 1,498.7

By 1977 the evening programs hosted about 1,115 stu­ dents. In 1980 that number had grown to 8,262. By the same year the evening program graduated 6,038 of this 8,262.

Evening classes were mainly designed to provide basic skills in the areas of brick laying, printing, tile laying, car­ pentry, plumbing, electrical wiring, welding, car repair, and air conditioning repair. The program was designed in such a way that no reading and writing abilities were required. This allowed the lower class of government employees, as well as those who missed formal education, to participate. This format meant that 90 percent of the training was conducted with hands-on exercises, and only 10

6Ibid., 23-24. 7Ibid. 128

percent consisted of classroom-type lectures.®

Prevocational training centers were established as

another form of training that was designed to give a chance

to another segment of Saudis between the ages of fourteen

and seventeen. The major objective of this program was to

improve these students' skills and to help them gain profes­

sional qualities that will prepare them for a brighter

future. In 1973 three of these centers were opened in

Riyadh, Jeddah, and Dammam. Due to the success of these

centers, three more were opened in Buraydah, Al-Ahssa, and

Abaha. These centers were designed to provide training over

a period of ten months at the rate of six hours a day, six

days a week, and included either industrial training such as

that described above, or commercial training.®

In an attempt to complement these schools' and

institutions' efforts, the government of Saudi Arabia

initiated an on-the-job training program. The program was

designed to require every company employing more than 100

laborers to train Saudis for an equivalent of at least 5

percent of its work force. To make this program attractive and acceptable to the private sector, in 1976 the government began a Saudi-training subsidy program. The program is said to pay any company participating in the program some of the cost of the training and the trainee's salary.

®Ibid., 27-28. 9Ibid., 28. This form of subsidy was extended to companies whether they train Saudis inside or outside the country. For Saudis trained inside the country, the government will cover the trainee's basic salary and travel expenses. The company covers other expenses such as the trainee's social security dues (5 percent employee's share and 7 percent company's share) and the cost of training materials, tools, and local transportation. The company is also due to pay every trainee who finishes his training successfully a 10 percent allowance. If the Saudi is sent outside the country by the company, then the government will cover all the trainee's expenses, providing the company pays half of his basic salary. When trainees are outside the country on training missions, the government requires that the training program be approved by the department of training at the Ministry of

Labor.10

Finally there is the trainers and technicians training program. This program recruits its trainees from among the graduates of the industrial secondary schools, and from those who graduated with high grades from the elementary technical training programs. These trainees are hired by the vocational and technical training directorate as assistant trainers. After a period of six months of on-the- job training, trainees are then granted a scholarship to

10Ibid., 28-29. 130

study in the United State or in the United Kingdom for two years.11

As the importance of training gained recognition by various government agencies and high officials, the govern­ ment decided in 1980 to combine the training departments of the Ministry of Social and Public Works with those of the

Ministry of Education. This new department was named the

Public Corporation for Vocational and Technical Training

(PCVTT). At the same time, the government created the Man­ power Development Council (MDC). The purpose of these two entities is to coordinate, design, and implement a sound and more consistent training program that is more responsive to the needs and objectives of the various government minis­ tries and agencies in an attempt to achieve the overall goals and objectives of the country's development plans.

The PCVTT was organized to be an autonomous entity operating under the auspices of a board of directors, chaired by the minister of social and public works, with an independent administrative and budgetary system. In order to make this department truly representative and responsive to the needs of all concerned parties, the minister appointed to the board of directors representatives of the various concerned government ministries and agencies and the private sector.

1;LIbid. 131

The MDC was also established as an autonomous entity that reports directly to the prime minister (the King of

Saudi Arabia). The Council was composed of fourteen board members and was chaired by the minister of defense and air force and the inspector general. The board of directors consists of the minister of interior as the. vice-chairman, the deputy minister of interior, the minister of foreign affairs, the director general of the intelligence, the minister of higher education, the minister of social and public works, the minister of planning, the minister of industry and electricity, the minister of education, the minister of finance and national economy, the deputy chief assistant of the national guard, the directorate of the public service, and the governor of the Public Corporation for Vocational and Technical Training.12

The Higher Technical Institute was founded in Riyadh in 1972 to prepare the needed trainers and technicians for the country's various industrial high schools and vocational and technical training centers. The Institute has two dif­ ferent programs, a three-year program to prepare industrial high school graduates to become teachers, and a two-year program to prepare vocational and technical training center trainers. By 1983 the Institute had graduated 86 qualified teachers, who joined the country's various industrial high

12Kingdom of Saudi Arabia, Manpower Council, Manpower Council: Functions, Organization and Achievements (Riyadh: Manpower Council, 1986), 7-9. 132 schools. The Institute recruits its students from high achievers among industrial high school graduates.13

In 1983 the Technical Mid-Level College was founded to replace the Higher Technical Institute. The purpose of this college was to upgrade the level of the program by providing college-level two-year programs in the hope that it would encourage students to join the program. The college program follows a university format, consisting of two semesters per academic year with courses are weighted by credit hours.

Although the college is not part of any of the country's universities, the director of the college is called a dean, and holds a Ph.D. degree.14

On the managerial level, in 1960 the government of

Saudi Arabia founded the Institute of Public Administration, an affiliate of the Civil Service Bureau, with branches in

Riyadh, Jeddah, and Dammam. The purpose of the institute was (1) to develop effective government workers and to improve administrative services throughout the various government ministries and agencies; (2) to provide profes­ sional advice and guidance to the various government minis­ tries and agencies on issues and matters that deal with administration and managerial problems. The Institute pro­ vides six major areas of active programs dealing with

“ Ibid., 40-41.

14Fuad M. S. Almalki, Dean of Jeddah Technical and Mid-Level College, interview by author, 13 February 1987, Jeddah, Saudi Arabia. manpower development, administrative consultancy, adminis­ trative research, information services, employment and training, and projects. In the area of manpower develop­ ment, the Institute offers training programs for (1) senior management development, a program that provides, through conferences and symposia, a stage for government senior officials to exchange views and discuss common problems and solutions; (2) preservice training, where four new govern­ ment employees are provided with basic training to begin their careers; (3) in-service training provides government employees with training courses in sixteen different fields of public administration (finance, accounting, clerical work, computer usage, and other skills that are needed to improve government services); (4) special purpose programs were designed to arrange and provide all types of training that is particularly needed and is not offered as part of the Institute's regular training program; (5) an English language program was designed to help those who are chosen to go abroad to study; (6) educational services are designed to provide the needed audiovisual equipment for the

Institute's various training programs.15

The administrative consultancy department covers various areas of concern to the government ministries and agencies, such as communication, organizations, economics,

15Kingdom of Saudi Arabia, Ministry of Planning, Fourth Five-Year Development Plan, 302-3. 134

financial affairs, and budgeting. The department also

provides advice, services, administrative reforms, and

prepares reports and studies on the issue.16

The administrative research department conducts and

publishes various research projects that focus on a wide

range of issues exploring new avenues that are germane to

the area of government administrative and managerial activ­

ities. Information services deals with the management and

maintenance of the Institute's library, document center,

microfilm collection, and computer-based services. The

employment and training department deals with the Insti­

tute's own staff, providing development and training to

Institute personnel. Finally, the projects department deals

with the Institute's physical plant projects.1"7

Public Corporations and Agencies

In addition to these government training centers,

institutes, and colleges, there are three training centers

that were designed and operated by a number of autonomous

government public corporations and agencies. The purpose of

most of these organizations is to meet rather unique or

specific needs of skilled and professional manpower. Among

these organizations, perhaps the most prominent and perma­ nent ones are the Saudi Arabian Airlines, the Royal Commis­

sion for Jubail and Yanbu, and Aramco. Saudi Arabian

16Ibid., 303. 1"7Ibid., 303-5 135

Airlines was the first among these organizations to develop

an elaborate training program. A more detailed and elabo­

rate discussion of Saudi Arabian Airlines training programs

will be presented in Chapter 8, which deals with the airline

as a case study.

The training program initiated by the Royal Commission

for Jubail and Yanbu is a tailor-made program that was

designed to develop the skilled manpower needed to operate

the government's massive petrochemical industrial complexes

in Jubail and Yanbu. Although both these cities are run and

operated by the same general directorate, the more specific

site-oriented tasks are left up to local management to deal

with in accordance with its own needs. Thus the training

program of each of these cities is individually designed and

implemented by local site management.

The training and human resource development programs

at both these industrial cities share common goals and objectives, like all the other training and human resource

development programs in the country. These goals are to give a greater chance to those Saudis who are interested in

participating in the country's industrial development and progress. Thus, these programs target Saudis from all dif­

ferent educational backgrounds (semiliterate, elementary school drop-outs, high school drop-outs, college drop-outs, and college graduates). These programs were also designed to meet local industrial needs of semiskilled, skilled, and 136 professional labor. These programs were also designed to reflect local industries/ demands and the changing nature of these skills and professions.18

Both institutes offer training and development pro­ grams in Arabic literacy, basic math, social education, and basic English language. English language is viewed as an

important tool for industrial workers in these sites because of the need to communicate with, and learn from, the non-

Saudi technicians that represent the vast majority of the working force. Also, knowledge of English is necessary because most of the machine operation manuals and instruc­ tion materials are in English. After successful completion of this program, graduates are allowed to either start work or pursue further training programs.19

The skilled workers training program is mainly designed for those who are at least elementary school drop­ outs. The program offers four distinct areas of specializa­ tion, with over twenty different concentrations. The first area is mainly divided into eight different concentrations: construction and industrial skills, such as masonry, car­ pentry, plumbing, air conditioning, electrical wiring, gar­ dening, basic technical drawing, and industrial electrician.

iaKingdom of Saudi Arabia, Royal Commission for Jubail and Yanbu, Directorate General for Yanbu Project, The Royal Commission Institute for Manpower Development in Yanbu (Yanbu: Directorate General for Yanbu Project, 1986), 11.

19Ibid. 137

The second area is that of industrial mechanics. Trainees can concentrate on either general mechanics, gasoline engines, diesel engines, or heavy equipment driving and maintenance. The third area of specialization, industrial production, offers a range of concentrations, such as metal working, welding, industrial maintenance, and electronics.

And finally, the fourth area of industrial control and oper­ ations offers trainees concentrations in either industrial machine operations and maintenance, systems analyst, com­ puter programming, and accounting and inventory control.20

In the area of professional and management training and development, both training centers attempt to attract

Saudi college graduate to provide them with on-the-job training programs. The program lasts from nine months to two years, based on each individual trainee's needs and abilities to acquire the skills to be placed as a manager or supervisor. This program is also supplemented by attendance at management courses, clerical skills workshops, and con­ ferences held outside the country. During training, train­ ees are provided with free room and board, free medical and dental care, a stipend for work clothes and tools, and any other necessary articles for training.21

2°Ibid., 3-4

21Kingdom of Saudi Arabia, Royal Commission for Jubail and Yanbu, Directorate General for Jubail Project, Informa­ tion Brochure (Jubail: Directorate General for Jubail Pro­ ject, 1983), 20-22. 138

Both institutes were founded in 1978 at temporary facilities that accommodated no more than a few dozen trainees. Today the institutes are housed in modern, sophisticated buildings that provide dormitories, recrea­ tional facilities, libraries, laboratories, workshops, and restaurants. The total land area allocated to these institutes is 419,689 square meters. The buildings cover

91,000 square meters.22

Aramco was the first entity to introduce to Saudi

Arabia, through extensive training programs, modern indus­ trialization and development. From the early days of its operation in the country, Aramco had consistently worked to train and develop Saudi human resources. Aramco's training efforts began in the early days of its operations when the company started hiring young Saudis to help drill for oil.

Due to the lack of technical and verbal language to communi­ cate, drilling instruction was mainly conveyed by the Amer­ ican experts to their Saudi help through unreliable, arduous communication efforts.23 Thus, Aramco's training of Saudi nationals was founded due to an urgent need to reach the oil, and because it is much more cost effective to train

Saudis than to import American or Canadian labor. By 1939,

22Kingdom of Saudi Arabia, Royal Commission for Jubail and Yanbu, Directorate General for Yanbu Project, The Royal Commission Institute for Manpower Development in Yanbu, 1.

23Wallace Stegner, Discovery; The Search for Arabian Oil, (Beirut; Middle East Export Press, 1971), 60-72. 139

only one year after the discovery of oil, the number of

Saudis hired by Aramco was about 3,178.24

By 1940 the company opened its first after-working-

hours school to teach its Saudi employees English, Arabic,

and arithmetic. Within eight months, two more schools were

opened and the enrollment of Saudis in these schools reached

325 students. By 1947 the number of Saudis working for the

company reached 12,018, which represented about 74 percent

of the total number of Aramco workers of 16,247. Subse­ quently, two training centers were opened at Dhahran and Ras

Tanura, then the country's then two main oil fields.23

From its inception until 1947, Aramco trained hundreds of Saudis in various training programs ranging from semi­ skilled and vocational to skilled courses, taught either in after-working-hours programs or on half-time or full-time schedules. Most of the vocational and skilled training pro­ grams involved metal welding, electrical wiring, electric motor winding, accounting, refinery operations, laboratory testing, lathe machine operations, typing, store keeping, commissary operations, ice plant and power house operations, carpentry, laundry operations, engine repair, garage repair works, air conditioning repair, gauging tanks, gas trap

24Aramco, Annual Report 1939 (Dhahran: Aramco, 1939), 138-40.

23Stegner, 60-72. 140 operations, transportation dispatching, and telephone opera­ tions.26

By 1948, following the end of World War II, with the worldwide increased demand for crude oil, the number of

Saudis who were enrolled in training programs reached a record number of 2,372. In 1950 another training program was initiated in Dhahran, and more Saudi employees were hired after they were given aptitude, intelligence, and trade tests and short periods of trial on the job before permanent status was granted. The purpose of this new selectivity policy was to ensure that the new employees were on a level where they could cope with the center's advanced training program, which was more elaborate and costly (full­ time with full pay for up to two years' vocational train­ ing). Thirty-one Saudis were chosen for this program as an experimental group. More Saudis were chosen and sent on a ten-week summer training program at the American University of Beirut, to be trained as clerks, instructors, and engineer aids. Twenty-two more Saudis were sent to the

Aramco foreign service training center on Long Island, New

York, to be trained as Arabic instructors for new American employees. In this same year, more Saudis were enrolled in various training programs. By the end of 1948 the number of

Saudi trainees reached 4,598, which represented 42 percent

26Aramco, Annual Reports 1938-50. 141

of all Saudi employees.27

The training efforts of Aramco continued to progress,

bringing to Saudi Arabia more advanced training programs

such as the Professional Employees Development Program,

which started in 1951. The purpose of this program was to

ensure a higher level of professionalism to as many Aramco

employees as possible, including non-Saudis. Thus graduates

of Saudi and other Arab colleges, universities, and techni­

cal schools who worked for Aramco were given an opportunity

to participate in in-service executive, supervisory, and

technical training programs. By the same year, Aramco

initiated a Saudi scholarship program, sending twelve Saudis

to summer training programs at the American University of

Beirut and the Aleppo College in Syria.28 Throughout the

sixties and seventies, Aramco training and human resource

development efforts increased. Subsequently, Aramco7s commitments to education expanded to include opening schools

for employees7 children. Aramco started its employees7 children education program by building about ten primary

schools for boys under the auspices of the Saudi Ministry of

Education and sponsoring an ongoing summer scholarship program, instructional training, literacy classes, and

industrial training. The majority of Aramco7s human resource development programs were conducted at the

27Aramco, Annual Report 1951.

28Aramco, Annual Report 1952. 142 company's two major training centers, the Industrial Train­ ing Shops and the Industrial Training Centers. However, during the seventies the apprenticeship program was the newest and most attractive program, graduating 4,720 trainees.29

By 1975 Aramco extended its support to the country's newly founded universities, particularly the University of

Petroleum and Minerals, by donating $4.1 million. Addi­ tionally, a $4.2 million grant for scholarship programs was given between 1957 and 1975. During this period, Aramco's efforts in training and human resource development involved training 5,500 Saudis in its ITC/ITS programs, of which

3,037 attended full-time programs. It also provided 1,165

Saudis the benefits of on-the-job training. Over 1,200

Saudis were enrolled in Aramco's continuing education pro­ gram. Almost 580 Saudi employees participated in various management training courses, and 50 Saudis were sent to a two-week management seminar at the Harvard Business School.

Aramco also granted scholarships to 283 Saudis for full-time degree studies inside and outside the country, and hosted 42 students from the University of Petroleum and Minerals on a cooperative training program.30

In 1976 Aramco established a new training center in

Dammam. Additionally, 89 Saudi employees were sent for

29Aramco, Annual Reports 1953-75.

3°Aramco, Annual Report 1976. 143

short training programs at various universities in the

United States, and 364 full-time scholarships were extended

to others. By 1977 Aramco had developed a new training pro­

gram, with its own facilities to train drivers. It also

trained 659 Saudis in its various vocational and academic

programs. Aramco's policy of employing and developing Saudi

manpower continued. By 1978 the number of Saudis working at

Aramco reached 17,894, out of a total of 30,500. Of these,

1,742 occupied supervisory jobs, which represented 41 per­

cent of all the company's supervisors. The number of Saudis

at Aramco continued to increase, reaching 26,321 of the

total work force of 48,070 by 1980. The number of Saudi

supervisors also increased to about 46 percent of all com­

pany supervisors.31

Between 1980 and 1981 the number of Saudis who partic­

ipated in full-time and part-time training programs at the

ITC/ITS reached a record number of 13,630 and 15,600 stu­ dents, respectively. The number of Saudis enrolled in the teachers' and instructors' training programs was 550 in 1980 and 664 in 1981. Thus the number of classrooms and shops

increased by 374 and 475, respectively. In 1980 Aramco established fourteen more satellite training centers. The opportunity for on-the-job training programs was extended in

1981 to 2,500 Saudis within Aramco premises, and to 679

Saudis outside the country. A total of 670 Saudis joined

31Aramco, Annual Reports 1977-80. 144 the three-year Professional Development Program (PDP).

Aramco's scholarship program also allowed 905 Saudis to attend degree programs inside and outside the country. One hundred University of Petroleum and Minerals students were employed as part of the country's cooperative training pro­ gram, and 529 university students and 1,021 high school stu­ dents were provided summer jobs.32

In 1982 Aramco hired 1,670 teachers and instructors, and had a support staff of 1,100 to teach and manage the company's ITC/ITS centers. A total of 1,300 Saudi trainees were enrolled, and 712 enrolled in the PDP program. Also

12,001 Saudi employees participated in short-term management courses and training seminars. 1,228 Saudis were enrolled in the company's higher education scholarship program. A total of 273 college students, 1,420 high school graduates, and 3,421 Saudi employees were hired. Additionally, 1,261

Saudis were hired in summer job training programs. Thus,

Aramco's work force became 57,000, of whom 33,060 were

Saudis, with 3,192 Saudis holding supervisory jobs, a figure that represents about 56 percent of all supervisory jobs.33

By 1983 Aramco hired 3,103 more Saudi employees, in addition to the 1,830 Saudi teachers and instructors and

1,430 support personnel. Thus, Aramco opened eleven more industrial training centers, six skill training centers, and

32Aramco, Annual Reports 1981-82.

33Aramco, Annual Report 1983. 145

fourteen satellite training facilities. Also, 1,380 Saudis were granted undergraduate scholarships. As more and more

Saudis graduated from universities and high schools and entered the job market, Aramco hired 115 Saudi university graduates and 1,300 high school graduates. Aramco also enrolled 770 more Saudis in its PDP program. In 1984 Aramco developed a new training program and facility to train security and fire fighters for gas and oil plant operations.

