Where Innovation Creates Value

By M H Ahssan

It doesn’t matter where scientific discoveries and breakthrough technologies originate—for national prosperity, the important thing is who commercializes them. The United States is not behind in that race.

Now, perhaps, more than ever, the fear of globalization haunts the United States. Many manufacturing companies that once flourished there fell to overseas competition or relocated much of their work abroad. Then services embarked on the same journey. Just as the manufacturing exodus started with low-wage, unskilled labor, the offshoring of services at first involved data entry, routine software programming and testing, and the operation of phone banks. But today, overseas workers analyze financial statements, test trading strategies, and design computer chips and software architectures for US companies.

It is the offshoring of research and development—of innovation and the future—that arouses the keenest anxiety. The economist Richard Freeman spoke for many Americans when he warned that the United States could become significantly less competitive “as large developing countries like China and India harness their growing scientific and engineering expertise to their enormous, low-wage labor forces.” What is the appropriate response? One, from the conservative pundit Pat Buchanan, the TV broadcaster Lou Dobbs, and their like, calls for protectionism. Another, seemingly more progressive, approach would be to spend more money to promote cutting-edge science and technology. Much of the establishment, Democratic and Republican alike, has embraced what the economists Sylvia Ostry and Richard Nelson call techno-nationalism and techno-fetishism, which both claim that US prosperity requires continued domination of these fields.

We’ve heard such fears and prescriptions before. In the 1980s, many people attributed the problems of the US economy to the proliferation of lawyers and managers and to a shortage of engineers and scientists; Germany and Japan were praised as countries with a better occupational ratio. Yet in the 1990s, their economies slackened while the United States prospered—and not because it heeded the warnings. Indeed, math and science education in US high schools didn’t improve much. Enrollment in law schools remained high, and managers accounted for a growing proportion of the workforce. The US share of scientific articles, science and engineering PhDs, and patents continued to decline, the service sector to expand, and manufacturing employment to stagnate.

Of course, the United States can’t count on the same happy ending to every episode of the “losing our lead” serial. The integration of China and India into the global economy is a seminal and unprecedented phenomenon. Could the outcome be different this time? Is the United States on the verge of being pummeled by a technological hurricane? In my view, the answer is no. Worries about the offshoring of R&D and the progress of science in China and India arise from a failure to understand technological innovation and its relation to the global economy. Innovation does play a major role in nurturing prosperity, but we must be careful to formulate policies that sustain rather than undermine it—for instance, by favoring one form of innovation over another.

Three levels of innovation

Innovation involves the development of new products or processes and the know-how that begets them. New products can take the form of high-level building blocks or raw materials (for example, microprocessors or the silicon of which they are made), midlevel intermediate goods (motherboards with components such as microprocessors), and ground-level final products (such as computers). Similarly, the underlying know-how for new products includes high-level general principles, midlevel technologies, and ground-level, context-specific rules of thumb. For microprocessors, this know-how includes the laws of solid-state physics (high level), circuit designs and chip layouts (midlevel), and the tweaking of conditions in semiconductor fabrication plants to maximize yields and quality (ground level).

Technological innovations, especially high-level ones, usually have limited economic or commercial importance unless complemented by lower-level innovations. Breakthroughs in solid-state physics, for example, have value for the semiconductor industry only if accompanied by new microprocessor designs, which themselves may be largely useless without plant-level tweaks that make it possible to produce these components in large quantities. A new microprocessor’s value may be impossible to realize without new motherboards and computers, as well.

New know-how and products also require interconnected, nontechnological innovations on a number of levels. A new diskless (thin-client) computer, for instance, generates revenue for its producer and value for its users only if it is marketed effectively and deployed properly. Marketing and organizational innovations are usually needed; for example, such a computer may force its manufacturer to develop a new sales pitch and materials and its users to reorganize their IT departments.

Arguing about which innovations or innovators make the greatest contribution to economic prosperity, however, isn’t helpful, for they all play necessary and complementary roles. Innovations that sustain prosperity are developed and used in a huge game involving many players working on many levels over many years.

Consider, for instance, the story of the key active component in almost all modern electronics: the transistor. A pair of German physicists obtained the first patents for it in the 1920s and ’30s. In 1947, William Shockley and two colleagues at Bell Labs built the first practical point-contact transistor, which Bell used only in small quantities. In 1950, Shockley developed the radically different bipolar junction transistor and licensed it to companies such as Texas Instruments, which at first implemented it in a limited run of radios that were used as a sales tool. Within two decades, transistors had replaced vacuum tubes in radios and TVs and spawned a whole world of new devices, such as electronic calculators and personal computers.

The German physicists’ discoveries began an extended process of developing know-how at a number of levels. Some steps involved high-level discoveries, such as the transistor effect, which earned Shockley and his colleagues a Nobel Prize. Other steps, such as those needed to obtain high production yields in semiconductor plants, called for lower-level, context-specific knowledge.

A similar complexity characterizes globalization. A variety of cross-border flows can be important to innovators—for instance, the diffusion of scientific principles and technological breakthroughs, the licensing of know-how, the export and import of final products, the procurement of intermediate goods and services (offshoring), equity investments, and the use of immigrant labor. Many kinds of global interactions have become more common, but not in a uniform way: international trade in manufactured goods has soared, but most services remain untraded. Of the many activities in the innovation game, only some are performed well in remote, low-cost locations; many midlevel activities, for example, are best conducted close to potential customers.

