For the United States, still wincing from its recent recession, and newly buffeted by a savage winter, Saudi Arabia's now-famous five year plan for development promises a helpful infusion of money and, to many communities, jobs.
The kingdom's projected expenditures alone are impressive enough: a total of $115 billion for both government and private projects. But to countries still facing the high unemployment left by the recession, the potential impact of such expenditures is even more important: they can sustain and create jobs.
Economists, to be sure, often disagree on matters as complicated as employment and unemployment. But they generally agree that each billion dollars worth of exports maintains or adds thousands of jobs throughout the world. If, for example, the $68 billion earmarked by Saudi Arabia for just construction-related imports were to be spent in the United States, it could provide from 600,000 to 1,000,000 jobs in exporting industries and the satellite industries.
Saudi Arabia, of course, is under no compulsion to spend such sums in the United States; as in other Arab countries where multi-billion dollar programs are underway, European and Asian companies, with the full backing of their governments, are providing strong competition.
Companies in the United States undoubtedly have some advantages too: the 40-odd years of American experience in Saudi Arabia. On the other hand, they face the worrying possibility that restraints might be imposed on them. Such restraints could not only offset those advantages—and blunt their competitive edge—but also dam the flow of exports that, in 1977, was helping the American economy.
In 1976, that flow of materials and equipment was coming to Saudi Arabia from virtually every one of the 48 continental states Westinghouse, for example, supplied 14 gas turbines built in Pennsylvania; Fisher Controls shipped 1,650 control valves from Iowa and Anderson Greenwood, 2,800 relief valves from Texas; Bingham Willamette sent 464 pumps from Oregon and Allis Chalmers 4,300 electric motors from Wisconsin. There were also compressors, 113 of them, from the Elliott Company in Pennsylvania, Dresser-Clark Industries in New York, and De Laval Turbine in New Jersey.
Those shipments, furthermore, were only a part of the total. Altogether shipping charges for Aramco projects—ranging from 2,825 tons of heavy lift cranes to 37,000 pounds of Oreo cookies—came to $96 million, 6.4 times the cost of shipping the 1974 tonnage.
And even those figures pale by comparison with what's likely to follow. The $68 billion slated for construction-related imports will bring in 79 million long tons of imports.
Not all of those imports will come from the United States, of course, and not all of the jobs that such imports could provide will be generated in American companies. Nevertheless, Saudi Arabia has entrusted supervision of a considerable part of its building program to American companies and the U.S. Army Corps of Engineers, and those organizations, in turn, have enlisted the help of such engineering/contracting giants as Fluor Corporation, Bechtel Corporation, Ralph M. Parsons Company and Brown and Root, Inc.—all United States based.
More than 5,000 representatives of major contractors for example, are already at work on the Aramco projects being designed in the United States. American specialists in Fluor's Houston office are expending some 70,000 man-hours a week on the Eastern Province gas-gathering program. And Bechtel's Houston office has about 300 specialists there assigned to such projects as the 800-megawatt Ghazlan power-plant, a $370-million job that will pay for 600,000 American man hours in home-office work by the time it is completed.
The impact of the development program will extend far beyond the initial contracts, however. At materials-procurement time, for example, most engineers quite naturally specify those materials with which they're most familiar. "We create economic impact when we write our specifications," says a high-ranking official of an engineering firm. "Because we prefer American-made materials and we do our best to get them—in the face of pretty stiff competition, too."
Furthermore, he says, American equipment installed at the infrastructure level has a way of breeding requests for similar and compatible equipment as a project grows. And those requests can be expected to carry on into the development of private sector industry.
The pivotal gas-gathering project provides a clear example of that impact. As an Aramco senior engineer put it, "one purchase order for that program was worth $500 million, and it will all be spent with American manufacturers."
Like many of the kingdom's projects, the gas-gathering project, creating needs as it goes, is having an impact from coast to coast in the United States. The building of the NGL (Natural Gas Liquids) centers are being designed and managed by major American companies and will need instrumentation from California, compressors from Pennsylvania, boilers from North Carolina, heat exchangers from Texas, 30,000-hp motors from New York and vibration sensors from Nevada—to list but a few—and well over $100-million worth of construction equipment, all of it from the United States. Each of those orders will generate purchases, manufacturing and wages.
Jubail is another example. Bechtel, headquartered at San Francisco, holds a multi-billion Saudi government contract to oversee construction of an industrial park at Jubail. At the same time, the Ralph M. Parsons Company, based in Pasadena, California, has a $6.5 million contract to draw up the master plan for a similar complex on the other side of the Peninsula: the Red Sea port of Yanbu'. Yanbu' will have extensive additions to its port facilities and, eventually, an industrial base.