Also, a microcomputer usage training program was devel­ oped.34

By 1986 Aramco had 45,006 employees, of whom 31,900 were Saudis, with 3,328 holding supervisory jobs that represented 73 percent of the company's supervisors. Two hundred fourteen new Saudis were hired, the majority of them college graduates. Aramco also offered cooperative jobs to

72 university students and summer jobs to 1,300 university and high school students. Aramco also sponsored 908 stu­ dents in bachelor's degree programs and 26 in master's degree programs. During this same year, 200 Saudi employees received bachelor's degrees and eighteen received master's degrees.35

The Aramco training program became the world's largest program, with 400 classrooms, 125 workshops, 1,000 teachers and instructors, and 950 supporting personnel. Their

34Aramco, Annual Reports 1984-85.

3SAramco, Annual Report 1986. operation extended over seven main industrial training cen­ ters and five main skill training centers, in addition to three satellite training centers. Thus, 6,900 employees received job-related academic training, 2,100 attended tech­ nical and vocational training programs, 19,200 were enrolled in driver training, and 1,800 in heavy equipment operations and testing training programs. Also, 57 Saudi employees received short-term technical training outside the country, and 810 Saudi employees who were graduated from various col­ leges joined Aramco and were enrolled in three-year PDP pro­ grams. Two hundred ninety-one Saudi engineers enrolled in the new specialist development program, which provided them with in-depth experience to become part of Aramco's expert staff. On the management level, over 7,800 employees attended 460 short-term conferences and training seminar sessions dealing with a wide range of management, super­ visory, technical, and professional skills.36

Although Aramco was first founded in Saudi Arabia as a

Saudi company, its top management and system was one hundred percent American. Thus it is fair to say that Aramco's edu­ cational and training activities were the first efforts to transfer soft technology to Saudi Arabia. In fact, many of today's top Saudi government and private company executives and owners, particularly in the eastern province, were

36Ibid. 147 trained and educated by Aramco, either in house or on scholarship. CHAPTER VII

ANALYSIS OF THE SURVEY

Preliminary Interviews

The first interview conducted for this survey was with

Dr. Nabeel Mohamed Abdulaziz, manager of the Information

Center at the Saudi Chamber of Commerce and Industry in

Jeddah.1 After a lengthy discussion of the research objec­

tives, Dr. Abdulaziz provided this researcher with a list of

all products produced in Saudi Arabia for 1985-86. This

list classified the Saudi products under ten major categor­

ies: (1) foodstuffs and beverages; (2) textiles and

leathers; (3) wood and metal furniture; (4) paper, packing,

and office stationery; (5) glass, plastic, and fiberglass;

(6) chemicals and petrochemicals; (7) construction and other building materials; (8) aluminum and metallics; (9) trucks, cars, and vehicle accessories; (10) machinery and electrical equipment.

In addition to this list, Dr. Abdulaziz provided various governmental publications that deal with government and nongovernment industries. He suggested that an

1Nabeel Mohamed Abdulaziz, Director of Information Center, Saudi Chamber of Commerce, interview by author, 12 January 1987, Jeddah, Saudi Arabia.

148 149 investigation be done of some of the government's major cor­ porations and directorate projects that operate various types of technological industries, such as Saudi Arabian

Airlines or the desalinization factory. Dr. Abdulaziz also suggested interviewing some of the businessmen who are active in introducing industrialization to Saudi Arabia, such as Al-Jafaly and the Xenel group, since most of these people have worked hard to adapt and modify the technical aspects of foreign industries to suit the Saudi environment.

This process of modification is crucial for the successful transfer of technology. Pointing out this need, he men­ tioned a case in which a businessman attempted to import a particular industry that he later found to be unworkable in

Saudi Arabia simply because the machine is unable to operate in the Saudi environment, which is notorious for its heat and humidity for most of the year, as is the case in Jeddah, the major Saudi industrial city. Discussions with the people directly involved in industry proved to be highly valuable.

Another avenue that Dr. Abdulaziz suggested was the universities, since many of their faculty act as consultants and researchers. He also suggested a review of the proceed­ ings of the conference that was organized by the Ministry of

Planning. The paper presented at that conference by Dr.

Mohamed Safer proved to be very important. Dr. Safer's paper dealt with the issue of technology transfer as a 150

"process." For a country like Saudi Arabia, that process starts by preparing•the younger generation for the various educational techniques in order to comprehend, understand, and become aware of the role of technology in development.

The paper also points out the importance of vocational and technical training and the importance of educating the public to accept and understand the role of technology in development.2

In an interview with this researcher, Dr. Abdulaziz explained the role of the Chamber of Commerce and Industry in the process of technology transfer. The Chamber con­ ducted research dealing with the issue of patent protection and the role of training in the development of technology in the country.

The publications of the Chamber of Commerce and Indus­ try were very useful in describing the industrial setting in the country. The Saudi Products Guide for 1985-86 was par­ ticularly useful. It is a very informative and well orga­ nized book, listing the names, addresses, telephone numbers, and product names (with a display of pictures of these pro­ ducts) in ten major groups. The categories used to group these products are based on the Ministry of Industry and

Electricity's classification method.

2Kingdom of Saudi Arabia, Ministry of Planning, National Center for Science and Technology, Proceedings of a Conference on Technology and Development in the Kingdom, vol. 1, 33-34. 151

One of the most notable factors apparent after review­

ing the publication is that 48 percent of these companies

are located in the city of Jeddah, most particularly in the

industrial city (industrial park). Given the proximity of

these companies, the researcher began the preliminary inves­

tigation with a series of telephone calls to these companies

in order to discuss the research and to schedule interviews

with the company president or manager. These executives

showed a surprisingly positive response to these phone calls

and a willingness to schedule interviews. Based on inter­

views with top officials of several companies,3 the

researcher was able to formulate a survey questionnaire that

made it possible to collect the preliminary data needed for

the research.

The first draft of the questionnaire contained 44

questions covering basic information about the company's

background, activities, market share, benefits received from

the Saudi government, and type of ownership (joint venture,

etc.). This preliminary questionnaire was tested on three

companies in Jeddah in the form of a pilot study. The ini­ tial response was very positive. Through contact with cor­ porate officials and the responses and comments on the ques­ tionnaire, the researcher was encouraged to expand and revise it. Within ten days a more elaborate and extensive

3Jeddah Industrial Park, Jeddah, Saudi Arabia, inter­ views with a number of top officials of Saudi manufacturing companies, January 1987. 152

questionnaire was developed, consisting of 110 questions.

The pilot study also indicated that the best format

for the survey was multiple choice, allowing for a few exceptions that required only a yes or no, or further elabo­ ration in comments. A covering letter was attached to the survey explaining the nature of the questionnaire, the pur­ pose of the research, and the researcher's background and school affiliation. The questionnaire was divided into five major areas (company background, manpower, marketing, train­ ing, and technical) in order to give the respondents an organized approach to the subject matter.

The preliminary research findings indicated that there are a large number of Saudi companies involved in the manu­ facturing sector of the economy, about 1,300 total, spread over a vast geographical area and ten different manufactur­ ing categories. Thus, a representative sample of 110 cases reflecting geographical (major characteristic) and manufac­ turing variations (secondary characteristics) was for­ mulated. The sample distribution was designed to carefully reflect these various characteristics of the universe. The main criterion for selecting the units was the geographical area representing the major industrial cities in the country

(Riyadh, Jeddah, Dammam, Al-Ahssa, and Al-Qaseem). The secondary characteristics for selection were based on the type of product, the form of ownership, and the nature of the business. At least one case was chosen to represent the 153 secondary characteristics when available. Since the vast majority of these manufacturing companies are located in

Jeddah, almost 30 percent of the Jeddah questionnaires were hand delivered. In many of these cases the researcher waited while the questionnaire was completed, or returned within a day or two to pick it up. Many of the question­ naires we re returned grossly incomplete or empty and were, therefore, discarded. The remaining questionnaires were mailed directly to the company address, with a self- addressed, stamped return envelope.

It was important to hand deliver as many question­ naires as possible. The initial pilot study revealed that most of the surveyed companies are managed and operated by non-Saudi employees, who have demonstrated (90 percent of the time) an unwillingness to cooperate in filling out ques­ tionnaires. This figure is compared to a rate of 60 percent for their Saudi counterparts, who tend to be either the owner of the factory or a very close relation, such as a son or brother. For this reason the researcher anticipated receiving fewer responses if he depended totally on mailing the questionnaires. This information was compounded by the fact that in a closed culture like Saudi Arabia, the best way to acquire information is through direct personal con­ tact. There are three reasons for the success of this tech­ nique: (1) it gives the researcher greater opportunity to provide clear background about the research and its 154

importance; (2) it gives the respondent respect regarding his role in answering the questionnaire; and (3) it gives

the respondent, particularly the owners of the factory or those related to the owner, a welcome opportunity to talk

about their venture and role in the venture.

As predicted, responses to the questionnaire corre­

sponded to the way in which they were received. Of the 90 questionnaires that were mailed directly to the company,

only 10 were returned. Further, it is also interesting to note that most of the questions dealing with financial mat­ ters were left unanswered, as well as those questions asking the name and address of the company and the respondent.

Understanding the nature of Saudi business and its political climate, it was deduced that those questions were not

answered because of the questions dealing with the company's policy on Saudization (hiring and training of Saudis in technical, professional, and managerial jobs). Therefore,

it was decided to hand deliver and pick up 20 of the ques­ tionnaires. This measure guaranteed greater access to the needed data.

The total number of completed questionnaires came to

23, 6 from the ones that were hand delivered and picked up

in Jeddah, and the remaining 17 from the 90 questionnaires that were mailed directly to the companies. The question­ naires that were hand delivered represent 18 percent of the original sample of 110. More importantly, the sample was 155 designed to represent the various industrial categories and the various characteristics such as product nature, owner­ ship, size, and invested capital.

Analysis of Sample Survey Data

The sample survey data consists of twenty-three cases, representing companies that are located in four cities, and nine of the ten industrial categories. The only category having no representation is the trucks, cars and vehicles accessories category. There are also two cases in which the industrial category is unidentified (see table 12). Twenty- one of these companies (92.3 percent) were founded after

1975. The vast majority of these companies (17, or 73.8 percent) were founded during the oil boom period between

1975 and 1982. Three companies (12.9 percent) were founded more recently, in 1983, 1984, 1985, and one company's found­ ing date is unknown (see table 13).

The survey data also indicated that two cases fell into the unidentified category, and the remaining twenty-one cases were scattered over the remaining nine categories, with five companies (21.7 percent) falling into the category of machinery and electrical equipment (see table 14).

Another important aspect of the survey data was the nature of the ownership of the sample companies. Eleven cases of the sample (47.8 percent) were found to be wholly owned by Saudis, seven companies (30.4 percent) were joint TABLE 12

CROSS-TABULATION OF COMPANY LOCATION BY INDUSTRIAL CATEGORY

Paper Packing Glass, Construction Food Textile & Office Plastic & Chemicals & & Building Aluminum Unident. S Bev & Leather Supply Fiberglass Petrochem Materials & Metal Machinery Total

Riyadh 1 0 0 0 0 1 1 0 0 3 50.0 0.0 0.0 0.0 0.0 33.3 50.0 0.0 0.0 13.0

Jeddah 0 3 1 1 1 2 1 2 4 15 0.0 100.0 100.0 100.0 50.0 66.7 50.0 50.0 80.0 65.2

Damam 1 0 0 0 1 0 0 1 1 4 50.0 0.0 0.0 0.0 50.0 0.0 0.0 25.0 20.0 17.4

Aljubayl 0 0 0 0 0 0 0 1 0 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25.0 0.0 4.3

Total 2 3 1 1 2 3 2 4 5 23

Note: Each column entry has raw count over percentage. TABLE 13

YEAR FOUNDED

Relative Cum Absolute Freq Freq Year Freq (%) (%)

1955 1 4.3 4.3

1962 1 4.3 8.7

1975 2 8.7 17.4

1976 3 13.0 30.4

1977 2 8.7 39.1

1978 2 8.7 47.8

1979 3 13.0 60.9

1980 2 8.7 69.6

1981 1 4.3 73.9

1982 2 8.7 82.6

1983 1 4.3 87.0

1984 1 4.3 91.3

1985 1 4.3 95.7

Unkn. 1 4.3 100.0

Total 23 100.0 __— 158

TABLE 14

INDUSTRIAL CATEGORY

Relative Cum Absolute Freq Freq Cateqory Label Freq (%) (%)

Unidentified 2 8.7 8.7

Food & beverages 3 13.0 21.7

Textile & leather 1 4.3 26.1

Paper packing & office supply 1 4.3 30.4

Glass, plastic & fiberglass 2 8.7 39.1

Chemicals & petrochem 3 13.0 52.2

Construction & building materials 2 8.7 60.9

Aluminum & metal 4 17.4 78.3

Machinery 5 21.7 100.0

Total 23 100.0 --- 159 ventures, three cases (13 percent) were share holders, and two (8.7 percent) were limited share holder companies (see table 15).

One factor revealed by the survey is that due to the government's 1974 industrial encouragement program, twenty of these companies (87 percent of the sample) receive government benefits, including low-cost land, financial aid, low-cost capital financing, and low-cost utilities (see tables 16 through 20). Also due to the same industrial encouragement program, eleven of these companies (47.8 per­ cent) were found to receive government protection, compared to five (21.7 percent) who received no aid and seven (30.4 percent) who didn't answer (see table 21). The above per­ centages can be explained by the response of those companies concerning the government's protection policy. Only two

(8.7 percent) thought it was good enough, while thirteen

(56.5 percent) thought it could be better, and four (17.4 percent) thought it needs to be revised. Four cases (17.4 percent) provided no answer (see table 22).

Technological Involvement

Nine questions were asked to identify the technologi­ cal level of the respondents. The first question in this series concerned the nature of the technology utilized in the factory. Five cases (21.7 percent) were found to util­ ize highly sophisticated technology, eleven cases (47.8 per­ cent) utilized sophisticated machinery, three (13 percent) 160

TABLE 15

OWNERSHIP NATURE

Relative Cura Absolute Freq Freq Cateqory Label Freq (%) (%)

Wholly owned 11 47.8 47.8

Joint venture 7 30.4 78.3

Share holders 3 13.0 91.3

Limited shareholder 2 8.7 100.0

Total 23 100.0

TABLE 16

RECEIPT OF GOVERNMENT BENEFITS

Relative Cum Category Absolute Freq Freq Label Freq (%) (%)

Yes 20 87.0 87.0

No 1 4.3 91.3

No answer 2 8.7 100.0

Total 23 100.0 - TABLE 17

RECEIPT OF LOW-COST LAND

Relative Cum Category Absolute Freq Freq Label Freq (%) (%)

Yes 20 87.0 87.0

No 2 8.7 95.7

No answer 1 4.3 100.0

Total 23 100.0 ___

TABLE 18

RECEIPT OF FINANCIAL AID

Relative Cum Category Absolute Freq Freq Label Freq (%) (%)

Yes 3 13.0 13.0

No 19 82.6 95.7

No answer 1 4.3 100.0

Total 23 100.0 - TABLE 19

RECEIPT OF LOW-COST CAPITAL FINANCE

Relative Cum Category Absolute Freq Freq Label Freq (%) (%)

Yes 17 73.9 73.9

No 5 21.7 95.7

No answer 1 4.3 100.0

Total 23 100.0 ---

TABLE 20

RECEIPT OF LOW-COST UTILITIES

Relative Cum Category Absolute Freq Freq Label Freq (%) (%)

Yes 17 73.9 73.9

No 5 21.7 95.7

No answer 1 4.3 100.0

Total 23 100.0 163

TABLE 21

RECEIPT OF GOVERNMENT PROTECTION

Relative Cum Category Absolute Freq Freq Label Freq (%) (%)

Yes 11 47.8 47.8

No 5 21.7 95.7

No answer 7 30.4 100.0

Total 23 100.0 ---

TABLE 22

OPINION ON GOVERNMENT PROTECTION

Relative Cum Absolute Freq Freq Category Label Freq (%) (%)

Good enough 2 8.7 8.7

Can be better 13 56.5 65.2

Needs total revision 4 17.4 82.6

No answer 4 17.4 100.0

Total 23 100.0 164

utilized average machinery, three (13 percent) utilized all of the above, while one company provided no answer, which

represents 4.3 percent of the total sample (see table 23).

Therefore, three tables (24-26) were compiled for the purpose of comparing the type of technology utilized— highly sophisticated (computerized machinery), sophisticated machinery (needs skilled operators), or average machinery

(needs operators with average skills; see question 11 in appendix)— to the number and type of Saudi employment.

These three tables list the total number of employees, the total number of Saudi employees, the ratio of the total number of Saudi employees to the total number of company employees, the breakdown of the number of Saudis employed in managerial positions, the breakdown of the number of Saudis employed in factory-related jobs, and the ratio of Saudis working in factory-related jobs to Saudis working in manage­ ment positions.

A study of table 24 indicates that in companies that use highly sophisticated technology, Saudi participation is very low. The ratio of Saudi workers to the total number of employees in companies that use highly sophisticated tech­ nology ranged between 0.6 percent and 19 percent, with an average of 6 percent. Moreover, the ratio of Saudis working in factory-related jobs to Saudis working in management positions was about 1.27. 165

TABLE 23

NATURE OF TECHNOLOGY

Relative Cum Absolute Freq Freq Category Label Freq (%) (%)

Highly sophisticated 5 21.7 21.7 machinery

Sophisticated machinery 11 47.8 69.6

Average machinery 3 13.0 82.6

All the above 3 13.0 95.7

No answer 1 4.3 100.0

Total 23 100.0 ---

TABLE 24

COMPANIES UTILIZING HIGHLY SOPHISTICATED TECHNOLOGY

Total No. Ratio of Saudis in Saudis in Ratio of of Total No. Saudis to Management Factory Factory to Employees of Saudis Total Positions Positions Management

37 7 19 5 5 1

250 17 7 5 12 1.4

62 3 5 2 1 0.5

175 1 0.6 1 0 0

130 10 8 5 5 1

654“ 00 6b 18“ 23“ 1.27b

“Total number. bOverall ratio. 166

TABLE 25

COMPANIES UTILIZING SOPHISTICATED MACHINERY

Total No. Ratio of Saudis in Saudis in Ratio of of Total No. Saudis to Management Factory Factory to Employees of Saudis Total Positions Positions Management

200 7 3.5 5 2 0.4

725 176 25 42 134 3.2

333 7 2 2 5 2.5

52 1 0.2 1 0 0

160 19 12 3 16 5.33

450 49 11 9 40 4.44

300 30 10 10 20 2

45 3 6.6 1 2 2

400 26 6.5 6 20 3.33

41 1 0.25 1 0 0

350 18 5 15 3 0.2

3,056“ 337“ llb 95“ 242“ 2.55b

“Total number.

^Overall ratio. 167

TABLE 26

COMPANIES UTILIZING AVERAGE MACHINERY

Total No. Ratio of Saudis in Saudis in Ratio of of . Total No. Saudis to Management Factory Factory to Employees of Saudis Total Positions Positions Management

70 6 8.5 1 5 5

241 13 5.3 3 11 5.5

120 18 15 6 12 2

406“ 37“ 8. 6b 9“ 28“ 3. llb

“Total number. b0verall ratio. 168

A study of tables 25 and 26 indicates that as the level of the technology utilized by the companies decreased, the number of Saudi working increased. When comparing the ratio of Saudi employees in management positions to Saudi factory workers, the ratio drastically decreased as the type of technology decreased. Table 25, dealing with sophisti­ cated machinery, shows that the total number of Saudis in management positions is 95, while there were 242 factory workers, a ratio of 2.55 to 1. Table 26, dealing with aver­ age technology, shows that the total number of Saudis in management positions is 9, while there were 28 factory workers, a ratio of 3.11 to 1.

