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Volume 25, Number 3May/June 1974

In This Issue

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Made In

The Gulf

Photographed by John Taylor and Peter Harrison Smith
Additional photographs by John Bassili

Overheard at Kennedy International .Airport: "I'm flying to the Gulf for a quick look at that new petrochemical site." The Gulf of Mexico? No, the Persian Gulf, known throughout the Arab world as the Arabian Gulf and the latest entry in the Arab East's race toward industrialization.

All eight states bordering the Gulf are currently undergoing an oil-fueled economic boom, but most references to "the Gulf states" usually mean the five small states strung along the western and southern shores: Kuwait, Bahrain, Qatar, Oman and the United Arab Emirates—a federation of seven tiny shaikhdoms, the most important of which are Dubai and Abu Dhabi.

Of the five states, Kuwait is the richest and most well known, Oman the largest and least known. But even in Oman the industrial age is making an appearance. A $52-million port at Matrah, near Muscat, is scheduled for completion this year. A $12.5-million airport capable of handling 747's is already receiving international flights and a $27.3-million, 130-mile highway to link long-isolated Oman with its northern Gulf neighbors is under construction.

Such links with the outside world are new but not rare. In an astonishing explosion of activity, all the long-dormant Gulf states are currently building the communication infrastructure essential to future industrialization.

Two satellite earth stations are in operation, in Kuwait and Bahrain, and a third, which will serve the U.A.E., is under construction at Jebal Ali near Dubai. Bahrain now handles 800 international telephone calls each day, and has such dependable Telex and mail service that First National City Bank of New York moved its regional headquarters there from Beirut. A chain of new highways tying the Mediterranean to countries up and down the Gulf is also being completed and Abu Dhabi, Dubai and Bahrain have all opened major international airports within the past four years, with a major expansion underway in Kuwait. Dubai, a city of hardly 75,000 persons, handled more international passengers and freight in 1972 than either Damascus or Baghdad, both cities of a million-plus.

Shipping—especially oil transport—is one industry that, insiders predict, Gulf states will stress in the next few years. The Kuwait Oil Tanker Company recently placed orders for four ships which will increase its fleet to 10 with a capacity of 2 million tons. In February, Kuwait interests also ordered four liquid propane gas (LPG) tankers of 70,000 cubic meters each.

An even bigger fleet, however, will be that of the Arab Maritime Oil Transport Company, capitalized at $500 million and jointly owned by eight members of OAPEC, the Organization of Arab Petroleum Exporting Countries. These include the Gulf states of Kuwait, Bahrain, Qatar and Abu Dhabi.

OAPEC is also behind the new Arab Gulf Repair Yard in Bahrain, a $100-million dry dock designed to maintain and service OAPEC tankers of up to 350,000 tons, beginning in 1976. Another dry dock, underway in Dubai, is to be the world's largest when it goes into service in mid 1976. Located next to the $86-million Port Rashid, the Gulf's largest harbor, the $210-million dry dock will have three basins and employ up to 4,000 workers. Two basins will handle tankers of up to 500,000 tons and the third, a giant measuring 410 by 1,722 feet, is expected to handle the million-ton tankers of the future. Backers predict annual revenues of $70-80 million.

A side from such major service projects—the port, dry dock, airport, ground station—Dubai also has some complementary facilities: 16 banks and a new 10-story Inter-Continental Hotel. But there is little industry proper as yet. One small firm produces aluminum kitchenware. A $2-million cement plant with an annual capacity of 500,000 tons is under construction; and Eternit, a company with Swiss and Lebanese links, opened a factory in 1973 which will employ 500 men and produce 30,000 tons of asbestos-cement pipe and 500 tons of polyethylene tubes annually.

Bahrain, where oil was discovered in the early 1930's, had a head start over its Gulf neighbors in education and industrialization. As a result, the small island state is probably the Gulf's most sophisticated business center today. Bahrain has established two vocational training schools and an industrial free zone where manufactured goods—if exported—are not taxed. Besides such light industries as bottling, plastic kitchenware, detergents and paint, one firm, the Awal Trading and Contracting Company, produces heavy-duty air-conditioning units, 80 percent of which are exported. There is also a major shrimp industry.

But the giant of Bahrain industry—and the Gulf—is Aluminium Bahrain (ALBA), a $150-million smelter which produces 120,000 tons of aluminum ingots each year from imported Australian bauxite. The plant opened in 1971, now runs at full capacity and employs 2,300 men. Using Bahrain's abundant and cheap natural gas, Aluminium Bahrain fuels a bank of 19 gas-turbine generators, including a $2-million giant which is the world's largest. A mile from the smelter is Bahrain Atomisers International, which produces nearly 4 percent of the world's aluminum powder. And both General Electric and Scotland's John Brown Engineering are considering million-dollar turbine maintenance plants on Bahrain to serve the Gulf region and perhaps areas of Asia and Africa.

Other than Bahrain, with its aluminum smelter, Kuwait has the only real non-oil related industry among the Gulf states as yet. Although manufacturing accounted for only 3 percent of the net national product in 1971, the increase in production the same year was 10.5 percent. Light industries include factories making ready-made clothing, detergents, dairy products, furniture, plastic consumer goods, ceramic tiles, bricks, lime, prefabricated buildings and car batteries. There is also a shrimp industry with exports of $16.2 million in 1973, and the Kuwait Flour Mills Company, which produced 100,000 tons of flour, bread, cookies and macaroni in 1972, is building a second mill. A new cement plant produces 300,000 tons yearly and the Kuwait Metal Pipe Industry recently won a $10-million contract to supply some of the pipe for Egypt's Sumed oil pipeline project. Also, according to Newsweek, the Kuwait Government has asked Japanese steel makers to help with a projected steel mill which would turn out 300,000 tons of bars annually beginning in 1978.

Two firms, the Kuwait Chemical Fertilizer Company, which went on steam in 1966 and now employs 400, and the Petrochemical Industries Company, which began operations in 1971, use Kuwait natural gas to produce ammonia, urea, ammonium sulphate and sulphuric acid. Under a recent agreement Kuwait will supply India with 250,000 tons of ammonia yearly from now through 1979.

Kuwait's further industrial development faces one major problem in common with other Gulf states—small populations and the need to import skilled and even semi-skilled labor. Some experts estimate that out of a total male work force of 250,000, as few as 25 percent are native-born Kuwaitis.

But the will to develop is there, and so—thanks to oil—are the funds. In fact Kuwait's small population relative to national income has made possible one of the most exciting ideas to come out of the tiny shaikhdom—the Arab Fund for Economic and Social Development.

Since 1962 when it was established, the fund has approved low-interest development loans totaling close to $300 million to 12 Arab nations in the Middle East and North Africa. It is, according to Harvard-trained Abdullatif Y. Al-Hamad, director general, a fund "run by Arabs, for Arabs."

By 1973, Mr. Al-Hamad says, the fund had participated in over 25 major loans and in February this year signed agreements for new loans totaling about $25 million for projects in South Yemen, Syria and Tunisia. The Kuwait Fund has also stimulated the formation of a similar fund: Abu Dhabi's Arab Development Fund, which this January loaned $6.6 million to Jordan and $4 million to Syria. These are portents of a new financial wallop that, many experts feel, will transform the Gulf in the years ahead.

This article appeared on pages 16-19 of the May/June 1974 print edition of Saudi Aramco World.


Check the Public Affairs Digital Image Archive for May/June 1974 images.