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June 1, 2008

3 Min Read
Processing operations offer hope of stability

Officials in some Near and Middle Eastern countries, including Saudi Arabia, are eyeing plastics processing as the perfect mixture of social project and profitable downstream enterprise.

The Saudi government’s emphasis today, says Mansour S. Al Kharboush, VP specialty products at plastics supplier Sabic, is to encourage investment in plastics processing operations within the country, including direct foreign investment, as a means to create jobs, and supply the region’s growing demand for pipes and profiles, water bottles, packaging, and other plastics applications.

The oil is there, the plastics are increasingly there, so why shouldn’t more processing be done in the region? Not only is plastics processing increasingly considered a natural downstream extension of current business, but it also offers hope for an increasingly touchy social issue: youth unemployment. “With 50% of the population under 20, offering hope for the future and employment opportunities are of major importance to prevent a radicalization of youth,” industry consultant Rashid Husain, VP of the Al-Khobar, Saudi Arabia-based M.A. Al-Azzaz Establishment, told attendees during the Dubai Plast Pro ’08 conference conducted in Dubai in March by Maack Business Services (Au, Switzerland). “Going downstream by polymer producers in establishing processing operations to provide jobs in the future may be more of a compulsion rather than a choice,” he added.

Such operations, mainly small- to mid-sized businesses, could be a big employment generator for youth, something Husain says governments now see as key to maintaining a cohesive society. Saudi Arabia for one is now pushing downstream development through incentives to establish processing operations as well as such projects as processing training centers like the Higher Institute for Plastic Fabrication (HIPF; Riyadh).

Plant manager Fahad Saud Al Tayar of Saudi injection molder and extrusion processor Al Tayar Plastic & Rubber Mfg. Co (Jeddah) agrees, and says there has recently been a change in mentality among his countrymen, as they question why plastics produced in the Gulf Region also should not be processed there. This changing mindset has, he says, spurred interest in investments in processing operations by many who previously parked their money in foreign banks.

Ashraf Alam Shah, business development manager at Saudi processor Rowad National Plastic (Riyadh), estimates that in Saudi Arabia there were in 2005 about 825 processors employing about 83,000. He says Gulf-based processors need to concentrate on applications that are in demand within the region and should focus on value-added goods rather than the commodity market, which is already saturated with imports. Rowad, which processes building and construction supplies such as geomembranes, high-UV-protected polycarbonate, and acrylic corrugated and multiwall sheet, recently announced it would enter the BOPP packaging-film market with the installation by 2009 of two tenter frames having an operating width of 8.7m and running at 450 m/min.

But Shah laments that there are no regional groups or associations to promote the interests of processors in the construction sector. He believes such Middle Eastern lobby groups would provide peer pressure to achieve and maintain international standards of processed construction products. Such organizations, he says, could also bolster a ‘buy local’ mentality if the processed products meet globally recognized standards. Currently, says Shah, imported products typically are assumed to be better than locally processed ones, which obviously won’t always be true.

Plastics processing in the region is slowly growing. Resin capacity in the Middle East is growing fast, says Horst Maack, president of Maack Business Services. Of the five major thermoplastics, the Middle Eastern (including Iran but excluding Egypt) share of worldwide capacity was 7% last year, but by 2015 will have jumped to 12%. This growth is coming despite delays in construction and startup of new projects. A lack of qualified construction personnel and increasing costs of building materials have hampered some projects, he says. No matter the pace, the growth—in local supply and, increasingly, in the processing of that supply within the region—seems assured to continue.

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