Tables 25 and 26 also show that the ratio of the number of Saudis working in the company to the total number of employees is 11 percent and 8.6 percent, respectively, which represents an increased of 5.0 and 2.6 from the pre­ vious category.

These conclusions confirm the proposition made earlier in this research that the best method for technology trans­ fer in a developing country such as Saudi Arabia is through technologies that utilize less sophisticated machinery. The data brought together in these tables clearly indicate that as the technology became less sophisticated, the ratio of

Saudi workers to the total number of employees in the com­ pany increased, particularly in factory-related jobs where

Saudis work directly with the machine. However, we should not assume that the Saudi experiment in technology transfer

is a successful venture. These data reveal that in spite of all the efforts of the Saudi government to encourage

Saudization, the private sector still is not cooperating, nor is it willing to take the issue seriously. The process of industrialization began in Saudi Arabia in 1974 with mas­ sive government financial support, including loans of up to

50 percent of the costs of establishing a factory, low-cost land, and a buy-Saudi program. Additionally, the Saudi labor law stipulates that any company operated in Saudi

Arabia, whether Saudi or not, must make up 75 percent of its staff from Saudi nationals. To support this law, the government launched a massive human resource development program in which companies were reimbursed for the training expenses for Saudi nationals and the salaries of Saudi trainees. In spite of these efforts, however, in the vast majority of private companies surveyed in this research, with the exception of Saudi Cable Company, the average number of Saudi employees did not exceed more than 11.0 per­ cent, with about one-third to one-half of these workers being in management positions. This indicates that in spite of all efforts, the key factor involved in the successful transfer of technology is the type of technology being util­ ized.

Another interesting fact revealed by the questionnaire deals with the character of the technology utilized by the companies. In 70 percent of the cases, capital-intensive technology was utilized, compared to 22 percent utilizing labor-intensive technology (see table 27). The other six questions focused on the method of acquiring technology and the similarity of the technology transferred to the source one (see appendix, questions 13 through 18). Contrary to the commonly held belief that most of the transferred tech­ nology comes from the United States, the research indicated that the source of the vast majority of the technology that was imported to the Kingdom of Saudi Arabia was primarily

Europe (56 percent). The majority (22 percent) comes from

Germany, while only 17.4 percent comes from the United

States (see table 28). The reasons for Europe's domination of the field were offered to me during the interviews with company executives. The primary reasons cited were the geographical distance and the unreliability of Americans to provide adequate after-sale services and cooperation.

Another interesting finding of this survey is the amount of paid capital, invested capital, the average annual revenues, and the average profit. The survey data indicates that the paid-up capital ranges from SR 5 million to SR 200 million. The invested capital ranges from SR 6 million to

SR 700 million. The average annual revenues range from SR 5 million to SR 500 million. The average profit indicates that over 56 percent of the respondents describe themselves as average and above, compared to 26 percent below average, 171

TABLE 27

INDUSTRIAL INTENSIVENESS

Relative Cum Absolute Freq Freq Category Label Freq (%) (%)

Capital intensive 16 69.6 69.6

Labor intensive 5 21.7 91.3

Both A & B 1 4.3 95.7

No answer 1 4.3 100.0

Total 23 100.0 -- TABLE 28

TECHNOLOGY NATIONALITY

Relative Cum Absolute Freq Freq Category Label Freq (%) (%)

No answer 1 4.3 4.3

US 4 17.4 21.7

Japan 2 8.7 30.4

UK 1 4.3 34.8

Germany 5 21.7 56.5

Italy 2 8.7 65.2

France 1 4.3 9.6

Europe 1 4.3 73.9

Saudi 1 4.3 78.3

Danish 1 4.3 82.6

International 1 4.3 87.0

Swiss 1 4.3 91.3

Sweden 1 4.3 95.7

Far East 1 4.3 100.0

Total 23 100.0 173

and 17.4 percent no answer (see tables 29-32).

Manpower

The manpower section mainly focuses on the number and

role of Saudis in both management and factory-related jobs,

with special emphasis on their level of education and qual­

ifications. The results were very disappointing, consider­

ing that twenty-two of these companies receive government

assistance and protection from foreign imports. The total

number of Saudis working in these companies range from 1 to

57. However, one company is a unique case, with an unusual

number of Saudis— 183 (see appendix, questions 25-37).

The low number of Saudis working in management com­

pared to expatriate positions represents almost the same low number of Saudis working in factory related jobs, which when

compared to the number of non-Saudis, also represents a rather small minority, averaging between one-twentieth to one-sixth. This is a poor representation, considering the government's efforts and policies to encourage the private sector to participate in the industrialization process and the government's policy on Saudization. According to Saudi

labor laws, companies that operate in Saudi Arabia, whether

Saudi or non-Saudi, should employ up to 75 percent of their working force from Saudi nationals. However, the law indi­ cates that if that percentage cannot be satisfied, then the government will grant exemptions for such companies, provid­ ing that they promise to take every possible action to TABLE 29

PAID CAPITAL

Relative Cum Millions of Absolute Freq Freq Saudi Riyals Freq (%) (%)

0 3 13.0 13.0

5 2 8.7 21.7

6 3 13.0 34.8

7 1 4.3 39.1

8 1 4.3 43.5

10 3 13.0 56.5

16 1 4.3 60.9

25 2 8.7 69.6

26 1 4.3 73.9

28 1 4.3 78.3

32 1 4.3 82.6

50 1 4.3 87.0

126 1 4.3 91.3

150 1 4.3 95.7

200 1 4.3 100.0

Total 23 100.0 _ — _ TABLE 30

INVESTED CAPITAL

Relative Cum Millions of Absolute Freq Freq Saudi Riyals Freq (%) (%)

0 3 13.0 13.0

6 2 8.7 21.7

10 1 4.3 26.1

15 1 4.3 30.4

20 8.7 39.1

25 1 4.3 43.5

26 1 4.3 47.8

32 1 4.3 52.2

45 1 4.3 56.5

60 1 4.3 60.9

65 1 4.3 65.2

80 1 4.3 69.6

85 1 4.3 73.9

120 1 4.3 78.3

126 1 4.3 82.6

140 1 4.3 87.0

200 1 4.3 91.3

315 1 4.3 95.7

700 1 4.3 100.0

Total 23 100.0 --- TABLE 31

AVERAGE ANNUAL REVENUE

Relative Cum Millions of Absolute Freq Freq Saudi Riyals Freq (%) (%)

0 5 21.7 21.7

5 1 4.3 26.1

7 1 4.3 30.4

8 1 4.3 34.8

13 1 4.3 39.1

17 1 4.3 43.5

20 8.7 52.2

25 1 4.3 56.5

30 1 4.3 60.9

37 1 4.3 65.2

60 1 4.3 69.6

70 1 4.3 73.9

73 1 4.3 78.3

75 1 4.3 82.6

110 1 4.3 87.0

120 1 4.3 91.3

200 1 4.3 95.7

550 1 4.3 100.0

Total 23 100.0 177

TABLE 32

AVERAGE PROFIT

Relative Cum Absolute Freq Freq Category Label Freq (%) (%)

Excellent 1 4.3 4.3

Good 7 30.4 34.8

Average 5 21.7 56.5

Below average 6 26.1 82.6

No answer 4 17.4 100.0

Total 23 100.0 ---- 178 correct the situation in the near future. For that purpose the Saudi government initiated a policy of financial assistance to companies that hire and train Saudis (see

Chapter 6).

Marketing

The marketing section of the survey indicates that 78 percent of these companies are aware of the existence of other companies in the same business. The number of compet­ itors ranges between one and twenty-six. They are also aware that these companies represent a major competition

(see appendix, questions 40-58). While their products are only distributed between consumer goods and industrial and construction products, about 74 percent of them benefit from the government's "buy Saudi" program (see appendix, question

46). Almost half of these companies sold between 26 and 100 percent of their products (see appendix, question 47) through that program. The survey also indicates that about

40 percent of these companies market anywhere between 1 and

40 percent of their products outside Saudi Arabia (see appendix, questions 44 and 45).

Although 87 percent of the respondents indicate that they have a marketing department (see appendix, question

48), only 61 percent conduct research studies on a periodic basis (see appendix, question 49). Also, only 34.8 percent based their prices on marketing research, while 21.7 percent based their prices on foreign competition. The majority of 179

43.5 percent based their prices on cost plus (see appendix, question 55). As far as advertising activity is concerned, almost all of them are involved with one form of advertising or another, and some of these companies utilize all forms of advertising. However, about 83 percent of them utilize exhibitions or trade fairs as a form of advertising to gain national and regional recognition (see appendix, questions

51-53).

Training

Among the most viable and effective methods of indus­ trial development and technology transfer is training.

Therefore, the training section in the questionnaire was given greater emphasis and the largest number of questions,

40 of the 110. Among the many disappointments encountered in my research, the data revealed in the training section was the most shocking of all. The survey found that only

39.1 percent of the respondents have a training program to train Saudis (see appendix, question 59), and only 26.1 per­ cent have this program documented (see question 60). The survey also indicated that only 30.4 percent of the respon­ dents train new trainees (see appendix, question 61), and only 13.0 percent have a training center (see questions 67-

76).

Although the government has a number of agencies to train Saudis in various skills and professions, and operates a job placement department, most of the respondents claim 180 that they utilize advertisements to recruit Saudis (see appendix, question 62). Not only does the government pro­ vide these services free of charge, but it also subsidizes any company that participates in training Saudis (see Chap­ ter 6). It is also interesting to note that according to this survey, about 65 percent of the respondents claim that they have difficulty finding Saudi employees. However, this researcher was able to personally observe a long line of

Saudis looking for jobs at the western region labor office, a fact that was confirmed by a high official of this office.

The official indicated that the problem lies in the finan­ cial incentives that these companies offer for Saudis (see appendix, questions 38 and 39) as well as the lack of clear career development programs for Saudis within most of the private-sector businesses.

The survey also found that 47.8 percent of the respon­ dents indicated that they have a policy on Saudization, but only 17.4 percent acknowledged that this policy is docu­ mented. Also, when they were asked whether they anticipate having 100 percent Saudis, 82.6 percent did not answer the question, 4.3 percent estimated 1990, while 13 percent indi­ cated never (see appendix, question 92).

Technical

Among the most important and essential elements in the technology transfer process is the issue of research and development centers, and the location, activities and number 181 of nationals working in the centers. Only 52.2 percent of the respondents indicated that they have an R&D center (see appendix, question 94) located on the company's premises

(see question 95). As far as the number of workers is con­ cerned, they range from one to twenty-five, where one to ten of them were identified as Saudis (see appendix, questions

96 and 97). The survey also indicated that the same number of companies have developed new products since they began operation and the number of these products varies between one and fifty (see appendix, questions 98 and 99). Also,

43.5 percent of these claimed that their products were designed in-house and 4.3 percent claimed that the new pro­ duct (s) were designed by the venture partner (see appendix, question 100).

Concerning machine repair, 78.3 percent of the respon­ dents claimed that they have resident engineers to fix their machines, and only 4.3 percent claimed that machines can be fixed by the operators, while 17.4 percent provided no answer (see appendix, question 101). The survey also indi­ cated that about 70 percent of the respondents make spare parts either in-house or at a local machine shop or both

(see appendix, question 103). Also, 65.2 percent indicated that they have completed improvements on their machines, whereas 56.5 percent of them were made by the company's engineers and only 4.3 percent by the venture partner (see appendix, questions 106 and 107). Almost 65 percent of them 182

indicated that these improvements were necessary either to

improve the production process or to adjust the product to the country's environment.

Among the most important findings of this survey is that the process of technology transfer in the Kingdom of

Saudi Arabia is without effective rules or regulations.

Another important finding of the survey and the research in general is that the aim of a vast number of Saudi companies that came to existence between 1970 and 1982 is to make a quick fortune by making or assembling consumer goods or con­ struction material, capitalizing on the country's urgent needs for these products and the government's "Buy Saudi" program.

The survey also concluded that despite the govern­ ment's extensive efforts and programs to provide the private sector with qualified Saudi manpower, the private sector fails to give the these Saudis a chance to join in the development process. Most Saudis who sought employment in the private sector were faced with low salaries and unfair benefits compared to those that they offered to expatriates. CHAPTER VIII

SAUDI ARABIAN AIRLINES: CASE STUDY

The initial survey of the Saudi economy and the manufacturing sector indicated that the importation of tech­ nology to the country has been restricted to the import of machinery, expertise, and foreign labor. The initial survey finding also indicated that most of the technology importa­ tion was primarily through joint ventures, turn-key proj­ ects, or direct purchase, in order to further explore the dynamics and conditions of this phenomenon, a case study approach was adopted in this research.

Two case studies were chosen. The first is a public- sector company, selected primarily for its early involvement in the importation of technology and for its massive partic­ ipation in efforts to Saudize the work force. The second case study is a wholly owned Saudi company in the private sector, selected for its involvement in the importation of technology to the country and for its relatively high par­ ticipation in Saudization, with a particular focus on the technical level. Thus, the purpose of the next two chapters is to explore the important issues and activities relating to the transfer of technology and to examine the level of success and failure experienced within these two companies.

183 184

Through these case studies an assessment will be made as to the common characteristics that may be of value to other companies, both public and private, throughout the Kingdom of Saudi Arabia.

The purpose of the case study is to examine the impact of the importation of technology on the development of Saudi technology and to determine whether or not a transfer of technology, as defined earlier in this research has occurred, on both the organization and individual levels.

On the organizational level, this research will exam­ ine the efforts, policies, and programs that are directed toward achieving technology transfer. On the individual level, this research will evaluate the Saudi individual's level of absorption, adaptation, and participation in this technology transfer process. This process is known in Saudi

Arabia as Saudization. Thus the word "Saudization" became a buzz word that is widely used among both the public and pri­ vate sectors. The term is also used to refer to the efforts and policies that are designed to prepare Saudi citizens to take over technical or professional jobs from expatriates.

Saudization is specifically targeted in the industrial sector and in governmental organizations that deal with highly sophisticated, technologically oriented services such as the electrical or petrochemical industries. 185

Historical Development of Saudi Arabian Airlines

Saudi Arabian Airlines Corporation (popularly known as

Saudia) was founded in 1944 as result of a personal gift of a single DC-3 airplane presented by U.S. President Franklin

D. Roosevelt to King Abd al-Aziz Ibn Saud during a meeting in Cairo in February of that year. By the end of the year two more DC-3s were purchased by the government in a move to found an official airline company. Throughout 1945 and 1946 the planes were used for domestic flights only, primarily transporting passengers and mail between the cities of

Riyadh, Jeddah, and Dhahran. In September 1946, Saudi

Arabian Airlines was placed under the auspices of the Minis­ try of Defense and Aviation, and by October had scheduled its first international flight, to Lyddah airport in

Palestine.

By 1951 the company had expanded its fleet and opera­ tions to include thirteen airplanes, five of which were large planes that were used for passengers and cargo. The company's operations were spread over various routes includ­ ing five domestic cities and four major Arab countries.

During the next decade the airline continued to grow on both the domestic and international levels as it acquired larger and more sophisticated airplanes. By 1960 the company ser­ viced twenty major towns and cities in Saudi Arabia, and sixteen international airports, utilizing fifteen airplanes.

During this period the company also opened its first basic 186 flight training program to train Saudi pilots in an attempt to increase the number of Saudi pilots.

During the next decade, from 1961 to 1970, Saudia con­ tinued to grow. In 1961 it was the first Middle Eastern airline to acquire jet airplanes when it added two Boeing

720Bs to its fleet. In 1963 a royal decree declared Saudia an independent, government-owned commercial entity, operat­ ing under the auspices of the Ministry of Defense, with its own board of directors, and managed on a day-to-day basis by a director general appointed by the board. In this same year, Saudia's staff grew rapidly, reaching a record number of 2,500 employees.

In 1964 three DC-6 jet airplanes were added. In 1967

Saudia joined the International Air Transport Association

(IATA). In that same year the airline acquired three DC-9 airplanes, which enabled it to expand its international network to five more international airports in Europe and

North Africa. In 1968, after acquiring two Boeing 707s, the airline was able to provide nonstop passenger service between Saudi Arabia and London. By 1970 Saudia was able to carry over 600,000 passengers.

The period from 1971 to 1980 was one of rapid growth and development as Saudia expanded ifcs fleet size, physical infrastructure, technical services, destinations, passenger capacity, and number of Saudi employees. In 1972 the company added five Boeing 737s, allowing it to provide jet 187 service to twenty domestic towns and cities. By 1973 Saudia transported over one million passengers and increased its cargo traffic by 50 percent over the previous year. By

1975, as a result of increased government financial support

(made possible by the oil boom), the airline phased out its nonjet DC-3 planes and added four Tri-Star L-lOlls to its fleet. Also thanks to governmental support, the company cut its domestic fares by 25 percent, resulting in a 38 percent increase in passenger traffic.

By 1976 the company had added ten more Boeing B-737s, increasing passenger traffic to a record 3.1 million. The next year nine more airplanes were added, increasing pas­ senger transport capacity to 4.9 million. In 1978 the network expanded to service three more European cities. In

1980 four more Tri-Stars were added, which enabled the com­ pany to add four more Far Eastern international airports to its network, to total of twenty-four international airports, carrying about 9.5 million passengers.

The 1980s marked a turning point for Saudia. Between

1980 and 1985, the company had acquired two more Tri-Stars, ten Boeing 747s, eleven Airbus A300-600S, and ten Boeing

747-300s. This increase in airplanes, unprecedented in the history of the business, brought Saudia's fleet to a total of over one hundred airplanes, employing 25,000 people, and carrying an average of eleven million passengers per year.

Also during this period, seven more international cities in 188

Asia, the Middle East, and Europe were added to Saudia's international network. Thus, Saudia became by far the largest company in the Middle East and the tenth largest airline in the world (see table 33).

This massive expansion of operations was accompanied by a corresponding physical expansion that enabled Saudia to become the world's tenth largest airline. In 1981 two international airports were opened in Jeddah and Riyadh.

