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Volume 28, Number 1January/February 1977

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Partners in Growth

The Gulf

Written by John Lawton
Photographed by Tor Eigeland

The Arab East is the fastest growing market in the world for Western goods, services and technology. Its ports are awash with imports, its cities are jungles of construction, and its governments are handing out contracts like newsboys selling extras. As one diplomat put it, never have so few people tried to invest so much money so profitably in so short a time.

To the United States this has been beneficial. During 1975, for example, when total world trade tumbled five percent, business in the Middle East climbed by 15 percent and in 1976 the United States alone sold $7 billion in goods and services to Arab countries.

The future, moreover, seems equally bright. With billions of dollars earmarked for capital expenditures, economists predict exceptional opportunities for foreign businessmen willing and also able, to do business with the Arab countries.

There is, of course, no guarantee that American business and industry will continue to share in the boom. According to both Arab and American spokesmen, restrictions—which could seriously affect U.S.-Arab trade—have sent a wave of concern sweeping through the American business community in the Arab world. As one U.S. contractor put it, "The Arabs like our goods, but not our restrictions".

Some American businessmen, in fact, have hesitated to bid on important projects—because of uncertainties about possible restraints. As a result, foreign competitors in many areas are flourishing.

At the moment, however, American businessmen and industrialists are still trying—and still hoping—particularly those who have entered the lists in countries such as Abu Dhabi, Dubai, Kuwait, Qatar and Sharjah where, a recent survey shows, the stakes are high and the combatants numerous.

Abu Dhabi. "Compared to here," said Norman L. Richardson, gesturing towards Abu Dhabi's scaffolding-draped skyline, "construction in the United States is penny ante stuff. Abu Dhabi has money and the Abu Dhabians are willing to spend it."

Richardson should know. His firm, C. & O. Developing Co. of South Kenly, North Carolina, has just completed Abu Dhabi's first government owned hotel, the Ramada Airport Inn.

"They asked for an all-American hotel and we gave it to them," Richardson said. "Everything, including the bricks, came from the United States."

By "everything," Richardson did mean everything. Knapp of Phoenix, Arizona made the bar, Thomasville Furniture of North Carolina made the beds, Triangle Brick of Durham, North Carolina made the bricks, Nello L. Teer of Durham did the building, J. G. Hopkins of Roanoke, Virginia the plumbing, and Ramada, which will manage the hotel, the engineering and design. "Altogether, 600 American subcontractors and suppliers were involved and revenue for the States totaled $10 million."

And that sum, Richardson went on, does not include the $1,000-a-week wages for 75 Americans brought to Abu Dhabi to do the skilled work—wages which were apparently both needed and appreciated. "I've had calls from those who went home. They're begging to come back. They can't find jobs in the States."

Two Alabama competitors, who joined forces to tackle a venture in Abu Dhabi, have a similar story to tell. Faced with declining revenues during the U.S. recession, Harbert Construction Corp. of Birmingham, Alabama, and the Paul N. Howard Co. of Greensboro, North Carolina, decided to stop competing and start cooperating. As a result they won a $50-million contract to build a three-lane pipeline that today carries drinking water from a desalination plant to Abu Dhabi City.

As another result they kept the employees of the American Cast Iron Pipe Company of Birmingham, Alabama, busy for months manufacturing 68 miles of pipe, the largest single consignment—five shiploads—ever handled by the Port of Mobile.

And there may be more to come. Having completed the job almost one year ahead of schedule, Harbert-Howard expect to win another $45-million contract to lay pipe to the inland town of al-Ain.

"It's one of those American success stories," says Daniel Dolan of the U.S. Embassy in Abu Dhabi. "It proves that not only the big multinationals, but small firms too can succeed in business in the Middle East."

