Juffali & Brothers mirrors growth of Saudi economy

Ahmed Juffali recalls 40 years ago, when the only sizable business in this steamy Red Sea port was a British trading firm largely serving Muslim pilgrims to Mecca.

This sleepy town has been transformed into a thriving commercial center. Trucks and autos jam the streets, some that only a generation or so ago saw more donkey carts and camels than motor vehicles. Skyscrapers cast their shadows on the ornately decorated homes of the old merchant families.

''It is completely different,'' said Mr. Juffali, who is managing director of A.E. Juffali & Brothers, Saudi Arabia's largest private company, a conglomerate that would, if located in the United States, fall into the Fortune 500 size. ''We should feel proud to have grown so fast in the last 35 years.''

The Juffali brothers, Ibrahim, Ali, and Achmed, got started in business in 1946, soon after they were awarded a concession for the generation and distribution of electricity in Taif, southeast of Mecca. It was the first public utility in Saudi Arabia.

That utility was taken over about a year ago by one of the nation's four regional government-subsidized power companies. These regional utilities began in 1977 to acquire the dozens of private utilities scattered across this huge peninsular kingdom. In the meantime, however, the Juffali brothers had taken advantage of Saudi Arabia's oil boom to move into dozens of other activities.

In fact, during the 1970s, the company grew at up to a 50 percent annual rate.

''Growth is leveling off now, because the country has more or less completed its infrastructure projects,'' Mr. Juffali said.

Amazingly, the company grew out of profits. ''We regenerate our own capital for our growth,'' said the Saudi executive. ''We don't rely on loans from banks.''

By now, the company acts as sales and distribution agent for some 60 major foreign companies; it has a dozen industrial joint ventures and another eight joint ventures in the engineering and construction field. It holds the majority interest in each case. It builds Mercedes trucks with Daimler-Benz; it assembles tractors with Massey-Ferguson; it makes Kelvinator refrigerators with White Consolidated Industries and air-conditioning equipment with Borg-Warner. Its partners include such prestigious corporate names as IBM, Michelin, Ericsson, Siemens, Fluor, Dow, Raychem, Butler, and Beck.

''The Saudi businessman is a reliable person,'' Mr. Juffali says. ''The Saudi mentality can go well with the Western approach to business and way of thinking.''

He went on: ''The Saudi businessman has no complex. All Saudi businessmen built up their businesses themselves. They started from scratch.''

Mr. Juffali says most of his joint ventures have been successful and his foreign partners ''quite happy.''

But he does see signs of somewhat tougher business conditions in Saudi Arabia , partially because of the world recession. ''If it starts whistling in Wall Street, we hear it in Jiddah,'' Mr. Juffali says. As a member of an international advisory committee of Chase Manhattan Bank, he occasionally passes along Wall Street.

Further, heavy-equipment manufacturers, particularly the Japanese, have been ''dumping'' their goods on the relatively healthy Saudi Arabian market, he says. This has depressed prices.

Mr. Juffali expects the government to use its international reserves to continue with development projects scheduled under the kingdom's current five-year plan. But if oil revenues drop off for a longer time, he figures some Saudi firms with ''haphazard'' management will get into difficulties. There is more ''healthy competition'' today, he adds.

Fortunately, Mr. Juffali says, the rapid change in Saudi Arabia has occurred ''under control. It was done peacefully without disturbance to society and the family structure.'' Saudis educated abroad come back, unlike many students of other nations. That's because of strong family bonds and good career opportunities, according to Mr. Juffali.

One of the kingdom's key needs nowadays, the business executive says, is a larger supply of good managers and skilled workers.

To partially meet that need, Juffali Brothers established a center to provide mechanical, electrical, and electronic training for young men. The 100 Saudis in the program receive free board and education, as well as $200 a month, for up to three years. Once graduated, the students will receive help in getting established. A newly trained mechanic, for instance, could be helped to open a shop to repair Mercedes autos and trucks.

Further, the company will send managers to Geneva for education in a management school.

As for the future, Mr. Juffali forecasts a trend in Saudi Arabia for more investment in small industries and agribusiness. But, given the large size of the kingdom, he also expects continued sizable expenditures on road construction and telephones.

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