The opening of these two airports gave Saudia its own termi­ nals, which hosted large hangar and technical services. In

1982 another major physical infrastructure was established when Saudia City was completed. Saudia City was the first of its kind to be built in the country. It includes a huge housing complex capable of housing the company's non-Saudi staff and employees, with complete facilities including recreational facilities (swimming pool and health club), shopping center, four-channel local television broadcasting, and its own water and electricity supply.1

In order to meet the demands of this expansion, the company diversified its development efforts to include its technical, managerial, and automation services, and manpower development and training. Most of Saudia's early activities involved strong efforts to develop the skills and profes­ sional capabilities of its employees. However, the rapid

1Saudi Arabian Airlines, Saudia Annual Reports, 1960- 85 (Jeddah: Saudi Arabian Airlines, 1960-85). TABLE 33

MIDDLE EAST AIRLINES: KEY FACTS, 1987

Passenger Passenger Passengers km Flown Load Fac­ Freight Ton-km Number of 1 Change Number Airline Carried (xlOOO) tor (1) Flown (xlOOO) Employees on 1986 Aircraf

Afghan Airlines 217,916 174,676 72.0 8,093 1,307 +15.5 12

Air Algerie 1,719,867 2,247,743 66.8 10,622 7,152 + 5.2 21

Alyemda 204,436 247,209 54.9 3,182 1,207 + 1.9 6

Cyprus Airways 683,732 1,586,492 73.7 30,378 1,406 - 4.3 9

EgyptAir 2,891,216 4,906,274 62.1 111,974 11,770 + 4.1 28

Emirates 471,491 1,049,287 63.8 36,600 878 +88.4 5

Ethiopian Airlines 594,076 1,243,828 54.6 86,264 3,475 + 1.5 28

Gulf Air 2,485,996 4,639,439 61.6 125,997 4,477 - 8.1 19

Iran Air 4,693,856 4,746,998 80.2 137,769 9,741 - 1.3 26

Iraqi Airways3 ——— — —— —

Kuwait Airways 1,511,057 3,770,887 62.1 243,957 5,339 - 2.9 21

Libyan Arab Airways 1,515,115 1,446,683 64.7 3,501 5,242 + 9.9 33

MEA 353,271 642,157 55.3 13,135 4,606 - 2.5 12 8T 6 TABLE 3 3 — Continued

Passenger Passenger Passengers km Flown Load Fac­ Freight Ton-km Number of 2 Change Number of Airline Carried (X1000) tor (1) Flown (xlOOO) Employees on 1986 Aircraft

Pakistan International Airlines 4,434,401 7,760,566 63.5 327,944 19,286 - 3.1 39

Royal Air Maroc 1,110,956 2,218,186 55.5 50,931 4,484 + 4.8 21

Royal Jordanian 1,177,985 3,449,623 58.2 186,296 4,750 + 5.6 16

Saudia 10,258,393 15,639,636 58.2 453,220 23,106 - 5.3 107

Somali Airlines - 124,190 291,930 63.3 3,903 786 - 2.0 5

Sudan Airways 417,195 470,740 69.1 9,305 1,720 -17.6 11

Syrian Arab Airlines 390,644 791,836 50.4 13,512 3,588 + 2.0 14

Tunis Air 1,132,618 1,389,294 65.6 15,655 4,471 - 0.8 13

Turkish Airlines 3,260,942 3,296,395 62.9 46,900 6,675 -11.8 31

Yemen Airways 417,354 584,461 52.7 7,274 1,875 - 0.2 7

Total 40,066,707 62,644,340 — 1,931,412 127,341 — 484

Source: International Air Transport Association, June 1988. aNot reported. 191 growth and acquisition of sophisticated airplanes in large numbers taxed these development efforts. By 1969, 74 per­ cent of Saudia's employees were Saudi. However, as the number of airplanes increased, particularly as the depen­ dence on jet planes increased, the need for foreign exper­ tise also increased. Therefore the overall percentage of

Saudi employees to non-Saudi employees began to decrease to about 46 percent Saudis to 54 percent non-Saudis, mainly in the technical and professional fields.2

The determination to develop the technical and profes­ sional capabilities of Saudis has always been one of the country's major objectives. Saudia's efforts to Saudize its staff and technical and professional employees began in its early days. However, it wasn't until 1963 that a formal in- house training center was founded as the nucleus of Saudia's various training activities.

The Corporate Training and Development Center (CTDC) is Saudia's mother training center and for twenty-four years provided companywide English language training and basic technical and flight operations training. The center's main area of concentration is the ongoing training for new entry- level employees in the areas of report writing, negotiation skills, data processing, and cost benefit analysis.3 More advanced courses that range from two days to four weeks in

2Saudia Annual Report, 1969, 15.

3Saudia Annual Report, 1985, 22. 192 duration are also offered in the areas of business science, computing, finance, administration, and technical studies.4

In the 1969 Annual Report, the director general of the airlines described Saudization (which can be called soft technology transfer) as a major objective of the company's newly developed five-year comprehensive training plan. To ensure the success of this plan, the company signed a man­ agement and technical assistance contract with Trans World

Airlines (TWA). According to this contract, TWA agreed to provide Saudia with training programs for Saudi nationals in an attempt to achieve 100 percent operation by Saudi nation­ als in as short a time as possible.3

As the demands of the business grew, its training needs also grew and became more diverse. Today, Saudia's training activities include five major areas. In addition to the original and main training activities at the Corpo­ rate Training and Development Center, the company developed four more training departments that are oriented toward special tasks. These centers operate in separate facili­ ties, but are in close cooperation with the CTDC in the basic areas of training and development. These four depart­ ments include a technical services training center, a flight training academy, a marketing and communication center, and

4Ibid.

5Saudia Annual Report, 1969, Preface by the Director General, Mr. Ismail Sindi, 4. 193 a data services training center.

Due to the company's expansion in the area of manage­ ment and administration in recent years, the training and development center developed a consultancy service depart­ ment in the fields of organizational development and manage­ ment. One of the major achievements of this department was the design and implementation of a number of companywide employee attitude surveys. The objective of these surveys is to develop guided development plans that could benefit corporate and departmental decision makers in developing a workable and productive work environment.6

The flight operations department was the first and oldest department to start its own training program. The operations training program was established in 1960 with an initial enrollment of eighteen cadets. Although cadets received their initial flight training in Saudi Arabia, they were sent to the United State to obtain their private pilot's licenses. According to Captain Al-Amri, the center also was responsible for routine pilot refresher training.

This training is a requirement in the business in order to ensure that pilots continually maintain their skills and stay current with the latest professional developments,

6Ibid., 23. 194 particularly flight equipment and operations.7

Although pilots were sent to the United States to train, the idea of having a complete in-house pilot training program persisted until 1985. The company's commitment to

Saudization was the impetus it needed to upgrade its flight operation training to a basic flight training academy. The academy was accredited by the U.S. Federal Aviation Adminis­ tration (FAA). The new program expanded from flight train­ ing for a private pilot's license to an air transport rating

(ATR) program that is capable of graduating pilots as high as the rank of captain. The operation department training program extended to included programs to train flight engi­ neers, flight dispatchers, and other flight operations ser­ vices specialists.®

The academy utilized two different locations for its flight training program, the Jeddah International Airport and an airfield 100 kilometers outside of Jeddah, near the

Petromin industrial complex at Rabigh. By the end of 1985 the academy graduated a total of 87 flight operations ser­ vice staff, including 26 pilots and 15 flight engineers, all of whom were examined and certified in the country by

7Captain Hamood Abdullah Al-Amri, Assistant General Manager, Flight Operation Ground Training, Flight Training Center, Saudi Arabian Airlines, interview by author, 14 Feb­ ruary 1987, Jeddah, Saudi Arabia.

aSaudia Annual Report, 1985, 22. 195 registered FAA examiners.9 During their course of training, cadets receive classroom instruction in both locations; how­ ever, their flight training is conducted mostly at the

Rabigh airfield. The flight training is conducted on single-engine Piper Archer 11s or Beech Bonanza A-36s, or multiengine King Air airplanes.10

The second departmental training program was started by the Technical Services Department (TSD). The TSD train­ ing program was founded as part of a purchasing agreement for DC-9 airplanes in 1963. The program started by sending a number of Saudia staff to receive technical training in the United States.11 When the Center for Training and

Development was established in 1963, the Technical Services

Department became part of its facilities. With the opening of Jeddah International Airport in 1979, the technical ser­ vices training program was moved to a larger and more sophisticated modern facility at the airport, and acquired an independent status under the auspices of the vice presi­ dent for technical services. In 1969 the department started a more formal and well planned project of recruiting a larger, but select, number of Saudis. According to Mr.

Tamarik, manager of the Saudia Technical Services Training

9Ibid. 10Ibid.

1:LJamil Tamarik, General Manager, Technical Services Training Center, Saudi Arabian Airlines, interview by author, 16 February 1987, Jeddah, Saudi Arabia. 196

Department, the goal was to achieve at least a 90 percent rate of Saudization among company technical services by

1990.12

By 1970 the first 30 Saudis were recruited and placed in the company training center to receive technical language and basic technical instruction before being sent to the

United States to receive on-the-job training by the air­ plane's suppliers. Between 1970 and 1978, the department's number of recruits fluctuated between 30 and 60 per year.

The company's fleet continued to grow rapidly, and by 1979 the number of recruits had grown to 450. This aggressive recruiting efforts continued until 1986. By the end of

1986, the total number of Saudi recruits numbered about

3,000.13

According to Mr. Tamarik, the job responsibilities of the Technical Services Department are highly demanding due to the difficult requirement of maintaining the airline's fleet at a high level of safety. Therefore, technical per­ sonnel must be trained to become highly disciplined and to appreciate the responsibilities of their jobs. Mr. Tamarik indicated that such discipline is enforced through the Tech­ nical Services Training Department, which utilizes harsh measures, particularly in terms of monitoring trainees' attendance and progress. The monitoring system includes measures such as pay cuts of as much as $50 for being more

12Ibid. 13Ibid. 197

than five minutes late to class. If tardiness is continual,

the trainee may be dismissed. Although in earlier days it

was difficult to find Saudis willing to take technical

jobs,according to Mr. Tamarik, beginning in 1980, due to

very attractive incentives (training salary up to $1,000 per

month, full room and board, free tickets, and two years of

special training in the United States) and future job

security provided by the company, the ratio of job appli­

cants to positions available was about 30 to 1. The surplus

of applicants has been a factor in the company's ability to

maintain strict disciplinary measures.

The technical training program is very comprehensive.

In addition to the basic five- to eight-month technical

English language training given at Saudia's Corporate Train­

ing and Development Center, trainees are sent to the United

States to receive from two to three years' technical train­

ing in areas such as general aviation, hanger/line, power

plant overhaul, and airframe to avionics.14 After returning

from the U.S., trainees are then set to start a locally

developed on-the-job training program. The on-the-job training program assigns each trainee to a professional

technician to receive close training and supervision. The trainee remains in that status until receiving the necessary

recommendation from the supervisor and a job offer from his prospective work station. Only then can a trainee become a

14Jamil Tamarik, interview. 198 full-fledged employee of the company.15

The Marketing Department is the third department that started its own separate training program. The major objec­ tives of the Marketing Department is to maintain the com­ pany 's share of the market both in and out of the country.

Thus the major objectives of the training program are to prepare personnel for the country management program. The major function of country management personnel is promote

Saudia as a viable commercial airline in the international arena.

The marketing training program also provides courses that teach qualified Saudis the necessary skills to work at the company's catering service. Saudia catering service was founded as a joint venture operation with the Scandinavian

Airlines Service (SAS). The catering service is one of

Saudia's major commercial business operations, extending its services to over forty-nine airlines that fly in and out of

Saudi Arabia. As an investment the catering service gen­ erates an average of about SR 350 million per year in revenues.16

15Faisal A. Subaihi, Chief Instructor, Maintenance and Recurrent Training, Technical Services, Saudi Arabian Air­ lines, interview by author, 16 February 1987, Jeddah, Saudi Arabia.

16Adil A. Khan, Manager Sales Projects, Catering Ser­ vices, Saudi Arabian Airlines, interview by author, 16 Feb­ ruary 1987, Jeddah, Saudi Arabia. 199

The marketing training program offers both long- and short-term career development courses. An example of the long-term program is the country management program. Short­ term courses are designed to familiarize employees with new techniques and procedures in the marketing business.1-7

During 1985, as many as 1,104 courses were offered to a total of 8,962 employees (an employee can attend more than one course per year).1® The program also offers field training courses in various cities on Saudia's routes, such as Riyadh, Dharan, Cairo, Karachi, and London. The depart­ ment is also involved in planning, designing, and conducting a number of conferences that deal with marketing issues, including the company's annual conference.19

The Communications Training Department is the air­ line's fourth separate training center, founded to provide

Saudia employees with a two-year training program leading to a communication technician certificate. The training department also offers a course on telephone and teleprinter operations, radio, and other telecommunication equipment.20

As the company grew and became more sophisticated, a greater number of people were required to operate the company's highly sophisticated telecommunications equipment, including the automated reservation network.

1-7Saudia Annual Report, 1985, 22.

iaIbid. 19Ibid.

2°Ibid. 200

The automated reservation network involves a system

linking several thousand visual display units to satellite, cable circuits, and a central computer. The computer used to be located in London, but was moved to Saudi's Data and

Communication Building in 1987. The department training center also offers in-house training and supervises the process of sending Saudis overseas to acquire needed skills.

By 1985 the center had trained enough Saudis so that up to

40 percent of the installation and maintenance department

(156 employees and staff) jobs were Saudized.21

Saudia has been a long-time user of automated systems, but as mentioned earlier, most of its sophisticated systems were positioned overseas with other airlines, including

British Airways and Alitalia. When the Data Services

Department was first established in 1967, its primary func­ tion was to provide the company with financial and statisti­ cal data for management purposes. At that time the depart­ ment employed about 30 people.22 By 1970 the company had its first IBM 360/20, which enabled it to computerize its information processing, thus its staff was increased to

65.23 The department continued to expand as the operations of the airline grew.

22-Ibid., 20.

22Saudia, Data Services, Data Services Brochure (Jeddah: Saudia, 1985), 9.

23Ibid. 201

Saudia's use of a large number of highly advanced air­ planes, and its complex network of cities and reservation stations, mandated that the company utilize the expertise of other airlines to manage and operate its computer programs and systems. This operation was expensive, as Saudia had to pay for the systems in full, in addition to high charges for their upkeep of the systems. Among these programs and com­ puters were two IBM 3033 computers and programming systems that range from the reservation system to fare and tickets.

Computerization also included a department control system at

British Airways and a material management and technical system at Alitalia.24

As the availability of more gualified Saudi computer specialists grew, the company decided to bring these com­ puter systems to Jeddah and built a large building to house both the Saudia communications department and the computer facilities. Thus, in 1983 Saudia established a Data Ser­ vices Training Department at the Data Services Department, which was under the auspices of the executive vice president for finance and administrative affairs.

The Data Services Training Department is Saudia's newest training center. It was founded to provide the com­ pany with the needed Saudi staff and technicians to handle its computer facilities: over five computers, 1,800 termi­ nals, and over a dozen highly sophisticated programs that

24Ibid., 8-9. 202 range from a basic personnel and payroll system to a reser­ vation and inventory control system.25

According to Mr. Abdulrahman Rajeh, manager of the skills branch of the Data Services Department, the depart­ ment trains three different types of computer specialists: data entry, computer operators, and programmers and systems analysts.26 The training program recruits new Saudi trainees from the scientific group of high school and col­ lege graduates. Trainees are then placed in the Corporate

Training and Development Center's English language training program for as long as it takes for each individual to become competent in reading and writing English.

Once the recruits finished their language courses, they were sent to the United States to be trained as pro­ grams and systems analysts for a period of fourteen months.

This arrangement is part of an agreement that was specifi­ cally designed to train Saudis at Boeing's computer facili­ ties in Seattle, Washington. Approximately fifteen to twenty students are taken into the program each cycle.

After completing the U.S. training program, graduates are then placed at Saudia's Data Services Department in an in- house training program for eight to twelve weeks before being assigned to a job. The purpose of this program is to

25Ibid., 9.

26Abdulrahman H. Rajeh, Manager of Human Resources, Data Services Department, Saudi Arabian Airlines, interview by author, 1 February 1987, Jeddah, Saudi Arabia. 203 get those new graduates acquainted with Saudia's data services standards and procedures. Once the trainees have completed this program, they are assigned to entry-level jobs. During the period in which the recruit is holds entry-level status, he continues to receive on-the-job training. Entry-level status can last as long as it takes for the recruit to prove himself to be capable of becoming a full-pledged junior programmer.

The computer operators training program is somewhat different. According to Mr. Rajeh, after trainees complete their basic English training they receive in-house on-the- job training classroom instruction that is provided by the department's local trainers and professionals. This is also the case with data entry specialists. Both of these pro­ grams can last for up to two years before a trainee becomes a full-fledged employee.

According to Mr. Isam Burai, manager of data services administration, systems analyst trainees are recruited from among advanced programmers and university graduates in com­ puter science.2-7 Trainees in the systems analyst program can receive training either in-house or in the United King­ dom or the United States. The U.K. and U.S. training pro­ grams are specially designed for the systems analysts to receive advanced training at a number of international

2-7Isam Burai, Manager Data Services Administration, Data Services Department, Saudi Arabian Airlines, interview by author, 24 February 1987, Jeddah, Saudi Arabia. 204 airline training centers. Due to the newness of the train­ ing program and the highly specialized programming skills that are needed to train airline programmers and systems analysts, training for such skills can only be obtained in computer training departments at major airlines. Therefore, the Saudia center has not been able to graduate any Saudi systems analysts to date. On the other hand, the center was able to train a number of junior- and senior-level program­ mers, which brought the number of Saudi programmers of these categories at the Data Service Administration department to

100 percent.

The Data Services Department provides a well docu­ mented career path policy for the trainees, including guide­ lines for their progression, the time frame necessary for promotions, and the qualifications necessary to achieve each stage of career development. This policy is documented in sixty-four legal-size typewritten pages and includes the specific formulas for progression between grades.

The achievement of 100 percent Saudi programmers at the junior and senior level at the Data Services Department is also a major achievement for Saudia, as the development of human resources represents the nucleus of any industri­ alization and development efforts. According to Mr. Isam

Burai, manager of data services administration, the total number of these Saudi programmers reached 75 by February 205

1987.2a These training efforts also brought the total number of Saudis that work at the Data Services Department to 209 by February 1987, which represents 75 percent of the

total Data Services Department work force. Due to the new­ ness of the training program, most of the Saudi work force represents skilled and specialized computer operators and programmers, including ten drivers, filing clerks, and mes­ sengers and twenty-one computer operators and programmer trainees.

Another major achievement of Saudia is its effort to completely domesticate its flight operation program. This effort resulted from the fact that as the airline grew and became more sophisticated and continued to upgrade its fleet, moving into the jet age like many major airlines, which made demands on experienced pilots greater, it became harder and harder to attract experienced non-Saudi pilots.

Thus there was little choice for Saudia but to develop its own flight operations training program. However, as the opportunity presented itself, Saudia equipped itself with the necessary equipment to set up complete in-house basic and advanced pilot training facilities. It is also impor­ tant to note that Saudia was the first airline outside the developed world to become completely engaged in the jet age.

2SSaudization Plan, 5-12. 206

Although Saudia began its basic flight training school in 1960, it wasn't until 1979 that it started its advanced simulators, navigation, and cockpit training. The Boeing

B-737 simulator was Saudia's first ground school equipment.

By 1985 Saudia had already installed Tri-Star and Boeing

B-747 simulators, thus making its flight operation training center complete with the necessary equipment to provide professional ground school training for new and old pilots.

This equipment completed Saudia's ground school technical needs and thus become self-sufficient in its flight opera­ tions training program.29

With the establishment of the new basic flight academy in 1985, Saudia became the first Middle Eastern airline to have a self-sufficient, complete flight operations training program capable of training and developing its own human resources in both ground and flying schools. Most of the flight operations training center personnel are non-Saudis.

However, according to Captain Al-Amri, this is intentional and represents a realistic approach to its Saudization policy.30

Captain Al-Amri also indicted that due to the.rela­ tively small number of Saudi pilots, the department's policy is to keep as many Saudi pilots flying as possible in order to gain enough experience to complete the Saudization of

29Ibid.

3°Captain Hamood Abdullah Al-Amri, interview. 207 active pilots. He also indicated that in order for a pilot to become a full instructor for advanced airplanes, he has to have been a captain for at least ten years on one of these planes. Due to the short history of the Saudia pilot training program, Saudia has not been able to graduate any

B-747 pilots.