The gas-gathenng and processing project will be linked to Yanbu' by an 800-mile pipeline—designed and engineered by an American company—through which natural-gas liquids will flow to the industrial complex that will be made to grow in Yanbu'. Paralleling that NGL line the width of the Peninsula will be the 48-inch crude oil pipeline which will also be designed and engineered by an American company.
The capacity of these pipelines is considerably greater than the projected requirements of Yanbu'. The crude line, for example, will be equal in size to the Trans-Alaska Pipeline and capable of pumping better than 2 million barrels of crude oil a day, some of it for export.
Pasadena-based Parsons has lined up a prestigious roster of American firms to get Yanbu on stream: Arthur D. Little, Inc., of Cambridge, Massachusetts; Skidmore, Owings and Merrill of Los Angeles; DeLeuw, Cather International of Chicago and Tetra Tech, Inc., of Pasadena.
More made-in-America equipment is going into the projects being supervised by the Corps of Engineers. Parsons, for example, is building Saudi Navy facilities at both Jubail and Jiddah, as well as the Navy Headquarters at Riyadh. And a number of American companies—including DeLeuw, Cather; Perkins and Will of Chicago; The Architects Collaborative of Cambridge, Massachusetts; Blount Brothers of Montgomery, Alabama, and J. A. Jones of Charlotte, North Carolina—have part, or have had part, in designing and building facilities at Khamis Mushayt, Tabuk and elsewhere in the kingdom.
American exposure to—and in—the Middle East counts heavily in winning contracts. The Architects Collaborative, for example, first went into the Middle East in 1957 with a contract to design the University of Baghdad Campus. Now a good 50 percent of its work is in Abu Dhabi, Bahrain, Kuwait, Oman, Qatar, and Sharjah, as well as Saudi Arabia. The firm has also established Middle East headquarters in Kuwait.
Or consider the rewarding experience of Ward School Bus Manufacturing, Inc., of little—pop. 15,510—Conway, Arkansas. Late in 1975, Ward completed its first export order: 700 specially modified buses, each built on a specified International Harvester chassis, for shipment to Jiddah. Essentially 66-passenger school buses, these were modified to meet the special needs of Muslim pilgrims. Now these buses are shuttling pilgrims between the Jiddah port and the Holy Cities of Mecca and Medina.
For Arkansas, that job was worth $20 million and something like 147,000 man-hours of work. But that was only a starter. As a direct result of that toehold in the Middle East, says company president Charles Ward, the firm is now assembling, under a $54-million Egyptian contract, 1,600 public-transit buses for use in Cairo and Alexandria.
The Egyptian order—fully 25 percent of Ward's typical annual production—means roughly 336,000 more man-hours of work for Ward and, obviously, some additions to his 800-employee work force before it's finished.
Just as important, though, is an attitudinal change the Saudi order brought to Conway. As part of the original agreement Ward sent 14 of his Conway mechanics to Jiddah to ready the buses for the road and to instruct selected Saudis in their repair.
Several among those 14 had not previously travelled beyond the Arkansas borders, says advertising director Bill M. Ward, and many were fundamentalist Protestants. But after nine weeks in Jiddah they came away with a strong respect for the Islamic culture and mores and warm memories of friendships with the Saudis they worked with. Back Conway, where they had become celebrities of sorts, several addressed school and civic clubs and always lauded Saudi friendliness. "As a result," says Ward, "I'll bet there isn't a town Conway's size anywhere that has a greater awareness and appreciation of Saudi Arabia."
And for Ward Bus, there's still more. Ward is now working toward a joint venture with a Saudi Arabian partner to establish a bus-assembly plant in Jiddah to serve the entire Middle East. He'll ship motors, chassis and parts from Conway and—most likely—a few enthusiastic Conway workers as well.
American efforts to meet the Arabian Peninsula's special needs have paid unexpected dividends in accelerating the application of modern systems. In meeting the needs for trained manpower, for example, some American companies closely involved with development have had to turn to automation at an accelerated pace.
And manpower is a problem. Out of the approximately seven million people in Saudi Arabia the effective work force is estimated at less than two million—roughly the population of Newark, N.J. Those in charge of projects, therefore, have had to either import foreign labor or stress automation. Engineers planning the gas-gathering project, for example, have had to devise ways to tie the project's widespread stations together electronically so that, once the system is operational, one man can sit at a computer console in Dhahran and regulate or monitor a given valve's performance hundreds of miles away. "It's expensive, yes," says a planning engineer, "but it's the only way when you're short of manpower."
