Saudi king showcases mining hub in push to move beyond oil

Tue Nov 29, 2016 2:07pm EST
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By Reem Shamseddine

RAS AL-KHAIR, Saudi Arabia (Reuters) - Saudi Arabia's King Salman underlined the kingdom's intention to invest heavily in speeding up is diversification away from oil exports with the inauguration on Tuesday of a $35 billion mining and minerals processing complex.

Riyadh has tried to reduce the economy's reliance on oil for decades, but the challenge has become particularly urgent in the past couple of years as low prices have pushed state finances deep into deficit and growth has slowed sharply.

King Salman and his top ministers visited the complex at Ras al-Khair on Saudi Arabia's eastern coast, where energy minister Khalid al-Falih said the government would invest in all available resources to develop strategic industries.

The vast complex showcases the government's ability to use its oil wealth to push big industrial projects, but also shows how dependent the economy remains on state spending in the absence of a dynamic private sector. Most of the $35 billion invested so far was arranged by the government.

Projects include a $5.6 billion phosphate complex which produces fertilizer and chemicals and is operated by Saudi Arabian Mining Co (Ma'aden) 1211.SE in partnership with petrochemical giant Saudi Basic Industries Corp (SABIC) 2010.SE; both companies are majority state-owned.

A $10.8 billion aluminum facility is operated by Ma’aden and U.S. firm Alcoa (AA.N: Quote), while the complex also features a 1,400 kilometer (875 mile) railway link, a port, and desalination and power plants.

Economic reform plans announced earlier this year aim to expand the mining sector's contribution to gross domestic product to 240 billion riyals ($64 billion) by 2030 from 64 billion riyals at present.

"Jubail was where the Saudi petrochemicals industry started with SABIC - Ras al-Khair is becoming just that for the mining industry," said Fadl al-Bouainain, a prominent Saudi economist.   Continued...

Saudi King Salman (C) attends the inauguration ceremony of several energy projects in Ras Al Khair, Saudi Arabia, November 29, 2016. Saudi Press Agency/Handout via REUTERS