The Corporate Training and Development Center (CTDC) is perhaps Saudia's most important and effective vehicle for

Saudization and development of the airline's human resources. Since its inception, the center has been responsible for the training of more than 10,000 Saudi nationals and 1,500 non-Saudis. The center offers a number of training programs including language, technical services, communications, computers, management, and advertising.3x

The center's achievements are not only in the field of training, but also in the design, testing, and implementa­ tion of various new management and administrative techniques through its management consultancy program.

The CTDC center has also served as a forum for confer­ ences and symposia that deal with the many issues of concern to the airline and the airlines industry in the Gulf coun­ tries, particularly in the marketing and planning areas.

Due to its extensive training programs and direct guidance to a great number of Saudia's employees, the center had great influence on the company's culture and provided a

31Saudia Annual Reports, 1963-85. 208 unique set of professional values and ethics, all of which have added new and exciting characteristics to the profes­ sional life of the country.

Although most of Saudia's technical activities are in the area of services, rather than manufacturing, the com­ pany's various training programs made major contributions to skills and professional development of a great number of

Saudi nationals. Thus, the research found Saudia to be a unique case of success in its efforts to accomplish the first, and most important, stage of technological develop­ ment and industrialization: the development of human resources. This success can be attributed to the company's long-standing, intense efforts and aggressive training programs.

By February 1986, the number of Saudis working in the technical services represented about 48 percent of the total of 5,299 technicians. Given that there are some 3,000 trainees in various stages of training and development, which usually takes from three to four years, the Technical

Services Department projects that once these trainees start graduating, the percentage of Saudi employees at the depart­ ment will grow to about 68 percent by the end of 1986 and about 90 percent by 1989.32 The figure of 90 percent repre­ sents the Technical Service Department's projection after

32Captain Al-Amri, interview. 209 the Saudization plan is completed.33

The task of educating and training young Saudis is difficult. Many come from high schools with little or no industrial background. Given the difficult task, Saudia's efforts are highly regarded and commended, particularly in light of the cost of training such a large number of Saudis.

The company has made a tremendous sacrifice in order to achieve such an important goal. According to Mr. Hassan

Tyeb, general manager of personnel planning at Saudia, the annual training budget averaged as high as SR 600 million, the equivalent of US $160 million.

Saudia has made a great number of significant contri­ butions to the country of Saudi Arabia and its people. Its efforts at human resource development have been highly suc­ cessful and its incorporation of high standards has facili­ tated a work ethic of the greatest respect. The company's persistent hard work has resulted in the evolution of a com­ mercial entity capable of competing in the international market. This level of success has been achieved because of

Saudia's abilities to transform and adapt to its culture a unique kind of technology, which is the technology of self- respect and self-belief.

33Husseen Bandakji, Assistant General Manager for Cor­ porate Training and Development Center, Saudi Arabian Air­ lines, interview by author, 2 February 1987, Jeddah, Saudi Arabia. CHAPTER IX

SAUDI CABLE COMPANY: CASE STUDY

The government's program to facilitate industrializa­ tion within the private sector, formalized in an act in 1977 titled "Encouragement of National Industry," attracted a large number of Saudi companies to the manufacturing sector.

The majority of these companies are involved in the manufac­ ture of consumer products and other light industries. Aside from the public-sector industries, the preliminary research finding indicated that only a few companies from the private sector were involved in heavy industries. Only one of these companies responded to the survey research. Saudi Cable

Company was identified by the survey research to be a lead­ ing Saudi company involved in heavy industrialization,

Saudization and technology transfer in an organized and well-planned fashion. Thus the purpose of this chapter is to review and examine the policies and efforts of Saudi

Cable Company to Saudize its work force and transfer tech­ nology.

Historical Development

Saudi Cable Company was established in 1976 after two years of extensive research and negotiations with a number

210 211 of international cable manufacturers in order to enter into technical partnership. In 1975 a joint venture agreement was signed between a group of Saudi entrepreneurs led by

Xenel Industries and an American technical partner called

Anaconda. Anaconda, a subsidiary of Standard Oil of Cali­ fornia, was the second largest cable manufacturing company in America. The agreement stipulated that the paid-up capi­ tal of the newly founded Saudi Cable Company would be SR 3.5 million, of which 60 percent of the company was to be allo­ cated to the Saudi partners and the other 40 percent was to be taken by Anaconda. In 1976 the company obtained its com­ mercial registration, thus a capital financing agreement was obtained from the Saudi Industrial Fund and several Saudi banks. In that same year, Anaconda sold half of its share to Standard Oil of California, thus giving it 20 percent position in the venture. This sale resulted in an increase in the company's capital from SR 3.5 million to SR 10.5 million.1

By 1978 the company began production of two types of cable, aluminum bare cable and insulated copper wires and cables, both of which are 1KV gauge. Although the company's original production capacity was projected to be 3,500 tons of copper cable per year, by the end of 1978 the company's production capacity grew to 6,000 tons. Thus the company's

"■•Saudi Cable Company, Company Brochure (Jeddah: Saudi Cable Company, 1987), 1. 212 sales for that year reached SR 15 million. Due to increased demand for its products in the local market, in 1979 the company increased its production capacity to 15,000 tons.2

In order to meet increasing demand, by 1980 the company expanded its factory to meet the production of 25,000 tons.

This production capacity increase was the result of a capi­ tal expansion from SR 10.5 million to SR 70 million.

As result of this capital increase the company was able to obtain additional loans of SR 220 million from a group of international banks and SR 101 million from the

Saudi Industrial Fund. The expansion was directed toward increasing cable manufacturing capacity and to build three new plants. The purpose of the new plants was to provide the cable manufacturers with the most essential raw materials, copper rods, polyvinyl chloride (PVC) cable insulating material, and wooden reels.3

The major objective of this investment was to enable the company to become a self-sufficient and integrated manufacturing company. This investment was also aimed at cutting costs incurred by the importation of these raw materials, ensuring high quality of raw material as well as protecting the company against the risk of pricing and delivery policies of the exporting countries and companies.4

Operating from the same self-sufficiency philosophy, in 1980

2Ibid., 1-2. 3Ibid., 3.

4Ibid. 213 the company started a training program in skilled and semi­ skilled jobs for Saudi nationals. In 1982 the program grad­ uated an entire factory shift of 157 technicians.3

The company's determination to expand and ensure its control over the supply of raw materials led to the purchase of 50 percent of the shares of Midal Cables of Bahrain in

1982. In addition to its production of aluminum cables,

Midal Cables was, like Saudi Cable, capable of manufacturing its raw materials of aluminum rods. Thus Saudi Cable's attraction to Midal was based on its desire to ensure access to raw material for its newly founded aluminum cable factory in Jeddah. This investment also ensured Saudi Cable's capacity to produce bare overhead cable and small and large insulated, armored and nonarmored multicore aluminum cables.

Saudi Cable's quest for expansion and modernization led it to expanded its low-voltage insulation into cross-linked polyethylene (XLPE). XLPE is an advanced method of cable insulating that uses a higher grade of insulating material to ensure a better and more environmentally sound cable.

The quest for better quality and a bigger share in both local and international markets led the company in 1984 to acquire a more technologically sophisticated manufactur­ ing process to produce a computer-controlled XLPE insulation line; screening, sheathing, and rewinding lines; and a com­ pletely automated-curing, medium-tension cable production

3Ibid., 2. 214 line. The new production line is also capable of producing power cables of up to 35 KV gauge, with its new 61 strander.

A number of other significant developments took place at Saudi Cable. A new two-week supply of raw material storage was built, with overhead cranes and a mechanical storage and retrieval system. A 50,000-square-meter ware­ house was built to house the company's various stock items.

A push-button automatic cutting and nailing wood and reel- making plant capable of producing up to 70,000 reels a year was also purchased. These upgrades make the company less dependent on outside supply in its manufacturing industry.®

The company quickly became the country's only manufacturer of a wide variety of cable products ranging from low- to high-tension power cables.

The year 1985 also saw continued growth and develop­ ment for Saudi Cable Company. It was in this year that the state-of-the-art SR 90 million copper rod mill factory started production. The mill rod production capacity was designed not only to fulfill the company's needs for raw material but also to export these raw materials to other

Middle Eastern and N'orth African countries. In early 1986 the company opened its new PVC compounding plant. The plant was designed to use locally produced PVC resins (raw

®Ibid. 215 material) manufactured at the newly established SABIC petrochemical plants at Yanbu and Jubail."7

In order to keep up with national and regional devel­ opment, Saudi Cable Company has already obtained a license to manufacture metallic telephone cables, fiber-optic tele­ phone cables, electronic telecommunication systems, acces­ sories for electrical and telecommunication cables, and plastic cable covers for identifying underground cables, it

is expected that the metallic telephone cable plant will be

in production around the middle of 1989 and that the fiber­ optic plant will be in production year later. Capitalizing on the future ability of the country's mining industries to produce several types of materials, including copper and aluminum, the company is already engaged in preliminary plans to build an aluminum smelter in Yanbu and a copper refinery for the production of copper cathode.® At the end of 1986 the company was able to buy out both of its foreign partners and became a 100 percent wholly owned Saudi company.

Manpower Development

Among the companies surveyed for this research, Saudi

Cable Company was by far the most diligent and progressive in the area of recruiting, training, and employing Saudis in all of its various administrative, professional, and skilled

''Ibid. 8Ibid. 216 jobs. Although the company is deeply involved in highly sophisticated and competitive industrial technology and markets, the number of its Saudi employees reached a total of 183 in December 1986. This figure represents about 25 percent of the total work force of 725. However, 127 of these Saudis work in technical and professional factory- related jobs, representing 35 percent of those categories.

Thus the remaining 56 employees work in administrative and finance areas in the company's various managerial and semi- technical departments (see table 34).

Although the company is only eleven years old and industrialization is still a relatively new phenomenon in

Saudi Arabia, the company has instituted an aggressive and continual training program to train Saudi nationals for both technical and managerial positions. In 1980 the company started an extensive technical training program. Within the first two years, the program graduated 157 Saudi technicians and continues to train an average of 20 Saudi students per year. During that period the training program expanded to include basic and advanced managerial and semi-skilled tech­ nical programs, including such skills as fork-lift driver, machine operator, and marketing, purchasing, and storage supervisors and managers.

The company's basic training program utilized in-house training techniques that included classroom lectures, on- the-job training, and external company facilities inside and 217

TABLE 34

SAUDI CABLE COMPANY MANPOWER DISTRIBUTION BY SAUDIS AND NON-SAUDIS

Total Saudis Non- Saudis

% of % of % of Total Division Number Division Number Division Number Manpower

Corporate 4 12 29 88 33 5

Operations 127 28 319 72 446 62

Materials 22 25 67 75 89 12

Finance 4 10 35 90 39 5

Commercial 7 15 40 35 47 6

Administration 19 40 47 60 66 9

Project development -- -- 5 100 5 1

Total 183 25 542 75 725 100

Source: Saudi Cable Achievement Reports, 1987. 218 outside the country. Most of the external company training programs throughout the Kingdom of Saudi Arabia were sponsored or conducted by professional institutions such as the Saudi Chamber of Commerce and IBM. Training programs offered outside of the Kingdom of Saudi Arabia were spon­ sored or conducted by the company's technical partners in the United States or Holland, or other companies involved with similar industries.9

Saudi Cable also sought to broaden its participation in educating Saudi youth. The company offered several col­ lege scholarships to Saudi students for study both inside and outside the country based on an agreement to return and work for the company. Further, the company offered up to twenty Saudi college and high school students summer jobs and internships. In order to encourage students to partici­ pate in this program, the company paid each student a salary of SR 2,000 during the program. Unlike the training pro­ grams in other companies, Saudi Cable offers its technical trainees (i.e., machine operators) an up-front job commit­ ment with SR 2,000 per month plus other benefits such as housing allowance, transportation allowance, uniforms, and medical care. Management trainees and engineers are usually hired and then trained, thus they receive the full benefit package: salary, 25 percent living allowance, transporta­ tion compensation, and medical care and social security.10

9Ibid., 2. 10Ibid. 219

Presently, Saudis working at Saudi Cable number 183, which represents 25 percent of the company's work force (see table 35). However, training is an ongoing activity. In

1986 the company offered 163 Saudis training opportunities ranging from five days to twenty-two months. During that same year the company sent twelve Saudis outside the country to training programs, ranging from three days to twenty days

(see table 35).

According to Mr. Hasu Shah, executive vice president of the company, Saudi Cable made tremendous progress in

Saudizing many technical and administrative jobs in a rela­ tively short period of time because of the company's deter­ mination to attract and train Saudis for those positions.

Mr. Shah also added that the policies responsible for attracting Saudis to the company were developed because of the company leadership's consideration for the long-term viability of the company.11 In the early days, the company faced difficulties in recruiting and adapting Saudis to the factory environment as evidenced by the fact that many early trainees left the jobs. In fact, company records indicate that the number of Saudis that were enrolled in its training program was well over 1,000. However, because the company persisted in its efforts to recruit and train Saudis, it was

xxHasu Shah, Executive Vice President, Saudi Cable Company, interview by author, 15 March 1987, Jeddah, Saudi Arabia. 220

TABLE 35

SAUDI CABLE COMPANY MANPOWER DISTRIBUTION BY NATIONALITY

Number of Total % of Area/Country Employees Employees

Middle East 382 53

Saudi Arabia 183 25

Other Arabian Peninsula countries 85 12

Other Arab League countries 114 16

Africa 38 5

East Asia 83 11

West Asia 196 27

Western Europe 15 2

North and South America 11 2

Total 725 100

Source: Saudi Cable Achievement Reports, 1987. 221 able to attract and maintain a relatively large number of

Saudis in the factory's work force.

According to Mr. Roger Witby-Smith, manager of man­ power development and training, this policy can be attrib­ uted to the company's chairman, Mr. Khalid Aliriza,3-2 who from the beginning of the company's operation articulated a determined stance on the company's commitment and obligation to the development and industrialization of Saudi Arabia.

Accordingly, the company developed a detailed written policy to achieve Saudization. Although the company trains non-

Saudi employees as well, for the purpose of this research only those policies dealing with the training of Saudis will be examined.

The policy to Saudize the company was designed to develop the needed Saudi manpower through training in the following areas: senior management, middle management, junior management/supervisors, machine operators, appren­ tices, and helpers/laborers/dri vers.3-3 The policy also outlined the methods and time frame for achieving the devel­ opment of skilled Saudi manpower. For senior and middle management positions, the policy called for recruiting widely experienced and qualified Saudis from the local

3-2Roger Witby-Smith, Manager of Manpower Development and Training Department, Saudi Cable Company, interview by author, 14, 25 March 1987, Jeddah, Saudi Arabia.

3-3Saudi Cable Company, "Saudization Policy," internal memorandum (Jeddah: Saudi Cable Company, 1980), 7. 222

market and provided for a short-term orientation to the com­

pany's environment. For junior managers/supervisors, the

company sought to identify new college graduates with neces­

sary academic qualifications.

These recruits were then placed in in-house and out­

side training programs before being assigned to their

respective positions. Machine operators, who represent the

bulk of the Saudi Cable work force and the majority of

Saudis who work for the company (some 127 currently), were

given in-house, on-the-job training. The level of training

depended on the background of the employees, which were

evaluated in three categories. Category one, composed of

employees who completed elementary school, required three

years of training. Category two, composed of employees who

completed intermediate or vocational school, required two

years of training. Category three, composed of employees

who completed high school or industrial school, required one

year of training.14

The apprentice category was filled by employees who

had already been hired and had shown no aptitude for techni­

cal work, but who had some vocational training. These per­

spective Saudis were placed in the plant's engineering

department to receive on-the-job training in areas such as

mechanics, electronics, or mechanical and equipment main­ tenance areas. Finally, the helper/laborer/driver category

14Ibid., 10. 223 was filled with those who had none of the other qualifica­ tions, but who could read and write, and demonstrated an ability to do those kinds of jobs.13

Most of the in-house training is held at the company's training center, which consists of a number of classrooms equipped with modern audio-visual devices and a small library/reading room with video tapes, books, and course materials. The training center is managed by a British employee, who is also the manager of the Manpower Develop­ ment Department, and one Arab instructor and a secretary.

The Arab instructor was an Egyptian who was hired by the company from the beginning as part of a group of Egyptians who came to Saudi Cable Company as result of a loan agree­ ment from their company as part of the inter-Arab coopera­ tion program.16

Although the technology used by the company, and the majority of the top experts in the factory, are from non-

Arab countries, Mr. Smith, the manager of the Manpower

Development and Training Department, pointed out that vir­ tually all of the in-class and on-the-job training of Saudis is conducted by Arab employees and specialists on a part- time basis. The number of Arabs working for Saudi Cable

Company represents about 53 percent of the company's techni­ cal and administrative staff (see table 32). It is also

lsIbid.

16Roger Witby-Smith, interview. 224

interesting to note, as confirmed by Mr. Shah and Mr. Smith,

that 96 percent of the company's employees come from Third

World countries (see table 35).

Mr. Smith also added that one of the major objectives

of the company's training program is to utilize the wealth

of expatriate specialists in the work force in the on-the-

job training program. Although the company faced its share

of failure (during the early days of the program) in keeping

some of these Saudi trainees, in the past two to three years

these programs have been proven to be highly successful.

Most of its early failure resulted in Saudis' leaving the

training program before finishing. Mr. Smith attributed

this phenomenon to the inability of these trainees to adjust

to the company's strict attendance policy and work ethics.

Due to the problem of lack of attendance, the company

initiated a study to identify the reasons behind this

absenteeism.17

The study revealed that the problem of absenteeism

started in the early days and persisted for a long time. In many cases employees were terminated. The study's approach

to the problem was through a series of one-on-one interviews conducted between the company's training center profes­

sionals and with employees with the highest absentee records. The study discovered that the major reasons for

absenteeism was the need of those employees to fulfill

^Ibid. 225 family obligations, particularly in the cases of employees who were married or were heads of household. The study then made a set of recommendations that allowed employees to work different shifts or to take a day off in order to meet their personal responsibilities.1®

According to Mr. Smith, the study was a testimony to the company's commitment to train and Saudize the company.

He also added that over the past seven years of training the company had trained over 400 Saudis in various technical jobs and professions. In evaluating the best technique for training, Mr. Smith indicated that trainees had made the best progress using on-the-job training as compared to classroom lectures.1®

The process of Saudization has been completely suc­ cessful at Saudi Cable. Saudis are working in various posi­ tions, in all departments— the president, vice president, assistant vice president, general managers, managers, engineers, computer specialists, foremen, skilled and semi­ skilled laborers, door guards, drivers, and messengers.

Unlike most other companies that this research surveyed, all of Saudi Cable's top Saudi officials are highly qualified professionals and engineers. The chairman of the board and founder of the company has a master of science degree in industrial engineering and operations research. The presi­ dent has a master of science and professional degree in

iaIbid. 19Ibid. 226 manufacturing engineering. One of the vice presidents has a

Ph.D. in physics. Another vice president holds a degree in chemical engineering, and a number of assistant vice presi­ dents and general managers hold degrees in engineering.

This level and type of education is also true for the com­ pany's top non-Saudi officials. The executive vice presi­ dent holds a master of science in industrial engineering and a master of business administration.20

According to Mr. Joukhadar (a Saudi national), senior vice president for Saudi operation, of the company's fifty engineers thirteen are Saudis who hold degrees in electri­ cal, mechanical, industrial, civil, and electronic engineer­ ing. Most of these Saudi engineers were hired directly after graduation, then were trained at the company's on-the- job training program or were sent overseas to receive short­ term training from the company's technical partners or other associates in the United States and Europe. On the adminis­ trative level, Saudi Cable's Saudi officials hold college degrees in business administration or management.21

Saudi Cable's Technical Achievements

Saudi Cable has made tremendous achievements not only in Saudizing its work force but in major technical areas as

2°Ibid.