There are numerous other examples too. One is an innovative construction technique to improve the housing of Aramco's bachelor work force. International Systems, Inc. of Mobile, Alabama, is supplying the company with over 1,000 prefabricated reinforced-concrete building modules to be used in erecting five story buildings at Abqaiq and Ras Tanura. The modules—in effect self-contained efficiency apartments—come complete with installed plumbing and fixtures, wiring and other components for simple, rapid building-block assembly. I.S.I, expects to export to Saudi Arabia for the next several years nearly all of the production from its 50-acre factory site.
Still another example is a building method developed by a Jacksonville, Florida building-industry engineer. Now being used on a 190-unit, 12-story luxury apartment building in Dammam, the method—introduced by an inventive engineer named James K. Strickland, president of Strickland Systems, Inc.—relies on a reusable "flying" form custom built for molding concrete building modules. Flexible—and mobile—the forms can be lifted away from, say, the poured deck of the 10th floor and "flown" by crane for use on the next-to-be-poured 10th floor. Similar forms are used for vertical modules and, as all are collapsible, they can easily be transported from one job to another.
The Dammam building is being constructed by Beck Arabia, a division of Dallas-based Beck International, for a Saudi firm. Beck engineers say the Strickland forming methods are expected to reduce its construction time to two years from a more customary three and a half years and—equally important in materials-short Arabia—reduce the quantities of forming materials that must be shipped in. "That one order means about $1 million to my business—not bad for a 35-employee company," says Strickland.
It is also another example of how one contract can funnel benefits into the United States. "I rely heavily on five sub-contractors," Strickland says, "and just think what it means to them. Even the guy who packed those forms for shipment got $56,000 for his work. Then we had to truck them to Panama City, load them on barges bound for New Orleans, then reload them on ships going out to Dammam. And somebody made money every step of the way."
Strickland's is a business view, of course. His flying forms save materials, shipping costs, man hours and construction time which, for a building program as extensive as Saudi Arabia's, adds up to a tidy sum of money saved. But for the construction industry it also means another step forward.
Saudi Arabia's hotel shortage has also stimulated advances as several American hotel chains—Inter-Continental, Sheraton, Holiday Inn, Hyatt, Hilton and Marriott—race to establish footholds in the Middle East. All have made inroads but, along the way, have found it extremely expensive not only to build hotels but also to furnish them. At least they did until Inn Keepers Supply (IKS) of Memphis, Tennessee—a Holiday Inn subsidiary—came to the rescue with a proposal to furnish any hotel or housing unit—not only Holiday Inn—that buys its service. "You see," explains an IKS spokesman, "it takes from 900 to 1,000 manufacturers and distributors to provide everything one hotel needs. So we simplify the procedure. We do all the buying and offer each hotel a one-stop shopping service."
Admittedly, IKS still faces stiff competition from European suppliers to the Middle East. Nevertheless, IKS is now furnishing everything from a 2,000-piece specially-built crystal chandelier to paper doilies for a 200-room yacht club and a Holiday Inn going up in Sharjah—plus a 200-unit Jiddah housing project and a 400-room Holiday Inn in Bahrain.
The IKS system is at once fascinating and instructive; it shows, again, how the Middle East building boom niters into the United States. IKS warehouses in Memphis have been made into a marshalling center for Middle East furnishings. Furniture makers in North Carolina, Michigan, Indiana or where ever ship their finished orders there. All other supplies—linens, paper goods, soaps, the always-at-hand Holiday Inn flyswatter—are stored there. When shipping time comes, everything—everything—the hotel needs is repacked and recrated and trucked over to Mississippi River docks. There the crates are fitted onto LASH barges like so many jigsaw-puzzle pieces and towed downstream to the port of New Orleans for lighter-aboard-ship handling. Like the containerized railroad cars that can be loaded on ships, the barges are plucked from the water by heavy cranes and loaded in their entirety onto specially adapted LASH ships. Their contents, so carefully packed at riverside docks in Memphis, are not touched again until the crates are off-loaded and unpacked at their final destination. As breakage and pilferage are reduced, along with shipping costs—savings of roughly $300,000 were achieved on each of the Sharjah jobs—IKS considers the system an open sesame to Middle East business.
It may turn out, in fact, that development of the Middle East will stimulate many advances in the housing and shipping fields. Anjean International Corporation of Houston, Texas is already creating "instant" hotels in Egypt and the Sudan now—largely because it has found a way to reduce building and shipping costs—and is negotiating for contracts on the Arabian Peninsula. Headed by W. Angie Smith, a former U.S. Foreign-Service officer with extensive Middle East experience, Anjean supplies hotel-room modules that can be literally bolted together into full-fledged hotels in short order. Each 12-by-52-foot module makes two 12-by-24-foot hotel rooms and a 10-unit commercial center comprises a lobby, a kitchen, dining room and house-keeping facilities. Each unit is fully furnished, fully plumbed, and complete "to the soap in the bathroom" before it leaves the U.S.