Where technomania goes wrong

Techno-nationalists and techno-fetishists oversimplify innovation by equating it with discoveries announced in scientific journals and with patents for cutting-edge technologies developed in university or commercial research labs. Since they rarely distinguish between the different levels and kinds of know-how, they ignore the contributions of the other players—contributions that don’t generate publications or patents.

They oversimplify globalization as well—for example, by assuming that high-level ideas and know-how rarely if ever cross national borders and that only the final products made with it are traded. Actually, ideas and technologies move from country to country quite easily, but much final output, especially in the service sector, does not. The findings of science are available—for the price of learned books and journals—to any country that can use them. Advanced technology, by contrast, does have commercial value because it can be patented, but patent owners generally don’t charge higher fees to foreigners. In the early 1950s, what was then a tiny Japanese company called Sony was among the first licensors of Bell Labs’ transistor patent, for $50,000.

In a world where breakthroughs travel easily, their national origins are fundamentally unimportant. Notwithstanding the celebrated claim of the author and New York Times columnist Thomas Friedman, it doesn’t matter that Google’s search algorithm was developed in California. An Englishman invented the World Wide Web’s protocols in a Swiss lab. A Swede and a Dane started Skype, the leading provider of peer-to-peer Internet telephony, in Estonia. To be sure, the foreign provenance of such advances does not harm the US economy.

What is true for breakthroughs from Switzerland, Sweden, Denmark, and Estonia is true as well for those from China, India, and other emerging economies. We should expect—and desire—that as prosperity spreads, more places will contribute to humanity’s stock of scientific and technological knowledge. The nations of the earth are not locked into a winner-take-all race for leadership in these fields: the enhancement of research capabilities in China and India, and thus their share of cutting-edge work, will improve living standards in the United States, which, if anything, should encourage these developments rather than waste valuable resources fighting them.

The willingness and ability of lower-level players to create new know-how and products is at least as important to an economy as the scientific and technological breakthroughs on which they rest. Without radio manufacturers such as Sony, for instance, transistors might have remained mere curiosities in a lab. Maryland has a higher per capita income than Mississippi not because Maryland is or was an extremely significant developer of breakthrough technologies but because of its greater ability to benefit from them. Conversely, the city of Rochester, New York—home to Kodak and Xerox—is reputed to have one of the highest per capita levels of patents of all US cities. It is far from the most economically vibrant among them, however.

More than 40 years ago, the British economists Charles Carter and Bruce Williams warned that “it is easy to impede [economic] growth by excessive research, by having too high a percentage of scientific manpower engaged in adding to the stock of knowledge and too small a percentage engaged in using it. This is the position in Britain today. It is very much to the point that the United States has not only great scientists and research labs but also many players that can exploit high-level breakthroughs regardless of where they originate. An increase in the supply of high-level know-how, no matter what its source, provides more raw material for mid- and ground-level innovations that raise US living standards.

Techno-fetishism and techno-nationalism also ignore the implications of the service sector’s ever-growing share of the US economy. Manufacturing, with just 12 percent of US GDP, accounts for some 42 percent of the country’s R&D and employs a disproportionately large number of its scientists, technicians, and engineers. Services, with about 70 percent of US GDP, accounts for a disproportionately low one. But this doesn’t mean that the service sector shuns innovation. As the economist Dirk Pilat notes, “R&D in services is often different in character from R&D in manufacturing. It is less oriented toward technological developments and more at codevelopment, with hardware and software suppliers, of ways to apply technology” to products. Whatever proportion of resources a manufacturing economy should devote to formal research (or research labs) and to educating scientists, the appropriate proportion would be lower in a services-based economy.

Consider a particularly important aspect of the US service sector: its use of innovations in information technology. It simply doesn’t matter where they were developed; the benefits accrue mainly to US workers and consumers because, in contrast to manufacturing, most services generated in the United States are consumed there. Suppose that IT researchers in, say, Germany create an application that helps retailers to cut inventories. Wal-Mart Stores and many of its US competitors have shown conclusively that they are much more likely to use such technologies than retailers in, for example, Germany, where regulations and a preference for picturesque but inefficient small-scale shops discourage companies from taking a chance on anything new. That is among the main reasons why since the mid-1990s, productivity and incomes have grown faster in the United States than in Europe and Japan.

Changing course

Since innovation is not a zero-sum game among nations, and high-level science and engineering are no more important than the ability to use them in mid- and ground-level innovations, the United States should reverse policies that favor the one over the other, and it should cease to worry that the forward march of the rest of the human race will reduce it to ruin.

One obvious example of its mistaken policies is the provision of subsidies and grants for R&D but not for the marketing of products or for the development of ground-level know-how to help the people who use them. Similarly, companies such as Wal-Mart have very large IT budgets and staffs that develop a great deal of ground-level expertise and even develop in-house systems. But none of this qualifies for R&D incentives.

Policies to promote long-term investment by providing tax credits for capital equipment and for brick-and-mortar structures seem outdated as well. The purchase price of enterprise-resource-planning systems, for example, is just a fraction of the total cost of the projects to implement them. Yet businesses eligible for investment-tax credits to buy computer hardware or software don’t receive tax breaks for the cost of training users, adapting hardware and software systems to the specific needs of a company, or reengineering its business processes to accommodate them.