21Mohamed Noor Joukhadar, Assistant Vice President for Operations, Saudi Cable Company, interview by author, 24 March 1987, Jeddah, Saudi Arabia. 227 well. Not only has it become a technologically self- contained and wholly owned Saudi company, but it has proven itself as an innovator, creator, and a leader in its own right. Becoming a self-contained, wholly owned Saudi com­ pany in less than ten years (1976-86) can be described as a major achievement, particularly for a company that started as a small cable joint venture plant.22

The company's innovative vision is confirmed by its determination to gain control over its raw materials by establishing the copper rod mill and PVC. plants. The com­ pany's acquisition of substantial shares in two companies outside Saudi Arabia not only expanded its wealth but indi­ cates its shrewd thinking. These two ventures were not only good foreign investments, providing expansion of the busi­ ness, but were unique methods to get easy access to, and to gain recognition in, the international market. The com­ pany's long-term vision is further confirmed in their strat­ egy of recruiting young, highly motivated, successful Saudi professionals from already established careers. For exam­ ple, the former dean of the College of Science at King Abdul

Aziz University in Jeddah is now the company vice president for corporate affairs. This type of association provided the company national recognition and respect. The company also has come to be identified with the national goals and objectives of the country. The fact that the company

22Hasu Shah, interview. 228 produces a product, cable, that is used in many important aspects of the country's development efforts, such as elec­ trification, made the name Saudi Cable synonymous with the country's national development achievements.

In the technical arena, Saudi Cable was able to modify, design, and develop various kinds of cables and machines and has begun to make a large number of its own spare parts in-house. According to Mr. Safwat Abunoor, manager of the Plant Engineering Department, the company started to do modifications on most of its cable manufactur­ ing machinery and specifications to suit the country's vast and distinct environment, hot and humid on the shores, hot and dry in the inland areas, and cold and rainy in the mountains. Most of these modifications were due to the need to make these machines suitable for the Saudi environment, to improve production quality and safety, and to improve the machine production speed and durability. Among the depart­ ment's many daring projects are test cages for low-tension cables, water-treatment plants, aging ovens, combined mechanical and electronic length measuring systems, overhead conductor tensile testing machines, pay-out stands for 22" and 28" bobbins, helical stripping machines, and logging projects. Mr. Abunoor indicated that not only did these projects generate significant revenue, but they also ensured that the products made for the use of the company were of the highest quality and, therefore, were designed to 229

maintain the highest standards of performance.23

Another technical achievement of Saudi Cable Company

came from its plant engineering department, particularly manufacturing spare parts. These efforts represent a genu­

ine accomplishment in developing indigenous skills and talents. The workshop's major objective is to manufacture

40 percent of its spare-part requirements, such as cogs, gears, spindles, guide rollers, pintles, pulleys, threaded shafts, bronze bushings, and many more. So far this work­ shop has been responsible for producing spare parts costing over SR 800,000, which represents a savings of SR 1.6 mil­ lion per year if these same parts were to be bought on the

local market or imported. This direct cost savings is in addition to the time costs based on the factor of time it takes for these parts to be imported and delivered.24

According to Mr. Abunoor, what makes the workshop important is that up to 40 percent of its technicians are

Saudis, including the supervisor and assistant manager. Mr.

Abunoor also indicated that many of the company's managers, including himself, pursue a conscious policy of involving and training Saudis in these important jobs in an effort to transfer as much know-how to these Saudis as possible.

Despite the fact that the early days were not always

23Safwat Abunoor, Manager Plant Engineering Depart­ ment, Saudi Cable Company, interview by author, 25 March 1987, Jeddah, Saudi Arabia.

24Ibid. 230 successful, the policy and the institution persevered in its direction and efforts. Today that persistence has begun to pay off.25

Another major area in which Saudi Cable Company has made significant technical achievements is its high specifi­ cation standards. According to Mr. Nasser Yasseen, manager of the specification department at Saudi Cable, in order for

Saudi Cable to maintain a market share and compete among other suppliers of cable, such as Yugoslavia and Korea, the company has to maintain its product specifications according to the world's best manufacturers (including American, Brit­ ish, and German).26 The company has been a leading partici­ pant in establishing standards within the country. Until recently the country didn't have standardized cable specifi­ cations. Specifications for government contracts were usually set either by the technical designers for the projects or consultants hired for the projects. Due to its highly respected reputation, Mr. Yasseen indicated that

Saudi Cable has been invited to participate with the Saudi

Agency for Standards in establishing the country's official policy on cable specifications. He also indicated that to date, although the Agency has not yet established official

2SIbid.

26Nasser Yasseen, Manager of Specifications Depart­ ment, Saudi Cable Company, interview by author, 14 March 1987, Jeddah, Saudi Arabia. 231 standards, the trend is to adopt most of Saudi Cable's stan­ dards.2-7

The record of Saudi Cable Company is clear, and its efforts at Saudization have been successful. The researcher observed the company's policies and actions during the research and case study data collection, a period of four months, from January to March 1987 and in July 1987. The company has made an all-out effort to Saudize its technical and administrative staff through intensive training and recruiting efforts. It was clear during this period that when Saudis are given appropriate incentives, encouragement, and benefits, their performance is equal to that of their expatriate counterparts.

Saudi Cable Company, due to its shrewd and hard­ working Saudi and non-Saudi leadership, was able to occupy a leading position among its group of companies in the public and private manufacturing sectors. This level of leadership was displayed in four different ways: (1) its ability to become a technologically self-contained, wholly owned Saudi company in less than ten years; (2) its ability to train and recruit a high number of Saudis and to involve them in advanced technology; (3) its maintenance of high quality standards and production; and (4) its recognition in the community as evidenced by the official opening of the com­ pany's complex in 1987 by the King of Saudi Arabia.

2-7Ibid. CHAPTER X

FINDINGS, RECOMMENDATIONS, AND CONCLUSIONS

The purpose of this chapter is to analyze the findings of this research project, to present the conclusions derived from those findings, and to offer recommendations concerning the international transfer of technology and its impact on the development of indigenous technology in Saudi Arabia.

Although the objectives of this research were limited to an exploration of the current state of technology transfer and development in the country, attempting to determine whether a transfer of technology had occurred, it is useful to identify and discuss the areas and issues that were pre­ sented during the course of the research that have an impact on the nature and dynamic of the transfer process.

One of the major findings of this research is that prior to 1927 Saudi Arabia had virtually no history of industrialization, education, urbanization, or development.

Due to the lack of economic and human resources, the process of development pursued as a formal national policy did not begin until 1970. Even though the first five-year develop­ ment plan began in 1970, it was limited in what it could accomplish because of the lack of available government funds. By 1974 that situation had changed drastically. In

232 v 233 that year there was a massive increase in government funds because of the dramatic increase in oil revenues. Accord­ ingly, the government began the rush to development. As the record indicates, this was the year in which every important decision or royal decree dealing with industrialization and development was issued (see development and industrializa­ tion chapters).

Development efforts in Saudi Arabia have depended on government revenues, which were mainly generated from crude oil export. Consequently, the volume of government expendi­ ture on development projects was directly affected by the international oil market's ups and downs in demand and prices. Since 1974, as the price of oil continued to increase, government expenditures on development and indus­ trialization increased; this correlation continued until

1982. By 1982, when oil prices began to decline, government expenditure and efforts on development and industrialization followed suit. The record also shows that the most active period of private sector participation in the process of development and industrialization took place from 1974 to

1982.

The slowdown in the production of oil in 1982, coupled with the decline of oil prices, resulted in a slowdown in the country's various economic sectors. When the government placed several of its major construction and development projects on hold, many private-sector companies went out of 234 business, particularly in the construction sector and its support industries. This resulted in a decreased demand for expatriate professionals and labor, many of whom left the country due to decreasing salaries, or were ordered to leave the country because of job cancellations.

This research also found that although the private sector was the major beneficiary of government expenditures, it rarely reinvested any of its own funds in the local econ­ omy. Its involvement was limited to obtaining operational licenses and applying for government loans from government developmental financing institutions. Thus the private sector always profited from government projects— either through handling government-sponsored construction projects directly or acting as agents for international contracting firms operating in Saudi Arabia (Saudi law requires foreign companies to have an agent/sponsor before being licensed to operate in the country). Thus the government's treasury was overburdened.

Moreover, in spite of the government's financing and sponsorship of massive private-sector projects, the majority of the workers were non-Saudi. Thus even when the trans­ ferred technological know-how is sponsored by the govern­ ment, it was transferred to non-Saudi employees rather than to Saudis. It is ironic to know that most of the non-Saudi workers who were brought into the country to help in the process of technology transfer and industrialization were 235

from countries that are not the producers of the tech­

nologies (most came from the Far East, India, and Pakistan),

and therefore they needed training in order to learn about

the technology as they began working in Saudi Arabia. Thus

the research concluded that the major reason behind this

massive importation of non-Saudi workers was their low

salaries and benefits rather than their know-how. There­

fore, the development of the Saudi manpower was compromised

by the private sector in order to make more money.

By 1985 the ratio of non-Saudi work force to Saudi

reached a record number of 55 to 45, compared to 44 to 56 in

1975.1 The fourth development plan, 1985-90, called for the

importation of capital-intensive technologies in order to

reduce dependence on foreign labor. Although this policy

sounds logical, it is unrealistic because these types of

technologies require highly skilled and professionally dis­

ciplined personnel with extensive technical experience. The

native work force in Saudi Arabia will not be prepared to

assume those roles for years to come. Thus efforts to

Saudize the work force will be impacted negatively. The

survey, as well as the information gathered during the

interviews, confirmed this fact.

An official at the Royal Commission Training Institute at Yanbu indicated that the government training institutes

^-J. S. Birks and C. A. Sinclair, Arab Manpower: The Crisis of Development, vol. 7 (London: Croom Helm, 1980), Ch. 20, passim. 236

are unable to produce the needed skilled labor for capital-

intensive technologies like those used in the petrochemical

industry. In fact, government training programs are said to

be so basic that their graduates are qualified to be little

more than handymen. Given the criticisms lodged against

these training programs, the Chamber of Commerce of Jeddah

initiated a study, and the Royal Commission Training Insti­

tute at Yanbu initiated a questionnaire. These two efforts

were initiated independently, but aimed to achieve similar

results. They attempted to examine the industrial sector's

criticisms of the training programs so that they may be

improved.

Another finding of this research concerned the impact

of foreign labor on the local economy. Due to the govern­ ment's policy of allowing massive migration of foreign labor

to the country (which began in 1974), the domestic economy responded and trade in consumer products and demand for housing and other services peaked. However, when the econ­ omy declined in 1982, forcing many of these laborers out of the country, many buildings were left standing empty and many consumer goods remained on store shelves.

Another major finding of this research is concerned with the notion of the transfer of technology and the dis­ tinction that should have been made between technological hardware and software. The transfer of technology is accom­ plished not only with the transfer of hardware, but through 237 the development of software. Thus the policy to Saudize the work force is crucial. If obtaining the hardware were suf­ ficient, then Saudi Arabia would be able to obtain the most advanced and sophisticated technology available given its financial resources. However, know-how, which relies on the development of human resources, cannot be transferred as easily.

This research found that the current business environ­ ment (public and private) in Saudi Arabia is conducive to

Saudization more than ever before. This is due in large part to the decrease in the availability of good-paying jobs and fringe benefit packages. Due to the decrease in govern­ ment revenues, Saudis are no longer able to find positions as before simply by virtue of the fact that they are Saudi.

Therefore, they are more willing to relocate to other cities that offer job and career opportunities.

The research was able to identify three problems involved in the Saudization of technical and professional jobs in the private-sector manufacturing industry. The first resulted from the inflated economic growth of 1974-84.

During this period, a great number of factories were licensed, and because of the Saudi government's industrial encouragement policy, most of these factories received government capital financing and subsidized services. This resulted in the waste of a vast amount of resources.

The research was able to identify clear government 238

policies concerning the process of licensing industrial

local or foreign companies to operate in the country based

on their willingness to employ Saudis as not less than 75

percent of their work force, with their salaries not less

than 50 percent of the total salaries in the company. In

theory, this was aimed at involving Saudi nationals in order

to enhance their technical and professional know-how; how­

ever, the government's open policy toward migration of cheap

foreign labor into the country to man these industrial

projects was counterproductive and worked against the suc­

cessful employment of Saudis. Another consequence of this

policy was that the new skills and know-how that these

projects brought with them into the country went to immi­

grant labor rather than to Saudis. Due to the importation

of cheap labor into the country, artificially low wages were

institutionalized. In the long run, this made it very dif­

ficult for Saudi nationals to compete in the job market.

Interviews with company officials from both the pri­

vate and public sectors revealed that there is a basic misunderstanding between the concepts of research and devel­

opment centers and marketing research centers. When the difference is pointed out to them, the usual response is

that it will take time before research and development cen­ ters can be initiated. The usual tactic is to depend on the

source of the technology for such activities.

Through the survey, it also was discovered that the 239 vast majority of the technologies utilized in the private sector are neither owned by, nor leased from, the multi­ national companies. However, this is not the case with most of the joint ventures, in which the partnership favors the

Saudi side, including that of government enterprises such as

SABIC's petrochemical companies at Jubail and Yanbu.

The research survey also found that in spite of the government's program to protect national industries from foreign imports, price dumping and unfair competition is the norm. This is due in large part to the government's relaxed policy on imports that allows such practices.

Another major finding of this research is that the current domestic infrastructure and market environment is not developed enough to support ambitious industrialization efforts. This is due in large part to the country's vast area and small population. The infrastructure necessary to connect this vast land— roads, highways, railroads, etc.— remain underdeveloped.

Finally, this research has found that there is no official government policy regulating the transfer of tech­ nology to the country. Thus many industries made their way to the country when they should not have, particularly those industries that were brought in to serve only a very limited market, such as those mainly utilized in the construction sector. 240

Recommendations

The first, and most important, recommendation is that the government of Saudi Arabia should formulate a policy governing the transfer of technology to the country. One of the major objectives of this policy would be to identify the type of technology that the country is in need of. Accord­ ingly, only this technology would receive government pro­ tection from foreign imports. The foreign imports policy needs to be improved, creating a sophisticated system that should be enforced through a special department designed to regulate and monitor the market place in order to ensure the validity and effectiveness of this policy.

This recommendation is based on information gleaned from the survey conducted in the private sector. The survey indicates that 8.7 percent of the industrial companies in the private sector are happy with the existing government protection policy and about 82.6 percent are not happy

(another 8.7 percent provided no answer). In addition to the survey results, a number of officials interviewed from private industry and government offices indicated that in many cases foreign imports sold in Saudi Arabia and its neighboring countries are actually sold below manufacturing cost (dumping), which results in unfair competition for local manufacturers.

Another recommendation of this research is that the

Saudi government should establish an import-export bank or a 241 similar institution in order to help declining industries.

Since 1982 and the decline in the level of oil exports, and thus government revenues, many Saudi industries have suf­ fered a decline in the demand for their products. However,

Saudi Arabia, being the most industrial and leading member of the GCC, and having a good relationship with many neigh­ boring Arab and Muslim countries, could penetrate those markets if it could provide export financing schemes to sup­ port the export of its products as do many other advanced countries in the world. Such a program on an international level could be sponsored by the Saudi Fund for Development, which has long been a generous source of soft loans and grants to many countries worldwide without strings attached.

The research also recommends that in addition to the above-mentioned policies, a national center should be estab­ lished to provide guidelines for negotiating contracts for transferred technology. Among the major issues that this center should be involved in are (1) training Saudi nation­ als in-house by the supplier; (2) research and development centers; and (3) terms and duration of the licensing agree­ ment, particularly after sale has commenced. Although the

Saudi Labor Law specifies that up to 75 percent of the employees of a company conducting business in Saudi Arabia should be composed of Saudi nationals, and that the total salaries to those nationals should not be less than 50 per­ cent of the total company payroll, the research was unable 242 to find a company that expects that to be the case in the foreseeable future.

Thus this proposed center should design a policy to monitor these companies in order to establish a time frame in which these conditions are to become reality. Based on the fact that Saudi Arabia does not have a basic industrial establishment capable of providing experienced labor and professionals, the policy should also encourage and support labor-intensive technologies to ensure greater interaction between the machines and the operators to serve as a vehicle for the proper transfer of technology. However, this policy needs to recognize the nature and dynamic development of businesses, and thus it needs to be reviewed continually and adapted to the new business environment. For example, given the shortage of technical and professional manpower in the country, as the national population becomes more qualified to work with capital-intensive technologies, this preference for labor-intensive technology should be relaxed.

In order to ensure compliance with these policies, the government should establish a national data base to keep vital records on the progress and conditions of technology transfer. In order to maintain the integrity and timeliness of this data base, the government should require those com­ panies that benefit from the technology transfer program

(protection from foreign imports) to report to this data base, providing updates, on a regular basis, about their 243

achievements in Saudization and compliance with high quality

specifications and technology transfer procedures. This

data base could also be used as a data bank for Saudis seek­

ing jobs as well as companies interested in hiring Saudis.

This kind of service can be accomplished by requiring these

companies to regularly provide the center with a list of

their needs for professional manpower and new opportunities

for Saudi nationals, so the bank can produce a list of these

jobs and opportunities and distribute them to Saudi Arabia's

universities for review by prospective Saudi job seekers.

Another major function of this data base or bank would be to provide the government's various policy makers with

timely and vital statistics on the state of the art of tech­

nology transfer. It could also handle information dealing with research and development, and it could provide up-to- date information concerning research and development efforts

worldwide.

The center could also sponsor research and conferences

on the various aspects of the transfer process, particularly the development of locally independent technologies and the

domestic transfer of technology. The center should provide a nationwide awareness program on the importance of techno­

logical development in order to gain support for national

industries, particularly through educating Saudi youth at various school levels, through television and radio program­ ming, and through public exhibitions and fairs. It is also 244 essential for this center to identify a wide -base of support from both the business and scholarly communities to act on its behalf in these endeavors.

Based on the finding mentioned in tables 24, 25, and

26 that deal with low Saudi participation in the work force in the private sector, the research attributes this problem to the attitude of the Saudi founders of these companies, which stems from their trade orientation. The vast majority of these businessmen see business from an orientation of short-term profits with minimum risk. Thus the research recommends future research to investigate the relationship between the background of the founders of Saudi companies and their success or failure at achieving industrialization.

According to the survey data and analysis of the case studies, the background of the founder of the company in private ventures, or of decision makers in semigovernment institutions, was of crucial importance to the success or failure of the operation and to the commitment to Saudiza­ tion. This research found that in both of the case studies the Saudi leaders involved had degrees in the same field of business or in industrial engineering. This background fostered a greater awareness of the issues involved in industrialization and technology transfer.

Another recommendation is for the government to open a third television channel to deal primarily with the dis­ semination of scientific and technological information 245 through locally produced programs employing distinguished national figures as narrators and hosts. This television channel could provide timely news about the country's latest inventions and technological developments, and allow commer­ cials only for national products. The channel could devise game shows that focus on knowledge of technology in general, and about local efforts in particular. In order to gain a wide audience, the shows should involve the audience in these games and provide attractive prizes for the partici­ pants and the audience, perhaps scholarships in technology studies and long and short trips to visit industrial areas in and out of the country. Winners of such prizes could return to the program to share their experiences with the audience.