As in other countries of the Arabian Gulf, Abu Dhabi, the major partner in the United Arab Emirates, is spending substantial portions of its oil earnings more than $5 billion a year—in the United States and, as a result, providing jobs from Massachusetts to Minnesota. In early 1977, for example, S. J. Groves and Sons of Minneapolis, Minnesota, was building roads, Bechtel of San Francisco, California was building an airport and The Architects Collaborative (TAC) of Cambridge, Massachusetts was designing a public library in Abu Dhabi and a hospital in al-Ain.

As American contractors almost invariably choose American machinery and vehicles, such contracts generate sales and jobs in the United States. "You use what you are familiar with," says George M. Meyer, area manager of Harbert-Howard, who bought $2.5 million worth of Caterpillar, Koering and General Motors vehicles and equipment to complete their pipe laying contract. And this, in turn, boosts U.S. exports, currently topping $500 million a year to the United Arab Emirates.

Future possibilities, furthermore, are "staggering," according to Francis X. Crowley, president of the Natgun Corp., water-tank builders in Wakefield, Massachusetts. As an example, Crowley listed the results of a visit to the Emirates in January by a 12-man U.S. trade mission. In three days it made 85.2 million in direct sales and reported $48.4 million worth of projected business during the next 12 months.

"It was the most successful U.S. trade mission ever to visit the Emirates," says Dolan. "It was way off the chart." The Emirate traders were so keen to do business with the United States, he went on, that one of the delegation who was too ill to fulfill appointments "just lay on his bed all day taking orders.''

During the same visit Oman sent three senior government representatives to Abu Dhabi for the first-ever contact with a U.S.-Government-sponsored trade mission. Even Iraq, which stopped buying American goods following the 1967 Arab-Israeli War, gave the delegation a red-carpet reception.

Not all of Abu Dhabi's plans are firm, of course, but those that are, according to the U.S. State Department, "offer significant opportunities to U.S. businessmen, particularly planners, architects and builders."

That would seem to be the case already. In 1976, says chief city planner Dr. Azmi Abu Taleb, more than 400 construction licenses were granted for multistory blocks. And even now buildings are sprouting skyward—the houses, apartments, offices, schools, hospitals, mosques and hotels that are turning the scorched little island into a mini-Manhattan.

Dubai. As in Abu Dhabi, the skyline of Dubai is showing the effects of growth. Along the fast straight road to the famous Dubai Creek last month, a forest of cranes at Jabal Ali outlined a new port, a vast industrial complex and—limned by saucer-shaped antennae—a satellite communications center. Nearby there was also a towering concrete shell showing the location of Dubai's 33-story trade center. When completed, it will be the tallest building on the Gulf.

There were other signs of growth too. On the creek where, in earlier times, seamen sailed off to the Indian Ocean, trading dhows and service vessels for American offshore oil rigs inched past a Greek cruise ship that had just opened as a floating hotel—and was already full. Not far away, taxis fought their way toward the 700-bed Inter-Continental where harried businessmen hustled off to one of Dubai's 30-odd banks, including Citibank and Chemical from New York and the First National Bank of Chicago.

Growth, in fact, is the name of the game in Dubai and American companies seemed to be doing most of the growing. On the lower part of the creek, for example, a Sheraton hotel was rising against the skyline and an American-made drilling platform was moving out to sea; enroute the platform passed what will be the world's largest dry dock, also a brainchild of U.S. technology.

The dry dock, which will be able to provide repair and maintenance work on several large ships simultaneously, typifies the opportunities open to American companies throughout the Middle East. Another American company hopes to land the contract to manage it.

But there are numerous other examples as well. One is the $765-million, 74-berth port being built nine miles north of Dubai City. A second is the projected industrial complex at Jabal Ali. It will include a $500-million aluminum smelter—with 7.5 percent of it owned by the Southwire Corp. of Atlanta, Georgia, a company that will also provide technology in construction. Also planned for the complex is a $394-million gas-liquefaction plant for which Hudson Engineering of Houston, Texas, will provide engineering, equipment and design. Altogether, construction work worth about $2 billion is underway with another $600-million worth under consideration.