Immigration policies that favor high-level research by preferring highly trained engineers and scientists to people who hold only bachelor’s degrees are misguided too. By working in, say, the IT departments of retailers and banks, immigrants who don’t have advanced degrees probably make as great a contribution to the US economy as those who do. Likewise, the US patent system is excessively attuned to the needs of R&D labs and not enough to those of innovators developing mid- and ground-level products, which often don’t generate patentable intellectual property under current rules and are often threatened by easily obtained high-level patents.

Thomas Friedman to the contrary, the world is hardly flat: China and India aren’t close to catching up with the United States in the ability to develop and use technological innovations. Starting afresh may allow these countries to leapfrog ahead in some respects—building advanced mobile-phone networks, for example. But excelling in the overall innovation game requires a great and diverse team, which takes a very long time to build. Japan, for instance, began to modernize itself in the late 1860s. Within a few decades, it had utterly transformed its industry, educational system, and military. Today, the country’s highly developed economy makes important contributions to technological progress. Yet after nearly 150 years of modernization, Japan remains behind the United States in the overall capacity to develop and use those innovations, as average productivity data show. South Korea and Taiwan, which have enjoyed truly miraculous growth rates since the 1970s, are still further behind. Do China and India have any real likelihood, at any time in the foreseeable future, of attaining the parity with the United States that has so far eluded Japan, South Korea, and Taiwan?

Complacency is dangerous, but fretting over imaginary threats impairs the ability to address real ones. A misguided fear of scientific and technological progress in China and India distracts Americans both from its benefits and from the important problems created by the integration of these two countries into the global economy—such as the soaring per capita fossil fuel consumption of more than two billion people. We do have much to worry about. Let’s worry about the right things.

First Impression of Blackberry Torch 9860

By Manav Arya

Out of sheer curiosity and boredom, rather than the need, I picked up the new BlackBerry Torch 9860 yesterday. I was feeling the Blackberry withdrawal symptoms especially since the Bold 9900 was such a disappointment and I hadn’t owned the berry since.

Instant impressions were great however I don't understand why RIM chose to name this device 'Torch' especially since it clearly follows the 'Storm' format. Just like the 9900 I was quite happy with the hardware build quality. The buttons on front are a welcome change from the recessed 'soft' touch ones we've gotten in the past. The back was curved and the phone felt great to hold. The phone was quite responsive too, in fact this is what the original 'Storm' should have been, the on-screen keyboard was the best I've ever used on any BlackBerry handheld, but I still would rate the Windows Phone 7 keyboard higher.

The phone comes loaded with the hyped OS7. But if you’re excited about this platform, you will be irritated by the lack of OS7 applications available on the Appstore. Even if you use the apps meant for an older platform, for some strange reason many of them will cause issues with the device.

The screen is great but it gets nowhere near the quality of the iPhone 4. It has all the other standard features/options that a BlackBerry has to offer. Although it is a great device, the price-point (Rs28,490/-) at which its sold puts it into direct competition with the likes of iPhone 4 and flagship Android phones like Optimus 3D and EVO 3D. Unfortunately, that makes the phone look rather lackluster and hence ends up being disappointing. I honestly feel RIM should get its act together (and fast) because being a BlackBerry loyalist over 6 years now the PlayBook, Bold 9900 and now the Torch 9860 have been huge disappointments.

MANY CONDIOLED THE DEMISE OF 'INDIAN CRICKET TIGER' MANSOOR ALI KHAN PATUDI

Indian cricket fraternity reacted with shock and sorrow on the demise of former captain Mansur Ali Khan Patuadi, who died in New Delhi due to lung infection, describing him as a "great human being" and "shrewd leader" who inspired a generation of players in the country.

Former and current stalwarts of the game remembered how Pataudi had influenced their careers in different ways and said his demise has left a void in Indian cricket.

Former opening batsman Gundappa Viswanath described Pataudi as his guide in early years of his career and somebody who had always helped the youngsters.

"It is a terrible news for me, he brought me up and guided me. I can't even express myself, it is one of my saddest days. He was a great human being, a great cricketer, a great fielder, shrewd captain, it is really sad," he said.

"He always guided the youngsters, I was very close to him, so I can't really forget the way he brought me up. He was my first captain under whom I played. Whatever career I had, it stands on him," he added.

Former captain and current selection panel chairman Krishnamachari Srikkanth said Pataudi was the one cricketer who ushered in style and aggression to Indian cricket.

"It is a great loss for Indian cricket. He is one fellow, so stylish and aggressive. He achieved so much at the age of 21, he played an aggressive brand of cricket. He was very friendly and a fun-loving person, he had very subtle and good sense of humour," said Srikkanth.

"His greatest quality was the way he hit those sixes. He is called Tiger because of his extraordinary fielding at covers. He lost one eye but still went on to score so many runs. He expresses his views but never tried to impose them.One thing I like to inculcate from him is his determination and aggressiveness," he said.

Current India batsman Rahul Dravid said Pataudi's illustrious career made a great impact on the game and on the Indian team.

"It is a sad day for Indian cricket, he was an inspiration for us. I never had the chance of seeing him play but I always heard how big an impact he made on the game. I had the chance of interacting with him on various issues. He was extremely knowledgeable, he deeply cared about Indian team. It is such a loss not only for his family and friends but also for Indian cricket," he said.

Dravid's India team-mate VVS Laxman felt Pataudi's legacy will continue even after his death.

"It's a sad moment for cricket fraternity. It's shocking news to me as only few days back I met him in England. I have never interacted with him on cricketing techniques but he had a great cricketing acumen and a very knowledgeable person, given the amount of experience," Laxman said.