The proposed television channel could also produce self-help programs to educate the public and attract them to such projects. This channel could become the stage for national forums and debates on issues that deal with devel­ opment, technology transfer, scientific progress, and other areas that may help to enhance public awareness of their role and duties in national development efforts. In addi­ tion to these educational programs, the channel can also provide professional diplomas and degrees in various tech­ nological fields like that of the Open University program in

England. Funding for such programs can be obtained from commercials, fees, and taxes gained from local sales of 246 foreign competitors' products.

The Saudi work force received criticism in the survey data concerning its lack of professionalism and work ethics.

The research suggests that the government establish techni­ cal cooperation agreements with friendly countries from which technology is being imported. Under such agreements,

Saudis could be sent to work in industrial institutions for a period of one to two years. This experience would expose them to the technology they would be working with on a first-hand basis and would allow them to experience the work environment in a professional way. Similar experience could be achieved by encouraging joint ventures between Saudi com­ panies and their foreign counterparts. This kind of coop­ eration would help Saudis to overcome such problems as the lack of professionalism and work ethics as well as the prob­ lem of unfair competition.

The government should also encourage the establishment of professional associations that would stimulate communica­ tion among Saudi and non-Saudi professionals and sponsor activities such as publications, conferences, and symposia.

The overriding purpose of these associations would be to facilitate discussion among specialists, which would help to establish standards, work ethics, and innovation.

The government should declare an annual holiday to honor those involved in the industrialization and develop­ ment of the country. For example, a national prize could be 247

awarded for the "technologist of the year" or the "innovator

of the year." Another avenue that could be utilized to

ensure access to a wider audience is to spread these mes­

sages in the most traditional medium, the Mosque. This idea

is in perfect harmony with the purpose of the Friday sermon,

thus the preacher can relate the issues of technology and

development to that of Islamic teaching, which encourages

Muslims to continuously pursue self-development and enhance­

ment of one's well-being.

Another area in which the government could make great

inroads toward laying the groundwork for industrialization

is to take a new approach in educational and technical

training. Given that Saudi Arabia has no history of indus­

trialization, this research recommends that the government

of Saudi Arabia encourage and finance internship programs

for high school (both technical and the scientific branch of

the general education program) and university students.

Such a program would place students with companies in the

public or private sector for at least two summers during

their academic training. Universities should also establish

educational programs that combine technical and theoretical work. This technique is widely used in England through the

polytechnical institutes and has proven to be very success­

ful.

The government also needs to review its policy on

training and developing manpower in the technical and 248

vocational centers to meet the actual needs of the local

industries. Further, the government should concentrate more

effort on publicizing and enforcing its training subsidies

program, as well as giving prizes to those companies that

endeavor to train and prepare Saudis for technical and

skilled jobs.

Finally, the government should allow the nationaliza­

tion of foreign nationals, or should grant permanent resi­

dence status to foreign nationals who have been involved in

industrialization and development. By providing citizenship

or permanent residency, expatriates would be more settled

and secure and would be more willing and able to participate

in these developmental endeavors. In this way the country

could benefit from their expertise. Saudi Arabia is a vast,

wealthy, and young country. It could gain tremendously by

opening its doors to a select number of foreign nationals,

without losing any of its values and traditions. Islam, as

a national religion, is a powerful tool for unifying new

citizens to the country.

Conclusions

In conclusion, it is now apparent that many factors are at work in Saudi Arabia to hinder the process of indus­

trialization and development, and many policies work at cross purposes. Those factors include the country's politi­ cal history and system, the lack of education until very recently, the lack of economic resources other than oil, the 249 vast and disconnected geographic character, and the lack of natural resources. It has been only through oil revenues and the government's persistent efforts that the country has begun to make progress toward industrialization. However, it is clear that many mistakes have been made.

First, the building of Yanbu, an industrial city, in the middle of nowhere prevented the enterprise from attract­ ing the large number of Saudis needed by the project.

Saudis have traditionally been reluctant to move from the areas in which they were born and where their extended families live. It would have been much more effective if these industries had been distributed around the country's rural areas, where they could have involved a greater number of the local population and, at the same time, would have created other related industries. Thus these projects would have brought a high standard of living to those communities and would have generated the growth of secondary industries.

Although the development plans claim that at a future date the government is going to transfer the ownership of these projects to the private sector, early involvement of the private sector in the design and implementation of projects of this magnitude would have been beneficial. Such involvement would have ensured a greater level of participa­ tion and support from the private sector, whereby there would have been a commitment by the private sector to util­ ize these industries in their business. A second major mistake was in the area of the importa­ tion of foreign labor. From the beginning, development planning in the country neglected the development of human resources and underestimated the importance of the human element in the industrialization process. This negligence led to the mass importation of foreign labor, which stifled the involvement of local manpower and prevented Saudis from gaining firsthand acquaintance with efforts to industrialize and develop the country. Although the idea of developing the country's human resources was a fundamental objective articulated in the development plans, it was not taken seriously by the designers of the plans, and policies aimed at achieving Saudization were not implemented or monitored.

The fact that almost all of the government's efforts to industrialize the country took place in one year created a sudden and artificial domestic economy, the consequences of which are today's economic stagnation.

Due to this highly centralized policy, development efforts have reached only a very limited geographic area.

If one visits the country in areas other than the three major cities of Riyadh, Jeddah, and Dammam and the two industrial cities of Jubail and Yanbu, one would think that the country's vast wealth and sudden economic boom were just mirages in the desert. Even today, the vast majority of the country's small towns and villages still do not have basic infrastructure— roads, electricity, transportation. 251

Therefore, a mass migration of people occurred from the vil­ lages and small towns between 1974 and 1980. Today one can find small villages and towns that are virtually empty, as young Saudis have moved to the major cities in pursuit of good-paying government jobs and more modern and urban ser­ vices. APPENDIX

RESEARCH QUESTIONNAIRE 253

Talal R. Chlach 4201 Mass. Ave. N.W., #8073 Washington, D.C. 20016

Dear Sir:

I am a doctoral candidate at the American University, Washington, D.C., in the School of International Service. I am also a member of the adjunct faculty with the Center for Technology and Administration at the same university. Cur­ rently I am collecting data for my Ph.D. dissertation. The topic of my dissertation research is "The Impact of the International Transfer of Technology on the Development of Indigenous Technology in Saudi Arabia."

As my research is mainly fieldwork oriented, I would appreciate your help and support in answering the attached questionnaire and to provide me with an related information that you may have at your disposal. Enclosed also is a stamped and self-addressed envelope that you could use to mail back the qauestionnaire to me at the nearest time. I understand the difficulty in answering long questionnaires like this, but I also understand that you are very inter­ ested in helping our industry and progress to be of the best and most self-sustained community.

Your cooperation and quick response can make a lot of contributions to my efforts and research quality. Finally, I would like to thank you very much for your valuable time and efforts and I pray to Allah to help us all.

Sincerely yours,

Talal R. Chlach 254

Talal R. Chlach 4201 Mass. Ave. N.W. #8073 Washington, D. C. 20016 U.S.A.

Ph.D DISSERTATION RESEARCH QUESTIONNAIRE

"The Impact of the International Transfer of Technology on the Development of Indigenous Technology in Saudi Arabia"

Presented to the Faculty of the School of International Service The American University Washington, D.C.

Company Name:

Year Founded:

Company Address:

R espondent's Name:

Industrial Category:

food and beverages paper packing & office supply glass, plastic & fiberglass chemicals & petrochemicals construction & building materials textile & leather aluminum & metal machinery unidentified

Please circle the appropriate option or write in your answer in the designated area if your answer is not listed. You may choose more than one option if necessary. On any ques­ tion that you don't have an answer for, please respond with NA (not applicable). 255

Company Background Section

1. What is the nature of your business? a. Assembly plant industry b. Manufacturing industry c. Both a & b d. No answer

2. Was your business established as result of a. Feasibility study b. To provide a complementary product to your mother business c. Personal conviction of the success of this venture d. Write in your answer ______

3. What is the nature of your company ownership? a. Wholly owned Saudi? b. Joint venture __% Saudi % Non-Saudi c. Shareholders d. Limited shareholders

4. Who did the feasibility study for you? a. In-house staff b. Saudi consulting firm c. Non-Saudi consulting firm d. Joint efforts between us & the venture partner

5. On a scale of 1 to 10, how accurate was the feasibility study in its findings?

6. Do you receive any government benefits? a. Yes b. No (skip to # 8) c. No answer

7. What kind of benefits do you receive? a. Low-cost land b. Financial aid c. Capital financing d. Low-cost water and electricity e. Low-cost fuel

8. Does your business belong to a professional association? a. Yes b. No c. No answer 256

Is your business protected by the government's national industry protection program? a. Yes b. No (skip to # 11) c. No answer

10. Do you feel that the government protection program is a. Good enough b. Can be better c. Needs total revision d. No answer

11. What is the nature of the technology utilized in your business? a. Highly sophisticated (computerized) b. Sophisticated machinery (need skilled operators) c. Average machinery (need average skilled operators) d. All of the above e. No answer

12. Would you describe your business to be a. Capital intensive b. Labor intensive c . Both d. No answer

13. Was the technology obtained through a. Licensed agreement using the foreign company name and paying royalties b. Licensed agreement with joint venture c. Outright purchase of the technology for a lump sum d. Turn-key project e. No answer

14. Does the agreement indicate a particular way of transferring the technology to you (for example, will you be able to operate, maintain, and further develop the technology without their assistance or intervention)? a. Yes b. No c. No answer

15. Was there any time frame specified for this trans­ fer (in which you no longer have to pay royalties)? a. Yes b. No c. No answer 257

16. Would you describe the technology you use to be a. One unit technology b. A collection of two or more technologies put together by the supplier c. A collection of two or more technologies put together by us d. A collection of two or more technologies put together by the venture partner e. No answer

17. What is the most important element in your technol­ ogy? a. The machine element b. The human element/management technology & know­ how c. The scientific process or know-how d. All of the above e. No answer

18. How would you describe the technology utilized in your business? a. Exact copy of the source technology b. Slightly modified to suit our purposes c. Modified to suit the Saudi environment d. Completely different e . No answer

19. Are you licensed by the Ministry of Industry & Electricity? a. Yes b. No

20. What is the nationality of the source of the tech­ nology that you use in your business? Write in your answer ______

21. At the start of the business were the workers a. Brought in by the venture partner as an essen­ tial part of the business technology transfer b. Hired by you based on their experience c. Hired by you beforehand and trained specifi­ cally for the jobs d. Need no experience but received on-job training e. All of the above

22. What is the company's paid-up and invested capital? SR______Paid up SR______Invested

23. What is your average annual revenues in the last ten years or since your inception? SR 258

24. Would you say that the average profit of your busi­ ness operation in the last ten years, or since your inception, is a. Excellent b . Good c . Average d. Below average

Manpower Section

25. What is the total number of people working in your company? ______

26. What is the number of people working in management positions? ______

27. What is the number of people working in factory- related jobs (such as technicians, skilled labor, engineers etc.)? ______

28. What is the number of Saudis working in management positions? ______

29. How many of these Saudis hold university degrees?

30. How many of these Saudis hold midlevel certifi­ cates?

31. How many of these Saudis hold high school diplomas?

32. What is the number of Saudis working in factory- related jobs (such as technicians, foremen, etc.)'?

33. How many of these Saudis hold professional univer­ sity degrees (engineering type qualifications)?

34. How many of these Saudis hold professional midlevel certificates (engineering type of qualifications)?

35. How many of these Saudis hold industrial high school diplomas? ______

36. How many of these Saudis hold industrial training certificates? ______

37. How many of these Saudis were trained by you? 259

38. What is the average labor salary including all benefits? SR ____ per month

39. What is the average employee salary including all benefits? SR ____ per month

Marketing Section

40. Are there any other Saudi firms that practice the same line of business as your company? a. Yes b. No (skip to # 43)

41. If yes, how many that you know of? a . None b. 1 to 3 c. 4 to 8 d. 9 to 15 e. 16 to 25 f. 26 or more

42. Do these companies represent a major competition to your business in the market place? a. Yes b. No

43. What is the nature of your product? a . Consumer goods b. Industrial product c. Construction material d. Industrial machinery e. Write in your answer ______

44. Where do you market your product? a. Locally due to our production capacity b. Locally due to the venture agreement c. Regionally, i.e., GCC or the Arab countries in general d. Internationally e. c & d

45. What is your market share distribution? a. Locally % b. Regionally % c. Internationally ___ %

46. Do you benefit from the government's "BUY SAUDI" program? a. Yes b. No (skip to # 48) 260

47. If yes, what percentage of your production is sold that way? a . None b. 0 to 10 c. 11 to 25 d. 26 to 40 e. 41 to 55 f. 56 to 75 g. 76 to 100 h. Write in your answer ___ %

48. Do you have a marketing department? a. Yes b. No, our product is marketed through outside agency c. No

49. How often do you conduct marketing research studies? a . None b. Periodically c. Once in a while

50. Who undertakes these research studies? a. The company marketing department b. Local marketing research firm c. International marketing research firm d. Joint venture with the venture partner e. Saudi university research center or professor

51. Do you utilize any form of advertising? a. Yes b. No (skip to # 54)

52. What advertising medium do you utilize? a. Newspapers/magazines b. TV or radio c. Billboards d. Street signs e. Gifts f. Exhibitions or trade fairs g. All of the above

53. Do you advertise outside the Kingdom? a. Yes b. No

54. How would you describe your product prices? a. Very competitive b. Competitive c . Average d. Expensive 261

55. Are your prices based on? a. Marketing research b. Foreign competition c. Cost plus d. Government regulations

56. Do you provide aftersale support for your products? a. Yes b. No

57. Do you offer any form of warranties on your prod­ ucts? a. Yes b. No

58. Does your product have to comply with the Saudi standards and measurements agency's standards? a. Yes b. No

Training Section

59. Do you have any kind of training program for Saudis? a. Yes b. No (skip to # 62)

60. Is this program documented? a. Yes b. No

61. Do you train new trainees and employees? a. New trainees only b. Employees only

62. How do you recruit new Saudi trainees or employees? a. Through advertisement b. Government agencies c. Write in your answer ______

63. Do you have difficulty finding Saudi trainees or employees? a. Yes b. No (skip to # 65)

64. If yes, please explain why? ______262

65. What kind of incentives do you provide the new trainees or employees? Please explain

66. What kind of incentives do you offer your employ­ ees/trainees? Please explain

67. Do you have a training center that you use to train Saudi employees? a. Yes b. No (skip to 74) c. No, but we contract outside training centers to train the needed manpower (skip to # 74)

68. If yes where is this training center located? a. On company premises b. Use the venture partner training center over­ seas c. Use different training centers whenever needed

69. Is your training center managed by a Saudi manager? a. Yes b. No

70. How many instructors do you have in your training center? Write in your answer ______

71. What is the number of Saudi instructors in your training center? a . None b. Write in your answer ______

72. Is your training center recognized by the govern­ ment? a. Yes b. No

73. Do you give your trainees any form of certifica­ tion? a. Yes b. No

74. When did you start your training program (please write in your answer)? 19__

75. What kind of training programs do you provide your new trainees and employee trainees? a. Managerial training b. Vocational training 263

c. Skills that are specifically needed by your company d. All of the above

76. Do you receive any government assistance for your training programs? a. Yes b. No (skip to # 78)

77. If yes in what form? a. Financial aid b. Technical assistance (i.e., training specialists)

78. What are your criteria in selecting new trainees? Please specify (i.e., education, age, skills, etc.)

79. What are your criteria for selecting employees/ trainees? Please explain (i.e., position, job requirement, etc.)

80. How often do you recruit new Saudi trainees? a. Annually b. Whenever we need them c. Write in your answer _____

81. How often do you recruit Saudi employees for train­ ing? a. Annually b. Whenever we need them c. Write in your answer ______

82. How many trainees do you recruit every time? a. 1 to 10 b. 11 to 20 c. 21 to 40 d. 41 to 60 e. write in your answer

83. How many of the new trainees complete the training program successfully? Write in your answer ______

84. How many of the employees complete the training program successfully? Write in your answer ______264

85. How many of them leave your company and go to work somewhere else after finishing the training pro­ gram? Write in your answer ______

8 6 . Do you keep track of your trainees' career paths after graduation? a. Yes b. No

87. Do you recall your trainees once in a while for further training? a. Yes b. No

8 8 . How would you describe your training program? a. Successful b. Somewhat successful c. Can be better d. Failure

89. How would you describe the effect of your training program in providing your company with the needed manpower? a. Very effective b. Effective c. Can be better d. Unsatisfactory

90. Do you have a clear policy on Saudization? a. Yes b. No (skip to # 92)

91. Is this policy documented? a. Yes b. No

92. When do you expect to have x00% Saudi workers? 19__

93. What is the most important problem that you face with the Saudization and training program? 265

Technical section

94. Do you have a research and development center (in this context, the research and development center mainly focuses on lab experiments to improve the quality, cost, marketing, production methods and machine efficiency that are utilized in the manufacturing process)? a. Yes b. No (skip to # 98)

95. Where is this R & D center located? a. On company premises b. Within the Kingdom but in another location c. On the venture partner's premises overseas

96. How many people work at this R & D center? Write in your answer ______

97. What is the number of Saudis working there, not including clerical staff? a . None b. 1 to 5 c. 6 to 10 d. 11 or more

98. Where you able to develop any new products since you started your operation in the Kingdom? a. Yes b. No (skip to # 101)

99. How many products did you develop? Write in your answer _____

100. Who designed these products for you? a. In-house R & D center b. Utilize the venture partner's R & D center c. Contract with local Saudi R & D center d. Contract with overseas R & D center

101. When one of your production machines breaks down, who fixes it? a. The machine operator b. Resident engineer or technician c. Local maintenance contractor d. Fly in the regional supplier technician e. The venture partner as part of the venture con­ tract 266

102. Do you feel that the cost of maintenance is a. Fair b. More than average c. Expensive

103. Where do you get your spare parts? a. Locally, through different dealers, made in Saudi Arabia b. Locally, through different dealers, made over­ seas c. Imported from different sources directly through us d. Ordered through the venture partner or supplier e. All of the above e. All of the above based on cheaper prices

104. Do you feel that the cost of these spare parts is? a. Fair b. More than average c. Expensive

105. Did you try to make your own spare parts? a. Yes, in-house b. Yes, through local machine shop c. Yes, through overseas machine shop d. Yes, with the venture partner e. No

106. Did you make any improvements on your machines? a. Yes b. No (skip to # 109)

107. Who did these improvements for you? a. Our engineers b. The venture partner on our recommendations c. The venture partner as part of the partnership contract d. a & b e. Contract with local firm f. Contract with overseas firm

108. On what basis did you decide to do these improve­ ments? a. To improve production process b. To improve product quality c. To increase production capacity d. To adjust the production process to our environment e. All of the above 267

109. Where do you get the needed raw material? a. Locally, made in Saudi Arabia b. Locally, through different dealers (made over­ seas) c. Imported directly through us d. Supplied to us by the venture partner as part of the contract e. All of the above based on the price factor

110. Do you feel that the cost of these raw material is a. Fair b. More than average c. expensive BIBLIOGRAPHY

Books, Reports, and Brochures

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Behrman, Jack N., and H. W. Wallender. Transfer of Manufac­ turing Technology within Multinational Enterprises. Cambridge, MA: Ballinger, 1977.

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Binswanger, Hans P. Induced Innovation: Technology, Institutions, and Development. Baltimore: Johns Hopkins University Press, 1978.

