Investment opportunities in the Kingdom

24 April 2002

In a recent report, the Saudi American Bank (SAMBA) expressed concern about the deficit and SR630 billion (around $200 billion) domestic debt. Unemployment is a big problem in Saudi Arabia, ranging between 15-20%, but the Saudis do not like to take up lesser paid professions. No Saudi has joined the leather industry except through proprietorship. Mostly the technicians are from Türkiye and India. Saudi Arabia is revamping its tax law to lure foreign capital and boost the economy, but the Kingdom has no plans yet to introduce income taxes. Abdulrahman Al-Tuweijri, secretary general of the Supreme Economic Council (SEC), told press that the law, drafted last year and now under review in the Shoura Council, proposes cutting corporate tax on foreign firms operating in the Kingdom from 45% to around 30%. An eleven month ban on the import of live animals into Saudi Arabia has created a scarcity of hides and skins. Now Sudan has agreed that doctors can examine the live animals before slaughtering. The animals imported into Saudi Arabia are kept in quarantine for about 20 days and if any disease is detected, they are to be deported at the cost of the exporters. Al Dagal Saud Al Dagal, managing director of Al Dagal Tanneries (Pvt) Ltd, told Leather International that to keep up the supply to their regular customers, they had the skins processed in Sudan and Syria under joint ventures with local tanneries. In this way, they were able to export 126,000 skins from Syria and 10,500 from Sudan, direct to the importers. Al Dagal has been concentrating on exporting wet-blue to Europe, India and Pakistan. They are exporting about 36 containers per year. The average cost of fine quality A, B, C and D is about 80c to one dollar per sq ft. Saud Al Dagal further disclosed that the price of leather is coming down and said that due to constant controls on the slaughter of animals, the quality of the leather had improved, enabling them to get better prices for their leather. Al Dagal also manage eight slaughterhouses which enables them to obtain the hides and skins. Al Jabreen Al Jabreen Leather Factory have been able to increase their exports which have gone up to six to eight containers per month. The present production of the Riyadh factory is 5,000 pieces out of which 45% is goat and 55% is sheep. The Taif tannery also produces 2,000 pieces per day. Al Jabreen have 20 centres for procuring hides and skins all over Saudi Arabia. The Al Jabreen Leather Factory concentrates on production of wet-blue from Harri sheep, which are in great demand due to their fine grain. They have been able to increase their exports to Portugal and Italy while other customers are Korea, Hong Kong and India. Al Ahli Al Ahli Leather Factory in Riyadh have maintained their position as the biggest producer of wet-blue and crust in the Gulf area. They have added two new roller coating machines to their factory. Al Ahli are the only leather factory in Saudi Arabia owning a dozen refrigerated vans for carrying raw skins from slaughterhouses to their factory or warehouse to keep up the quality of the wet-blue and crust leather. Al Ahli have maintained the production of 16,000 hides and skins, both of sheep and goat, in spite of the shortage of raw skins in the Kingdom. Their total exports are about $5 million. Yasir Saeed, the deputy general manager, told Leather International that they have been able to maintain high quality of production due to supervision of the processing of hides and skins at every stage. Al Ahli produce 2,000 pairs of sandals for men and boys and produce 1,000 Arabia chappals per day besides the ladies' bags and purses and leathergoods such as belts. They are producing sole leather in their own factory for the chappals. New shoemaking factories Two new shoe factories are coming up in Eastern Province and one factory is being set up to produce leather auto seat covers from camels and cows. They are: i) The Saudi Shoes Co Ltd PO Box 31691, Al-Khobar 31952 Tel: +966 3 8121066 ii) Al Fuhaid Shoe Factory PO Box 865, Dammam 31421 Tel: +966 3 8121145; Fax: +966 3 8340175 iii) Abjad National Factory for Auto Seat Covers PO Box 3419, Dammam 31471 Tex: +966 3 8121194; Fax: +966 3 8121183 It is expected that with more incentives for foreign investment, further new factories for shoemaking will be set up in Saudi Arabia. One million slaughter during Haj During the Haj (Big Pilgrimage), about one million animals, including camels and cows, are slaughtered at Mina (about 10 kilometers away from Mecca). Through the Islamic Development Bank, the Saudi government has been able to distribute meat from the slaughtered animals to needy Muslims all over the world, particularly in Afghanistan and Africa. However, it has not been able to make proper utilisation of the hides and skins which go to waste. Different companies have tried to utilise the hides and skins but due to unavailability of refrigerated stores, the raw hides and skins could not be kept for long periods before processing. Clearly there is an investment opportunity here. For an outlay of between $5-10 million to process approximately one million hides and skins on the spot, there could be a good return.

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