Built in the tiny town of Bean Station, Tennessee by family-owned Norris Industries, the modules are fitted with wheels, towed to the port of Mobile for shipment, put aboard 300-foot-long oceangoing barges, towed to their destination, offloaded and towed on wheels again to the erection site. The units can be stacked three deep on the barges—each barge can carry 292 rooms—and since barges are towed in tandem, each shipment can go out with as many as 584 hotel rooms.
One Anjean vice president says shipping costs run less than half those of conventional shipping methods. And further savings are achieved through use of shallow-draft barges that can be docked most anywhere and unloaded quickly. With hotel-building costs on the peninsula running high, Anjean's more spartan quarters become attractive indeed. The per-room cost estimate for proposed Anjean inn in crowded Jiddah, for example, is only $23,500—much of it flowing back to the workers in Bean Station.
Shipments to Saudi Arabia also caused a stir on the Great Lakes last year when, for the first time, Aramco shipped 81 fully assembled 145- to 280-ton cranes from the Lake ports of Toledo, Ohio and Duluth, Minnesota.
The 280-ton cranes—manufactured by Clark Equipment Company in Lima, Ohio and American Hoist International in St. Paul, Minnesota—were loaded by the usual roll-on/roll-off method. The 175-ton cranes were lifted aboard by the ship's own cranes and were shipped on shallow-draft vessels. Together, those innovations proved that self-loading vessels could handle fully assembled machinery weighing up to 175 tons, and that such machinery could be transported on shallow draft vessels able to dock in practically any port. Use of those systems opened the way for faster shipment of heavy equipment needed for the kingdom's development program. And as they also resulted in savings in money more cranes are being marshalled for shipments via the Great Lakes and the St. Lawrence Seaway.
Not all the effects of Saudi orders for development needs are so easily defined. Consider, just as one example, what's happening down in Beasley, Texas. Beasley is so small that visitors can't be quite sure whether they're entering it or leaving it. But it is where Hudson Products, a subsidiary of J. Ray McDermott & Company, makes the huge Fin-Fan heat exchangers used for industrial cooling needs around the world.
Fin-Fans run to 10 tons each in weight. Similar to gigantic automobile radiators, they can be—and are—used to cool just about anything that's fluid. They've been used for years in Saudi Arabia; fully 50 percent of Hudson's output, in fact, now goes into the Middle East. Beasley isn't overly aware of that; but Beasley is certainly aware that Hudson has come to town.
When, for example, the company moved its Fin-Fan plant down from Houston just five years ago it brought 250 employees with it, most of them Houston residents who commuted to the rather isolated plant site daily. Now, however, the Beasley facility employs some 600 Fin-Fan makers—skilled metal workers, machinists and welders—and few of them are Houston commuters. Now, they come from Beasley—or the nearby towns of Rosenberg, Wharton, East Bernard and Meadville—and most are farmers, or sons of farmers, who have learned new trades at Hudson.
Thirty-year-old Joe Chumchal, for instance, started at Hudson as a trainee three years ago, having worked previously on his father's farm and as a parts manager for a tractor dealer. Now he's a fitter and welder fast approaching the top-level welder's pay of $6.30 an hour. He and his wife Judy have one big dream—to build their own home—and have already used savings from Joe's Hudson pay to buy a 1.9-acre corner lot in East Bernard.
That plant is attracting trained outsiders to Beasley's rural environs, too. "Hudson has brought in some exceptional people," says W. J. Hlavinka, an East Bernard builder, hardware dealer, and tractor supplier. "Rural folk have a reputation for not being receptive to newcomers; but we like those who make a contribution to the community—and these do."
Hlavinka himself has benefited too. He has already built some 50 houses for Hudson employees and estimates that other builders have erected just as many—houses running between $40,000 and $60,000 in cost.
Nor does it stop there. East Bernard's Union State Bank could claim only $8,900,000 in deposits five years ago and only $4,100,000 in loans outstanding. But at the end of 1976, deposits stood at $20,300,000 and loans had practically tripled. The area's industrial payroll, moreover, increased by better than 20 percent during 1976.
What is happening in Beasley, however, is not extraordinary.
Indeed, it may typify what is happening in the nearly 48 states that have already received orders for goods and services to fulfill Saudi Arabia's development needs: one important contract that creates jobs, boosts income and, in ever widening economic ripples, stimulates growth.