Technology Transfer in Developing Nations

By Olayan, Hamad B. | Research-Technology Management, May/June 1999 | Go to article overview

Technology Transfer in Developing Nations


Olayan, Hamad B., Research-Technology Management


A case study from Saudi Arabia illustrates the transfer of technology from external licensors to a nation's industrial complexes.

OVERVIEW: Saudi Basic Industries Corporation (SABIC) has been able to convert the natural gas associated with crude oil production into value-added chemicals that form the raw materials for an extensive range of industrial and consumer products. The development of these products depends upon SABIC's selecting the most effective technologies available to profitably adapt the Kingdom's industrial potential to the realities of the world market. This article reviews the methodology and criteria used by SABIC to evaluate these technologies. Hopefully, the experience that SABIC has gained over the last 23 years will benefit other developing nations.

Saudi Basic Industries Corporation (SABIC), a 70-percent state-owned industrial conglomerate headquartered in Riyadh, Saudi Arabia, was established in 1976 to develop, operate and market the products of its basic industries and other downstream and support industries. SABIC now has 17 world-class industries which have been created to gain maximum benefit from Saudi Arabia's vast natural resources of hydrocarbons and minerals, and to reinforce the foundation of Saudi Arabia's industrial and economic growth.

During the past decade, two new industrial cities have been literally carved out of the desert, where hydrocarbon resources are plentiful. Al-Jubail on the Arabian Gulf and Yanbu on the Red Sea include complete industrial, port shipping, residential housing, shopping and recreational facilities. SABIC has already invested over $10 billion to establish, construct and operate its new industries.

In order to compete effectively in the world market, SABIC chose the joint venture approach to manufacturing quality basic petrochemicals. SABIC co-owns most of the plants, usually on a 50-50 basis, with major multinational chemical corporations that market and consume internally a percentage of the Saudi Arabian product. SABIC's partners include Exxon, Mobil, Shell, Hoechst-Celanese, and PanEnergy of the United States; Mitsubishi of Japan; Ecofuel of Italy; and Neste Oy of Finland. Technology selection was a major factor in the SABIC industrialization program (1).

The significance and interest of the Saudi Arabian experience is heightened by the fact that in the early 1 970s, Saudi Arabia envisioned a change of scope and intensity that had few parallels. Concerned about the day when its oil wells run dry, or the demand for oil drops, Saudi Arabia proclaimed the most ambitious industrial development program in history, calling for the expenditure of over $140 billion by 1980. These investments were to provide the country with a modern infrastructure, to diversify an economy that essentially rested upon oil, and ultimately to transform the state into a modern society, self-reliant in science and technology.

Technology was explicitly accorded a major role in this effort, and, since Saudi Arabia possessed little indigenous technological capability, the emphasis was upon the transfer of technology from abroad. At the same time, however, special attention was being paid to the selection of appropriate technologies. Also significant was the consideration that foreign technology not impair the development of the indigenous science and technology potential, in order to limit the dependence of Saudi Arabia on technology imported from industrialized countries (2).

Saudi Arabia as Technology Transferee

Saudi Arabia is a large country, one-third the size of the United States, with only 12.3 million people. About 60 percent of Saudi nationals today are under 18 years of age, and many of them will soon be graduates seeking meaningful employment. The country also has 4.7 million expatriate workers.

Saudi Arabia is also noted for its widely scattered centers of population and the thousands of miles of borders that need to be protected. …

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