"His record speaks for itself. May his soul rests in peace. I am confident his legacy will continue. He had a lot of passion for Indian cricket. His knowledge and acumen about cricket will definitely be missed," he added.

Pataudi's one-time team-mate Bishen Singh Bedi described him as the "foremost outstanding champion of Indian cricket".

"Very sad day for the Indian cricket. He was the foremost outstanding champion of Indian cricket. With his sad demise, that chapter is closed now. I am too shocked to react to this news," said Bedi.

Former captain Dilip Vengsarkar remembered Pataudi as an "innovative" captain who had won many matches for the country.

"It's a sad news. He was a great player, fantastic captain and an outstanding fielder. He was a gutsy player and an innovative captain. He won many may matches for India. We are going to miss him," he said.   (Newsindia Syndication)

TATA'S NEW NANO GOLDPLUS UNVEILED!

All that glitters is Nano Gold: Tata Sons Chairman Ratan Tata unveiled the world's first ever gold jewellery Nano car by Goldplus, a jewellery brand by Titan Industries. A car made of using 80 kg of 22 karat gold, 15 kg of silver and gem stones.

The Tata Group unveiled a Nano car - made with gold and silver, and studded with precious stones - worth an astronomical over Rs.22 crore.

But, it's not for sale - the valuable and fully functional car is a unique branding and promotional initiative by Goldplus Jewellery, part of Titan Industries, a Tata Group company, an official said.

The mega-value Goldplus Nano Car was unveiled Monday evening by Tata Group chairman Ratan Tata.

The Goldplus Nano Car pales the average Rs.1.40 lakh Nano, which started with a Rs.1 lakh price tag at its launch.

The Goldplus Nano Car is billed as the world's first ever gold jewellery car and celebrates the 5,000 years of jewellery making industry in India.

The car's body is made with 80 kg 22 carat solid gold, 15 kg silver, precious stones - including diamonds, rubies - and other expensive gemstones, the official said.

"As many as 14 techniques of jewellery making have gone behind the effort -- from the intricate filigree work to the delicate and colourful meenakari work, the stunning kundan to the traditional naqashi...marking the convergence of diverse and culturally distinct jewellery making techniques from around India," the official told Newsindia.

Titan Industries managing director Bhaskar Bhat said that since eternity, jewellery made with gold and precious stones has been an integral part of the Indian woman's life.

"Indian jewellery has been an epitome of innovation and creativity, and carved a niche worldwide for itself for the intricacy of the designs crafted out of the precious metals and stones," said C.K. Venkataraman, COO, jewellery division.

After its glittering launch in Mumbai, the Goldplus Nano Car will travel to all the Goldplus showrooms at 29 locations around the country.

The car incorporates beautiful designs, made with the precious stones of different colours, set on the gold and silver body of the car. - (Newsindia Syndication)

Saudi Arabia: A destination of choice for investors

By M H Ahssan

Investment as a process has been the key to the rise of Saudi Arabia as an economic power. Since the mid 1970’s, when the Kingdom decided to use its growing revenues from oil to industrialize by investing in processing plants that used the country’s hydrocarbon resources, this policy decision has needed at least a decade of very large investments to build the plants and the necessary infrastructure.

To build a downstream processing industry is capital intensive. However, the decision perfectly matched the Kingdom’s economic and demographic profile in that it had enormous oil reserves linked to the potential income they would generate and a small population. The government saw the logic in adding value to oil exports by processing them in-country - especially by utilizing natural gas reserves and gas that was until the late 1980’s burned off.

Some Saudi planners saw industrialization as a good opportunity to encourage the participation of both foreign and domestic firms to widen the Kingdom’s sphere of economic activity. Joint ventures with foreign companies became common and mutually beneficial. An important bonus to the Saudi economy was the transfer of technology that came with the investment.

As one local commentator put it recently, Saudi Arabia’s industrial revolution came in a box and the instructions were in English. The Kingdom used its wealth to capitalize where it may on available skills and technology to further its growth and generate its own skills and knowledge base for the future.

Thirty years or so later, the Kingdom is still an attractive investment destination. The landscape has widened from the narrow but lucrative confines of the petrochemical industry into a highly developed market with a variety of areas all offering long-term potential. Perhaps the days of the “quick buck” return on investment have passed, but medium and long-term investments in social and industrial projects are very much alive.

Tal Nazer is the CEO of Bupa Arabia. First business between Bupa and the Nazer group began in 1997. It is a post oil boom company that specializes in catering to the health and care needs for the rapidly changing demographics and social infrastructure in the Kingdom.

“We are one of the few companies that have international shareholders and one of the oldest companies in insurance in Saudi Arabia,” said Nazer, indicating that the company was a long way from the traditional partnerships of the 70s and 80s.

As a result of the increase in population, changing age profile and rising expectations of the increasingly affluent population, the company addresses different aspects of the health-care industry.
For Bupa, hospitals, insurance, health dialogue and care homes are the core of the business, while Bupa Arabia has health insurance as its main focus, an area that reflects the change in social concerns and infrastructure resulting from petrochemical fuelled societal development in the Kingdom. Nazer’s advice to an incoming investor was: “Specialize and do it well.”

Investing in a new business requires capital and adherence to existing local regulations. In 1997, for Bupa Middle East this was relatively easy as there were few if any insurance-specific regulations. However in 2003, insurance laws and regulations came into force.