Contracts of those magnitudes are not easy to come by and for the United States they mean jobs. Most of the jobs are in U.S. production and design centers, but some of them are right in Dubai itself. J. Ray McDermott & Company, Inc. of New Orleans, Louisiana, maintains a 650-man work force of Americans in the Middle East, half of them in Dubai—and needs them. In 1976, according to Charles L. Davies, group vice-president, the McDermott Company won $200 million in offshore construction work in the Arab world, much of it done in McDermott's 80-acre construction yards on the bank of the Creek.

In Dubai, however, construction is not the whole scene. For Dubai also has plans to develop as a financial center of United Arab Emirates, and as the U.A.E. Eurodollar and dollar investments already total nearly $7 billion, there are almost unlimited opportunities for U.S. bankers, according to J. C. Green, an American working with the Commercial Bank of Dubai. "There is a tremendous demand for corporate finance, term credits and the more sophisticated banking services," he said.

Kuwait. At first glance attractive opportunities seemed equally available in Kuwait last month. In the kilometer-square grounds of Kuwait City's Salim al-Ali center, for example, the hot Arabian sun glinted off the gleaming coachwork of the 6,000 brand new American automobiles parked wall-to-wall in the center's parking lot.

"We sold 16,000 of them last year," said Suhail al-Haraish of Yousuf A. Alghanim and Sons, the largest General Motors dealer in the world. "And this year," he said, waving toward a convoy of new Chevrolets pulling into the lot, "we should sell more."

With an $8-billion-a-year income from oil—plus interest on its petrodollar investments—Kuwait is one of the more attractive markets in the Gulf for American-made goods. Indeed, since the Middle East development programs began, U.S. exports to Kuwait—of everything from Sara Lee cakes to Boeing jet liners—have shot up 400 percent and in 1976 topped $414 million.

In addition, scores of U.S. construction firms, employing hundreds of American architects and engineers, are contributing to the vast development program that is transforming Kuwait from an ancient fishing and trading community into a modern, industrialized state.

Altogether more than 60 U.S. companies—including Bechtel, Honeywell, Otis and Merrill Lynch—have permanent offices in Kuwait to handle a wide variety of important—and profitable— projects. They include hospitals (Perini Corp.), housing (Perkins & Will), airport facilities (Stanray and FMC), a municipal fish market (Marcel Breuer), highways (DeLeuw, Cather) and a Disneyland-style amusement park (VTN). Recent orders placed by Kuwait with U.S. firms total $370 million. They are: Kellogg International—$250 million for a natural-gas processing plant; Foster-Wheeler—$70 million for oil refinery expansion; General Electric—$40 million for gas turbine engines; Parker Drilling Company—$10 million dollars to drill a 20,000-foot deep test well in the Burgan oil field.

And even that is just part of the picture.

Kuwait Airways operates a jet fleet of seven Boeings—all built by U.S. craftsmen—and is considering buying more. In addition, 80 percent of all the construction equipment used by the Ministry of Public Works is manufactured in U.S. plants—along with the parts Kuwait will need in years to come. For Americans, still shaken by the soaring and still uncertain unemployment figures of the recent recession, such statistics are unquestionably encouraging. But there are, according to U.S. officials in Kuwait, clouds on the horizon.

One is the alarm about new U.S. restrictions on trade. Like Arabs in the U.A.E. and Saudi Arabia, the Kuwaitis fear that artificial restraints will disrupt U.S.-Kuwait trade relations. Already, in fact, the previous tide of American businessmen pouring into Kuwait has slowed—apparently because of uncertainties in the U.S. about future American trade relations with the Arab world.

Another cloud is competition—especially from Europe and Japan. Across town from Alghanim's wall-to-wall Chevrolets, astute Kuwaiti salesmen, untroubled by any uncertain trade policies, display hundreds of Toyotas that, their signs suggest, they would be very pleased to sell to would-be GM customers. And atop Kuwait City's high-rise apartments, commanding neon signs tell Kuwait that companies like Sony of Japan and Philips of Holland are quite eager to sell Kuwait whatever they might need.