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Hancock, Alan, ed. Technology Transfer and Communication. Paris: UNESCO, 1984.

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Heston, Alan W. , and Howard Pack, eds. Technology Transfer: New Issues, New Analysis. Annals of the American Acad­ emy of Political and Social Science, vol. 458. Beverly Hills, CA: Sage, 1981.

Hoole, Francis W. Evaluation Research and Development Activities. Sage Library of Social Research Series in Social Research, vol. 68. Beverly Hills, CA: Sage, 1978.

Hyung-Ki, Kim. Building Scientific and Technological Infra­ structure in Developing Countries. Washington, DC: World Bank, 1984.

Jamal, Amir. "The Consequences of Technological Dependence in the Least-Developed Countries." In Mobilizing Tech­ nology for World Development, ed. Jairam Ramesh and Charles Weiss, Jr., 58-65. New York: Praeger, 1979.

Johnson, Harry G. Technology and Economic Interdependence. New York: St. Martin's, 1976.

Kingdom of Saudi Arabia. General Organization for Technical Education and Vocational Training. Technical Education 271

and Vocational Training: The Road to the Future and the Successful Campaign. Riyadh: General Organization for Technical Education and Vocational Training, 1985.

Kingdom of Saudi Arabia. Ministry of Finance and National Economy. Saudi Industrial Development Fund. Annual Report 1982-83. Riyadh: Saudi Industrial Development Fund, 1983.

Kingdom of Saudi Arabia. Ministry of Planning. The First Five-Year Development Plan, 1970-1975. Riyadh: Minis­ try of Planning, 1970.

______. The Second Five-Year Development Plan: 1975-1980. Riyadh: Ministry of Planning, 1975.

______. The Third Five-Year Development Plan, 1980-1985. Riyadh: Ministry of Planning, 1980.

______. The Fourth Five-Year Development Plan, 1985-1990. Riyadh: Ministry of Planning, 1985.

______. Achievements of the Development Plans, 1970-1985: Facts and Figures. Riyadh: Ministry of Planning, 1986.

Kingdom of Saudi Arabia. Ministry of Planning. National Center for Science and Technology. Proceedings of a Conference on Technology and Development in the King­ dom, vol. 1. Riyadh: National Center for Science and Technology, 1984.

Kingdom of Saudi Arabia. Royal Commission for Jubail and Yanbu. Directorate General for Jubail Project. Information Brochure. Jubail: Directorate General for Jubail Project, 1983.

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Kingdom of Saudi Arabia. Saudi Consulting House. A Guide to Industrial Investment, 7th ed. Riyadh: Saudi Consulting House, 1986.

Kumar, Krishna. "Social and Cultural Impact of Transna­ tional Enterprises: An Overview." Chap. in Transna­ tional Enterprises: Their Impact on the Third World Societies and Cultures. Boulder, CO: Westview Press, 1980. 272

Lall, Sanjaya, and Paul Streeten. Foreign Investment, Transnationals and Developing Countries. London: Mac­ Millan, 1977.

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Lucas, Barbara A ., and Stephen Freedman, eds. Technology Choice and Change in Developing Countries: Internal and External Constraints. New York:: UNIPUB, 1983.

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Morita-Lou, Hiroko, ed. Science and Technology Indicators for Development. Boulder: Westview, 1985

Mountjoy, Alan B. Industrialization and Under-Developed Countries. London: Hutchinson, 1966.

Norman, Colin. Soft Technologies, Hard Choices. Worldwatch Paper 21. New York: Worldwatch Institute, 1978.

______. The God That Limps: Science and Technology in the Eighties. New York: Worldwatch Institute, 1981.

Nyrop, Richard F., ed. Saudi Arabia: A Country Study. Washington, DC: The American University, Area Studies Division, 1984.

Olken, Hyman. The Technical Communicator's Handbook of Technology Transfer. Livermore, CA: Olken Publishers, 1980.

Organization for Economic Cooperation and Development. Choice and Adaptation of Technology in Developing Coun­ tries: An Overview of Major Policy Issues. Paris: OECD, 1974. 273

______. Methodological Guidelines for Social Assessment of Technology. Paris: OECD, 1975.

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Saudi Basic Industries Corporation. SABIC. Riyadh: SABIC, 1986.

Saudi Cable Company. "Saudization Policy." Internal memorandum. Jeddah: Saudi Cable Company, 1980.

Schumacher, E. F . Small is Beautiful: Economics As If People Mattered. New York: Harper & Row, 1973.

Shelp, Ronald K. Service Industries and Economic Develop­ ment: Case Studies in Technology Transfer. New York: Praeger, 1984.

Stegner, Wallace. Discovery: The Search for Arabian Oil. Beirut: Middle East Export Press, 1971.

Stewart, Frances. Technology and Underdevelopment. London: MacMillan, 1978.

Stewart, Frances, and Jeffrey James, eds. The Economics of New Technology In Developing Countries. Boulder, CO: Westview, 1982.

Teece, David J. The Multinational Corporation and the Resource Cost of International Technology Transfer. Cambridge: Ballinger, 1976. 274

Teich, Albert H. , ed. Technology and Man's Future. New York: St. Martin's, 1972.

Tihama for Advertising, Public Relations and Marketing. Industry and Electricity: Progress and Achievements. Jeddah: Tihama for Advertising, Public Relations and Marketing, 1986.

Tinbergen, Jan. Reshaping the International Order: A Report to the Club of Rome. New York: Dutton, 1976.

Tsurumi, Yoshihiro, ed. Technology Transfer and Foreign Trade: The Case of Japan, 1950-66. Tokyo: Ayer, 1980.

Twitchell, Karl Saben. Saudi Arabia: With an Account of the Development of Its Natural Resources. Princeton, NJ: Princeton University Press, 1953.

United Nations Organization. The International Transfer of Technology in Establishment of the Petrochemical Indus­ try in Developing Countries. New York: UNIPUB, 1975.

______. The Transfer of Technology: Economics of Offshore Assembly, the Case of the Semiconductor Industry. New York: UNIPUB, 1975.

______. Transfer of Industrial Technology from Japan to Developing Countries. New York: UNIPUB, 1975.

______. Guidelines for Evaluation of Transfer of Technol­ ogy Agreements. New York: UNIPUB, 1982.

______. Appropriate Industrial Technology for Basic Industries. New York: UNIPUB, 1983.

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Journals and Newspapers

Balasubramanyam, V. N. "Transfer of Technology: The UNCTAD Arguments in Perspectives." World Economy (London) 1 (1977): 69-80.

Belt, Robert W. "Technology Transfer Through Direct Assis­ tance to Small Enterprises." Industry of Free China (Taipei) 59 (1979):7-19.

Berrios, Ruben. "Technological Dependence and Alternative Development Strategies." Scandinavian Journal of Development Alternatives 4 (1985): 121-39.

Biermann, Herbert. "Imitation and Innovation Process Initiated by Technology Transfer Through Multinational Companies." Economics (Tubingen) 23 (1981): 52-74.

Bongnar, Jozesf. "Generation, Application and Transfer of Agricultural Technologies: Problems and Solutions." Development and Peace 1 (1980): 19-37. 276

Bulkeley, William M. "Know-How for Sale: Concern Grows over Rising U.S. Exports of Skilled Technology to Overseas Firms." Wall Street Journal 194 (5 September 1979):44.

Caporaso, James. "Dependence and Dependency in the Global System." International Organization 32 (Winter 1979): 1-12.

______. "Dependency Theory: Continuities and Dis­ continuities in Development Studies." International Organization 34 (Autumn 1980): 605-8.

Contractor, Farok J., and Taji Sagafi-Nejad. "International Technology Transfer: Major Issues and Policy Responses." Journal of International Business Studies 12 (1981): 113-35.

Dornan, Robert K. "Exporting American Technology: A National Security Perspective." Journal of Social and Political Studies 2 (1977): 131-41.

Drazin, Robert. "World Wide Industrial Innovation: Cross- Cultural Comparison of Factors that Promote or Inhibit National Ability to Innovate." Columbia Journal of World Business 19 (1984): 5-29.

Egea, Alejanro Nadal. "Multinational Corporations in the Operation and Ideology of International Transfer of Technology." Studies in Comparative International Development 10 (Spring 1975): 11-29.

Griffin, Keith. "The International Transmission of Inequality." World Development 2 (March 1974): 3-15.

Harvey, Michael G. "Application of Technology Life Cycles to Technology Transfers: Multinational Companies Often Wrestle with the Question of How to Transfer Technol­ ogies to Less Developed Countries." Business Strategy 5 (1984):51-58.

Heinrichs, Jurgen. "The Impact of International Division of Labour on the Patterns of Transfer of Technology and Related Social Costs." Millennium 8 (1979): 246-51.

Helleiner, G. K. "International Technological Issues: Southern Needs and Northern Responses." In The New International Economic Order: The North-South Debate, ed. J. N. Bhagwatti, 296-97. Cambridge, MA: MIT Press, 1978. 277

Hoffman, Lutz. "The Transfer of Technology to Developing Countries: Analytical Concept and Economic Policy Aspects." Intereconomics 20 (1985): 73-81.

James, Jeffery. "Growth, Technology and the Environment in Less Developed Countries: A Survey." World Development 6 (1978): 937-65.

Khader, Bichara. "The Social Impact of the Transfer of Technology to the Arab World." Arab Studies Quarterly 4 (November 1982): 226-41.

Killing, Peter. "Technology Acquisition: License Agreement or Joint Venture." Columbia Journal of World Business 15 (1980): 38-46.

Lall, Sanjaya. "Indian Technology Exports and Technological Development." Annals of the American Academy of Political and Social Science 458 (November 1981): 161.

Landman, Jerry R. "Technology Transfer to Less Developed Countries." Arizona Business 24 (1977): 15-21.

Leff, Nathaniel H. "Technology Transfer and U.S. Foreign Policy: The Developing Countries." Orbis 23 (1979): 145-65.

Mason, Hal R. "The Multinational Firm and the Cost of Tech­ nology Transfer to Developing Countries." California Management Review 15 (Summer 1973): 5-13.

Miller, Debra Lynn. "Panacea or Problem? The Proposed International Code of Conduct for Technology Transfer." Journal of International Affairs 33 (Spring/Summer 1979): 43-62.

Naur, Maja. "Transfer of Technology: A Structural Analy­ sis." Journal of Peace Research 17 (1980): 247-59.

Ndongko, Wilferd A., and Sundayo Anyang. "The Concept of 'Appropriate Technology': An Appraisal from the Third World." Monthly Review 32 (1981): 35-43.

Oliver, Dennis S. "Some Aspects of Technology Transfer." Social Research Administrators Journal 14 (1982): 5-16.

"Pugwash Conference on Science and World Affairs: Draft Code Of Conduct on Transfer of Technology." World Develop­ ment 2 (April/May 1974): 77-82. 278

Quinn, James B. "Technology Transfer by Multinational Companies." Harvard Business Review 47 (November- December 1969): 147-61.

Root, Franklin R. "The Role of International Business in the Diffusion of Technological Innovation." Economic and Business Bulletin 21 (Summer 1968): 17-25.

Sangster, Raymond C. "R&D for Developing Countries: The Role of Industrial R&D." Research Management 22 (1979): 34- 38.

"Science and Technology for Development." Science Policy Studies and Development (UNESCO, Paris) 47 (1981): 24.

Shabandar, Mahmoud. "Client, Consultant and Technology Transfer in Abu Dhabi." Arab Gulf Journal 5 (1985): 59- 69.

Szyliowicz, Joseph S. "The Prospects for Scientific and Technological Government in Saudi Arabia." Journal of Contemporary Business 9 (1980): 41-58.

Vicker, Ray. "Mutual Benefit: International Oil Firms Find OPEC Still Needs Their Technology, Skill." Wall Street Journal 192 (17 October 1978): 1.

Wallender, Harvey W. III. "Developing Country Orientations Toward Foreign Technology in the Eighties: Implications for New Negotiation Approaches." Columbia Journal of World Business 15 (1980): 20-27.

Weiss, Charles Jr. "Mobilizing Technology for Developing Countries." Science 203 (16 March 1979): 1.

Weiss, Charles Jr., Mario Kamenetzky, and Jairam Ramesh. "Technological Capacity: An Element of Development Strategy." Interciencia 5 (March 1980): 98-99.

Weiss, Charles Jr., and Jairam Ramesh. "A New Approach to the North-South Technological Agenda." In Mobilizing Technology for World Development, ed. Jairam Ramesh and Charles Weiss, Jr., 8-12. New York: Praeger, 1979.

Interviews

General

Abdulaziz, Nabeel Mohamed, Director of Information Center, Saudi Chamber of Commerce. Interview by author, 12 January 1987, Jeddah, Saudi Arabia. 279

Almalki, Fuad M. S., Dean of Jeddah Technical and Mid-Level College. Interview by author, 13 February 1987, Jeddah, Saudi Arabia.

Al-Marzoki, Humoud, Director of the Ministry of Interior Center for Crime Prevention. Interview by author, 2 March 1987, Riyadh, Saudi Arabia.

Al-Qean, Abdullah, Vice President, King Abdul Aziz City for Science and Technology. Interview by author, 2 March 1987, Riyadh, Saudi Arabia.

Al-Rashid, Abdullah Ahmed, Scientific Awareness Department, King Abdul Aziz City for Science and Technology. Interview by author, 2 March 1987, Riyadh, Saudi Arabia.

Al-Rawdah, Saud, ARAMCO representative at Yanbu Industrial City, ARAMCO Company. Interview by author, 14 February 1987, Yanbu, Saudi Arabia.

Commings, David, Manager, Industrial Development, Royal Com­ mission for Jubailand Yanbu. Interview by author, 16 February 1987, Yanbu, Saudi Arabia.

Halby, Riyad, Vice President, Sharco Co. Interview by author, 14 February 1987, Yanbu, Saudi Arabia.

Khan, Taher, Finance Director, Arabian Automotive Industry. Interview by author, 26 February 1987, Jeddah, Saudi Arabia.

Mansour, Hussni Omar, Director, Manpower Development Coun­ cil. Interview by author, 1 March 1987, Riyadh, Saudi Arabia.

Nazer, Hassan, Manager, Economic Development Department, Royal Commission for Jubail and Yanbu. Interview by author, 16 February 1987, Yanbu, Saudi Arabia.

Olfit, Abdulrahman, National Plan Coordinator, King Abdul Aziz City for Science and Technology. Interview by author, 1 March 1987, Riyadh, Saudi Arabia.

Saudi Cable Company

Abo Taleb, Abdul-Baset Abdulslam, Process Engineer, PVC Plant, Saudi Cable Company. Interview by author, 15 March 1987, Jeddah, Saudi Arabia. 280

Abunoor, Safwat, Manager Plant Engineering Department, Saudi Cable Company. Interview by author, 25 March 1987, Jeddah, Saudi Arabia.

Al-Akeel, Zuhair Mansour, Section Head, Medium Tension Cable Production, Saudi Cable Company. Interview by author, 25 March 1987, Jeddah, Saudi Arabia.

Al-Howaish, Abdullah, Manager, Copper Rod Plant, Saudi Cable Company. Interview by author, 27 June 1987, Jeddah, Saudi Arabia.

Al-Zahrani, Mubark, Manager of Production Department, Saudi Cable Company. Interview by author, 14 March 1987, Jeddah, Saudi Arabia.

Attyah, Ibrahim Ahmed, Manager Materials Department, Saudi Cable Company. Interview by author, 25 June 1987, Jeddah, Saudi Arabia.

Dobbel, Charles, Manager of Production Quality Control Department, Saudi Cable Company. Interview by author, 14 March 1987, Jeddah, Saudi Arabia.

Hussain, Mir Murtuza, Section Head, Industrial Engineering Department, Saudi Cable Company. Interview by author, 25 June 1987, Jeddah, Saudi Arabia.

Joukhadar, Mohamed Noor, Assistant Vice President for Opera­ tions, Saudi Cable Company. Interview by author, 24 March 1987, Jeddah, Saudi Arabia.

Kassab, Alaeldine Mohamed, Manager of Customer Services Department, Saudi Cable Company. Interview by author, 25 March 1987, Jeddah, Saudi Arabia.

Khalil, Ismail Ali, Section Head, Plant Scheduling Depart­ ment, Saudi Cable Company. Interview by author, 27 June 1987, Jeddah, Saudi Arabia.

Sait, Javeed Azeez, Manager of Production Control and Plan­ ning, Saudi Cable Company. Interview by author, 25 June 1987, Jeddah, Saudi Arabia.

Shah, Hasu, Executive Vice President, Saudi Cable Company. Interview by author, 15 March 1987, Jeddah, Saudi Arabia.

Witby-Smith, Roger, Manager of Manpower Development and Training Department, Saudi Cable Company. Interview by author, 14, 25 March 1987, Jeddah, Saudi Arabia. 281

Yasseen, Nasser, Manager of Specifications Department, Saudi Cable Company. Interview by author, 14 March 1987, Jeddah, Saudi Arabia.

Saudi Arabian Airlines

Abduljawad, Riza, General Manager, Data Services Department, Saudi Arabian Airlines. Interview by author, 1 Febru­ ary 1987, Jeddah, Saudi Arabia.

Al-Amri, Hamood Abdullah, Assistant General Manager, Flight Operation Ground Training, Ground Training Center, Saudi Arabian Airlines. Interview by author, 14 Febru­ ary 1987, Jeddah, Saudi Arabia.

Al-Mallatt, Eng. Ali, Manager Avionic Engineering Depart­ ment, Saudi Arabian Airlines. Interview by author, 12 February 1987, Jeddah, Saudi Arabia.

Bandakji, Husseen, Assistant General Manager for Corporate Training and Development Center, Saudi Arabian Air­ lines. Interview by author, 2 February 1987, Jeddah, Saudi Arabia.

Burai, Isam, Manager Data Services Administration, Data Ser­ vices Department, Saudi Arabian Airlines. Interview by author, 24 January 1987, Jeddah, Saudi Arabia.

Cancilla, Sam, Manager Systems Development, Data Services Department, Saudi Arabian Airlines. Interview by author, 24 January 1987, Jeddah, Saudi Arabia.

Donaway, Richard, Technical Training Instructor, Technical Training Department, Saudi Arabian Airlines. Interview by author, 28 January 1987, Jeddah, Saudi Arabia.

Khan, Adil A., Manager Sales Projects, Catering Services, Saudi Arabian Airlines. Interview by author, 16 Febru­ ary 1987, Jeddah, Saudi Arabia.

Murad, Ali, Assistant Manager, Catering Services Department, Saudi Arabian Airlines. Interview by author, 2 Febru­ ary 1987, Jeddah, Saudi Arabia.

Raj eh, Abdulrahman H., Manager of Human Resources, Data Ser­ vices Department, Saudi Arabian Airlines. Interview by author, 1 February 1987, Jeddah, Saudi Arabia.

Samarqundi, Omar, Technical Training Instructor, Technical Training Department, Saudi Arabian Airlines. Interview by author, 28 January 1987, Jeddah, Saudi Arabia. 282

Subaihi, Faisal A., Chief Instructor, Maintenance and Recur­ rent Training, Technical Services, Saudi Arabian Air­ lines. Interview by author, 16 February 1987, Jeddah, Saudi Arabia.

Tamarik, Jamil, General Manager, Technical Services Training Center, Saudi Arabian Airlines. Interview by author, 16 February 1987, Jeddah, Saudi Arabia.

Tyabb, Hassan, General Manager, Personnel Planning Depart­ ment, Saudi Arabian Airlines. Interview by author, 24 June 1987, Jeddah, Saudi Arabia.