This, said Nazer, meant that existing shareholders and the company had to make adjustments to conform. They included a minimum capital of SR100 million, a requirement to be a publicly listed company, and a capital input that met the solvency requirements of the Saudi Arabian Monetary Authority (SAMA).

Having met the requirements, completed the paperwork and launched one the most successful IPOs in the Kingdom — nine times over subscribed — Bupa Arabia came into being in 2008.

Nazer reflected on the change brought about by the formation of the current company. “We benefited from local experience and the international expertise,” he said. “We had to go through the processes that any insurance company had to go through, capital, management capability, business plan and due diligence for example, but that was OK,” he said. “The regulations are of a high standard and the reason for that is that the government wants to build an insurance industry of a high standard similar to the banking industry,” he added.

Nazer said that as with any inward investing company in any country, local know-how was important either by using a local partner or bringing in good quality local people to guide the investor through the challenges.

Changes in local employment law can produce very positive results. The Saudi government makes health insurance mandatory for expatriates. “That increased the market from 1 to 7 million customers,” he said. He noted that this had resulted in a knock-on effect on the Saudi market, producing customers who saw the benefits that health insurance gave.

The Saudi population is predominantly young with some 80 percent under 39 years old and 60 percent under 21, according to generally accepted figures. However, it will age and “medical inflation” will become a major factor in insurance. With the mandatory health insurance for expatriates and Saudis working in private sector, health care has become accessible to more people.

These factors, said Nazer, have combined to put pressure on the existing hospital facilities, which has resulted in medical inflation. His concern is to deliver world-class services and can see a growing need for hospital facilities to cope with the future demand. He would like to see facilitation and encouragement for foreign investors to invest in the provision of physical infrastructure, i.e. hospitals, to cope with current and future demand.

The need for local knowledge, however obtained, and the transparency but complexity of regulations was echoed in the experience of Bariq Mining Ltd, the first private company to be granted exploration right for minerals in the Kingdom. Graham Pratt, Bariq’s general manager, said that the application and registration process, although somewhat slow and voluminous, was precisely laid out and transparent.

Operating in the Kingdom now for five years, since the implementation of the new national mining code, and originally set up as an exploration company through the Ministry of Oil and Mineral Resources, it holds several mineral tenements (licenses) and a mining license for its copper mine south of Madinah.

Saudi Arabia is massively wealthy in minerals. The Arabian Shield that comprises the western half of the country has barely explored wealth, but initial findings hint at “gold rush” potential, but not only in gold. Moreover, it is the declared intent of the Saudi government to establish mining as the “third pillar” of the economy after oil and petrochemicals and so there is a positive investment climate for mining abroad in the Kingdom’s business world.

Pratt described the mining potential in the Kingdom as “huge” and as a genuine opportunity for local investment as well as international. Ma’aden has already identified bauxite and phosphate resources in the northeastern part of the country, but the Arabian Shield, though well studied, has barely been touched. The Saudi authorities are actively encouraging this by opening the doors to 100 percent investor ownership of licenses and a generous disposition towards the repatriation of profits.

“Within 12 months we should be producing copper from our flagship mine,” said Pratt. “We will be the first privately owned producing company for copper or indeed base metal or gold producer in Saudi Arabia, as previously all metals have been produced by the state mining company (Ma’aden).”

An outside investor seeking to establish itself independently, Bariq had no experience of the processes of registration to work within the Kingdom. Urban business legends tell of the difficulty of navigating legal and government procedures, but Pratt recalled that he was pleasantly surprised dealing with the various regulatory authorities.

The process, from initial approach to the granting of licenses is, said Pratt, a time consuming affair in any country. “Mining is a long term investment and we have to think strategically. Each country has its own regulations and it’s a time consuming affair. It may be a little more bureaucratic than some other places and would benefit from automation and digitizing in some areas, but for us as a mining company, five years is typical and really quite reasonable,” he said.

The process of registering a business, however, does take considerably more time than in other parts of the world, where in many places it can be done in an hour. “You can minimize that by doing your homework and get hold of a good local accountant and lawyers,” noted Pratt.

Potential investors are sometimes advised that the only way to forward business in the Kingdom is to develop strong personal relationships when selecting partners or dealing with the necessary formalities. Pratt said that the process was not as well defined as that, but by making good relationships, he had found that there was a commitment to and a good understanding of mining and its potential. “And it’s always nice to know the man you deal with on a personal as well as official basis.”

In a response to a similar enquiry, Axa Cooperative Insurance Company suggested that any investor spend time in ensuring that any proposed partner brings value to a relationship, not only in monetary terms, but in experience and active support of the operation.

The important thing for Pratt was that there was a clear structure and process. “In our experience, the process is as transparent, as clear and as good as anywhere in the world and by far the best in the MENA region,” he added.

It is perhaps another example of the decline of the “fast buck” investment and the rise of long-term, positively regulated and measured development that is beginning to characterize the Kingdom’s investment scene.

The legal system of Saudi Arabia, Shariah, is sometimes viewed as an area of concern in the West and among major investors. In Bariq’s experience, although all dealings are Shariah compliant, there is no differentiation in practice at all.

“Within the framework we work in, you are not aware of whatever legal system you are working in. The framework is there, the regulations are there - end of story,” said Pratt. “Certainly the Shariah principles of equity and fairness come into play. but in the final analysis it has had no effect on our operations.”