In 1975 American businesses and industries had begun to improve their position in Kuwait. Admittedly, they were still a long way from matching Europe's nine Common Market countries—who provided a whacking 38 percent of all Kuwait imports. But for the first time in a decade American exports to Kuwait had outstripped those of Japan—18 percent to 16.2 percent.

And the future, say U.S. officials, was looking even better. Past and present U.S. earnings from Kuwait are peanuts, they claim, compared with future prospects. The billion-dollar construction boom in Kuwait, for example, will probably last for decades. In short, a U.S. State Department spokesman put it, "There is virtually no limit to what American businessmen could do in Kuwait."

The key word there, of course, is "could." Because, as one observer added, "If U.S.-Kuwait trade relations go sour for any reason, there's damned few imports that Kuwait can't get somewhere else and other countries—such as Japan or Britain—would be only too willing to provide them."

Qatar. In Qatar that has already happened. For nowhere is the cut and thrust of competition for Arab petrodollars more plainly illustrated than in the foreign trade figures of Qatar, where the United States, Great Britain and Japan jockey for supremacy in import league standings.

In 1974, Japan ousted Britain as Qatar's major foreign supplier and relegated the United States, previously the runner-up, to third place. Britain bounced back in 1975—capturing 21 percent of Qatar's total imports to Japan's 15 percent—but the United States, with 12 percent, stayed where it was.

In absolute terms the figures on U.S. exports to Qatar might not seem discouraging. In 1975 they increased 80 percent: to $50 million, mainly in sales of cigarettes, automobiles and heavy equipment. And Doha, the capital, boasts such American institutions as a branch of New York's Citibank, a fully automated AMF bowling alley and even a Colonel Sanders' "finger-lickin' good" fried chicken emporium. It will also soon have a pyramid-shaped Sheraton on its white-sanded shores.

American firms, moreover, are actively participating in, or bidding for, multimillion dollar contracts arising from the small shaikhdom's billion-dollar-a-year development program. Price International of Bartlesville, Oklahoma, for example, is coating sections of a 222-mile natural-gas pipeline, William F. Pereira of Los Angeles, California is planning a prestigious new suburb at the end of Doha Bay. And The Architects Collaborative of Cambridge, Massachusetts (TAC) is competing for a $105 million building contract.

American companies are also involved in, or bidding on, even bigger projects. One is a $260-million university. Another is a $2.6-billion industrial complex rising like a mirage from Qatar's eastern seaboard salt flats at Umm Said which will include petrochemical facilities, a steel mill and an aluminum smelting plant.

Nevertheless, U.S. officials in Qatar are worried. Sent to Doha two years ago, when the United States first opened an embassy in Qatar, they had hoped to improve U.S. trade. But so far, Qatar's import figures show, other countries are doing better.

One reason, according to Kamal Ali Saleh, the director general of the QatarChamber of Commerce, is that British and Japanese businessmen are often more aggressive and flexible than their American counterparts. "We had lots of visits by U.S. trade delegations, but no follow-up," Saleh says. "Some U.S. companies just have a take-it-or-leave-it attitude."

U.S. Ambassador Robert Paganelli agrees. "Some American businessmen think they can sell anything here at any price on any terms. In actual fact, the Qataris are extremely price and quality conscious and competition is fierce."

Another reason is that although Qatar businessmen and officials are favorably disposed to American products and technology, they know—and make it plain—that Qatar can survive without U.S. trade.

"Continued trade with the Arab states is more in America's interest than ours," says Mohammad Shabana Ali, economic adviser to the Ruler of Qatar.

That situation, they conclude, plus changes in U.S. attitudes toward U.S. firms doing business with the Arabs, could leave the U.S. in third place—or lower—for years to come, at least in Qatar and possibly, they imply, the entire Arab world.

This article appeared on pages 4-11 of the January/February 1977 print edition of Saudi Aramco World.


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