Investment needs long-term capital, especially in the high risk mining industry. Traditionally, investment in the Kingdom has been effected by individuals who prefer not to apply it to long-term projects. Mining is by nature a long-term investment and no guarantee of major returns. Pratt estimated that 90 percent of exploration projects and mine developments yield nothing, eight percent will survive and yield a varying degree of profit and perhaps two percent return a bonanza.
“I feel that the local investor looks for more certainty in the use of his capital,” he noted.

Speaking from the perspective of the mining industry, Pratt felt that a major inward investor would encounter challenges in hiring labor. While general tradesmen and administrators were available, there was, he thought, a lack of high-level technically skilled people available. “That’s understandable, as mining is still a young industry, but speaking to other managers, I find it applies to other industries as well,” he said.

While there is a move in the Kingdom to develop industrial technical skills, notable examples being the General Organization for Technical Education and Vocational Training (GOTEVOT) skills development program and the work done by Jeddah Technical College and the Saudi Japanese Higher Institute among others, the output is not sufficient.

In-house training and on-the-job training that many companies provide are seen as a burden and many industrial concerns would welcome a ready supply of well trained local people with high-level skills that integrate well with the needs of industry.

Consequently skilled labor had to be brought in to the country. The process and issuing of visas for labor, even skilled labor not available locally, was, thought Pratt, a major challenge for any industry setting up business in the Kingdom. “A review and easing in the restrictions of visa issuing and eligibility rules would be very welcome,” he said. “I would welcome an education system that produces a tranche of local labor with the skill sets that incoming industries need.”

If this were to come about, then the Kingdom would be able to build an industrial base and national labor pool that would be in a position to add value to the Kingdom’s core products and address the need for jobs for future generations. It would seem to make great sense to export finished aluminum products using cheap energy for example, rather than export raw bauxite or billets.

The question of availability of specialist staff and visas applies to the AXA Cooperative Insurance Company. In a written response asking what two things the company would change with a theoretical “magic wand,” it specified an easing of visa restrictions that currently limit the recruitment of quality expatriate staff to the Kingdom and an improvement in the process of granting business and visit visas to the Kingdom.

Established in the Kingdom in 1972, the company became a 100 percent Saudi-owned company early last year. Their focus has always been commercial insurances, both on a direct basis and also through intermediaries. In the past few years, the development of compulsory medical insurance has become an important factor and looking forward, they say more focus will be given to personal lines. A fillip was provided to the insurance industry with the government move to register all insurance companies as wholly Saudi companies and also the introduction of compulsory medical and motor insurance.
During its time operating here, AXA has noted an ever-increasing awareness and responsibility to employ and develop Saudi nationals in the workplace, which is now a regulatory requirement from SAMA for insurance companies. With training and support, the company claims its Saudi staff are as good as any other nationality.

Currently, 39 percent of the staff is Saudi and that figure is growing year on year, as the company says it is committed to developing an effective Saudi staff capable of managing the company in the years to come.

However, a major hurdle AXA faces as an international company and with businesses worldwide is communication. A key challenge for personal progression in an international company is to be able to effectively speak and write in English, it says.

Once again, people power in the Kingdom is available and they are fully able to acquire the skills needed to contribute to any incoming investor. However, in many cases the skill sets that one would expect from a broad-based education system are not available.

As with Bupa, quality of service is at the centre of AXA’s business. However, the company said that Saudi Arabia remains a price driven market where quality of product and service are often seen as secondary.

That said, from an insurance perspective Saudi Arabia is still a developing market. “But as the economic driver of the region, the KSA market has great potential,” said an AXA spokesperson.
“There are some 30 insurance companies in KSA, a figure which may well be excessive and no doubt some of these companies as a result of poor performances will close or merge with others in the years to come.”

The investment environment in the Kingdom is healthy, developing and can be profitable. Setting up business is, in the experience of many companies including our contributors, a long and complex process, but one that is structured and transparent.

There remain challenges, not least the unavailability of skilled staff, be it in the vocational or professional skills area and, especially in the case of companies that deal outside the Kingdom as a matter of course, in English literacy.

Saudi Arabia has a stable government, huge resources and with both a very healthy credit rating and cash flow, it has a well-developed regulatory structure that seems transparent, if time consuming, to work through.

However as the economic powerhouse of the region, the Kingdom remains and will surely develop as the investment destination of choice, especially with an increasingly sophisticated and growing population and an almost wholly untapped reserve of mineral resources that could be in the long term as sustaining as its oil reserves.

Investment opportunities abound in Saudi Arabia

The performance of Saudi Arabia’s economy has been remarkable in recent years, especially since 2002 with the national economy more than doubling to $481.6 billion owing mainly to rising oil revenues.

The combination of additional government spending toward the ongoing program of economic liberalization and greater foreign participation in the economy has sparked numerous investment projects. Saudi Arabia recently announced a $400-billion plan over the next five years aimed at upgrading energy projects, and the social and physical infrastructure in such areas as power, water, transportation, education and housing.

“Saudi Arabia is becoming a significant emerging economy able to attract substantial foreign direct investment (FDI). Since 2000, the investment environment has benefited from significant progress on structural reform involving liberalization and greater transparency. Real estate sector represented the major recipient of foreign investment, with a share of total FDI to the Kingdom expected to be more than 20 percent. This reflects the importance of the construction activities in the national economy,” said John Sfakianakis, chief economist at Banque Saudi Fransi.

According to the industry estimates, Saudi Arabia’s total transport sector investments are set to reach $100 billion by 2020 with over $30 billion allocated for new transport projects in the government’s next five-year plan. The Saudi government’s aggressive plans to overhaul existing transportation infrastructure will likely see huge investments flowing into the large-scale port, airport, rail, road and logistics projects in the coming years, the NCB Capital said in a recent report.

Inflows to the chemical and petrochemical industries sector will account for more than 10 percent FDI inflows, while FDI in mining, oil and gas will represent also around 10 percent of the total. Moreover, refined petroleum products should account for around 1 percent of total FDI inflow. Specifically, Ras Tanura, which is a combined refinery and petrochemicals project with an estimated cost of $22 billion, involves establishing a grassroots petrochemicals plant in order to produce more than 300 different products. Equally, the PetroRabigh complex, which is nearing completion, is another major combined refinery and petrochemicals project, spreading over eight square miles and involving 38,000 workers. Construction costs of the plant have reached $10 billion.

In 2007, construction started in six planned economic cities in addition to the King Abdullah Financial District in Riyadh. The new city focuses mainly on heavy industry, comprising oil industry and an integrated petrochemical complex, a copper refinery and smelter, an aluminum complex and an integrated aluminum refinery. Moreover, it is expected that projects worth more than $300 billion are under way for execution over the next few years.

The variety of domestic and export-oriented investment opportunities in Saudi Arabia has attracted steadily increasing foreign direct investment as the economy has been progressively opened. Saudi Arabia’s rapid improvements have made the country an increasingly attractive destination for investment. The country’s growth in FDI inflow was especially impressive in light of the global economic downturn.

Improvements to business and property registration procedures made it easier and less costly to start a business and register real estate deeds enabled Saudi Arabia to reach the top 20, the World Bank said. Protection of public company investors was enhanced with a series of new laws from the Capital Market Authority and the Ministry of Commerce and Industry.

The government has already taken a number of decisions to increase the role of the local and foreign private sector in expanding the economic base and diversifying the source of national income. The move is also to increase the value of the country’s natural resources.

Saudi Arabia made bold business reforms making it one of the world’s leading reformers. Saudi Arabia is now the top ranked economy in the Middle East. Saudi Arabia has become the number one recipient of foreign direct investment in the Middle East. Inflows have increased and will continue to do so. With Saudi Aramco’s recent expansion of refineries and the building of the Kingdom’s economic cities, foreign investment in the country has become more attractive to investors abroad, mainly due to the liberalization of investment rules.

“In generally FDI volumes will reflect the overall scale of investment activity, with perhaps some bias in favor of those sectors that benefit from more favorable regulations. But ultimately, the key driver is economic opportunity, which in turn is a factor of the growth potential underpinned by population growth, the diversification policies, etc.,” said Jarmo T. Kotilaine, chief economist at the National Commercial Bank.

There will be massive opportunities in the great infrastructure boom, in energy, water, real estate, etc., but also most types of services. In some cases, however, investors may be cautious because of restrictive regulations on pricing. Health care is one case in point, he said.

The mode of FDI may vary depending on the regulatory environment. In some cases, foreign companies will take direct stakes in projects and operate on a fully equal basis. But the fact that the investment environment is more restrictive does not necessarily mean that foreign investors cannot benefit from it through investments in outsourcing and service companies.

“One of the major, still largely open questions, is the level of foreign interest in massive greenfield projects such as the economic cities. Here, the level of involvement will still depend on things like government guarantees/assurances, and greater clartiy on the time line of the ventures,” Kotilaine said.


According to professor Mohamed A. Ramady of King Fahd University of Petroleum and Minerals, Dhahran, the Kingdom has gone a long way in attracting both domestic and foreign investments but that the path has not been simple. The answer, according to Ramady, lies in a combination of factors: A quiet determination to overcome internal obstacles to business, whether faced by Saudi companies or multinationals, assisted by the creation of autonomous but empowered government institutions such as the SAGIA, to create a pro-business environment; develop a more knowledge-based society, and channel Saudi and foreign investments into mega economic clusters known as “economic cities.”

Unlike earlier large infrastructure developments, a key element of this strategy has been reinvigorated regional economic diversification and more equitable wealth creation for Saudi citizens. On the surface, the special economic zones and mega economic cities are seemingly alike, but in reality each are planned to specialize in certain niche core activities to leverage on the area’s location advantages.” Until such mega investor friendly projects had been launched, according to Ramady, “the Kingdom had not seemed to match inward investments with its undoubted economic size and potential compared to other Arab and Islamic countries. The reasons were a sluggish bureaucracy, uncompetitive incentives and taxation regime, multiple layers of governmental approvals, and seeming inflexible labor and sponsorship laws.”

However, Ramady said a wide range of regulatory and structural reforms were introduced to make Saudi FDI attractive, starting with the establishment of SAGIA as a one stop shop to take care of foreign partner’s investment needs and overcome the often mindless bureaucracy that had been the hallmark of doing business in the Kingdom. SAGIA was empowered to cut through red tape and assist with licensing, identifying local Saudi joint venture partners and presenting investment opportunities to foreigners. Corporate taxation levels were slashed to 20 percent levels and foreign companies were now able to own properties for their operational requirements as well as sponsoring their own employees without having to go through local sponsors.

Ramady said that the gradually whittling down of the list of “prohibited” economic activities in which foreigners could not invest in has helped to attract foreign investments, and today the prohibited areas are mainly in security and defense related sectors, but stated that “the overriding principle of welcoming FDI to Saudi remained the same with priority for those that added value through technology transfer and job creation.” - (Newsindia Syndication)

Montreux Riviera — Be Inspired!

Thanks to its micro-climate and safe environment, Montreux Riviera is one of Switzerland’s most famous resorts.

A wide range of overnight accommodations — from the palace to the private guest house, romantic villages, medieval castles and elegant “Belle Époque” edifice — attest to the great variety of the region. Furthermore, highlights such as the famous Chillon Castle (www.chillon.ch), fun parks, private schools and spas/clinics and international festivals such as the Montreux Jazz Festival (www.montreuxjazz.com) contribute to Montreux Riviera’s worldwide reputation.

Explore, learn, discover… while having fun with your family. Montreux Riviera is a great resort for families. Many fun parks and excursion opportunities allow guests to spend a marvelous time in the region. People will feel at ease in the numerous hotels that overlook Lake Geneva and the Alps. Even more, if someone is looking for an apartment in a hotel, the Bristol is the place to go, with its seven modern apartments with lake view or five suites (www.hotel-bristol.montreux.ch).

Theme parks
In the immediate vicinity of Montreux Riviera, a number of theme parks offer a wide range of diverse activities for families. Some include: Adventure Park (a tree-top trail), Swiss Steam Park (miniature trains), Bex Salt Mines, Adventure Labyrinth, Aquaparc (toboggans, aquatic games) and FunPlanet (karting, bowling).

A haven for animals
At the “Marmottes Paradis,” which can be reached by the railway to les Rochers-de-Naye mountain, you can learn about the life and habits of the marmot, a cute and shy little mountain animal. An information center (permanent exhibition, film, games) and various observation posts are installed close to the burrows.

Dream trains and boats to get away from it all
From Vevey to the Pléiades mountain, from Montreux to les Rochers-de-Naye mountain, cogwheel trains and funiculars carry you through landscapes of intact beauty. You can also discover the “Lavaux Express” and “Lavaux Panoramicm” or hop on the “Chocolate train,” which is a special treat for all gourmets.

For those who prefer water, old paddle steamers are still sailing on Lake Geneva (www.cgn.ch). This is a great way to spend a sunny afternoon on a deck while gazing at the area’s most beautiful landscapes!

A feast for the eyes
The GoldenPass, the world’s first panoramic train with ultramodern carriages, offer wide angled views of the landscape. In addition, its early 20th Century “Belle Époque” Pullman cars offer you an incredible view of the Swiss Alps during the journey from Montreux to Gstaad. While you are at it, you can almost cross the whole of Switzerland via Interlaken and then Lucerne. (www.goldenpass.ch)

Be inspired by the region’s multiple charms! Visit Montreux Riviera! - (Newsindia Syndication)

Ishaan cooks to impress Suhana in 'Chef Pankaj ka Kya Zayka' in Star Plus Daily Soap

Ishaan, aka Jay Soni from Sasural Genda Phool, will be the next celebrity guest on India Gate Basmati Rice presents Chef Pankaj Ka Zayka. Ishaan admits to being a complete foodie and was delighted to learn to prepare new dishes on the show, since it will help him to impress his darling wife Suhana.

Sharing his experience with Chef Pankaj, Ishaan says, “It was good. I have to confess that I am a big foodie. Thanks to the show, I got to learn about a lot of new dishes and cuisines. I learnt that cooking is not as tough as it seems and I also learnt the importance of presentation from Chef Pankaj. Besides, being a good chef, Pankaj is also a good teacher. She guided me very well when I was preparing the dishes on the show. One thing that I noticed about her is that she is very particular about cleanliness. Even if a little food gets spilled by mistake, she immediately wipes it because she wants her kitchen to be neat and clean. I admire this habit of hers because even I feel that cleanliness is of utmost importance.”

Speaking about cooking, Ishaan recalls a funny incident, “I can never forget the time that Suhana had tried to cook for me. She spent the whole day in the kitchen and ended up making two rotis for me, that too in some funny shapes. I ate them happily because she had prepared it with so much love.”

Which dish taught by Chef Pankaj does Ishaan plan to prepare for Suhana? “The first dish that I will prepare is Suhana Shorba as whenever Suhana is angry with me, I hope that Suhana Shorba will do the trick and she will forgive me. I will tell her that I learnt the dish, especially for her since it has her name in it.”

Ishaan also has a valuable tip to offer to husbands. “I will advise all husbands to learn cooking as it is the most cost effective way of impressing your wife. Gifting her jewelry or clothes are expensive options,” he laughs.

Ishaan is known for his cooking skills among his co-stars from Sasural Genda Phool. Is that true? “I like to cook and do it whenever I find the time. I also try to prepare dishes from different cuisines every time. People say that I make good salads and that is because I normally eat only salads for dinner as it is healthy. So yes, I do carry salads to the sets of Sasural Genda Phool too and co-stars who have tasted it have praised my cooking skills.”

Speaking about his favourite food, Ishaan states, “Ghar ka khana is my favourite. I enjoy dal-chapatti the most, there is nothing better than yummy homemade food. As I have said before, I am a complete foodie. I will eat anything that is given to me except Karela. However, one cuisine that I dislike is Chinese, which must be surprising as most people love it.” -  (Newsindia Syndication)