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Alcoa Case Study: Benefiting from Saudi Economic Planning
In 2009, the multinational aluminum producer Alcoa announced a joint venture with the Saudi mining company Ma’aden. Together, they are constructing an integrated bauxite mine and aluminum smelter in Saudi Arabia, pioneering production of this metal in the Kingdom. The project sheds light not only on Alcoa’s commercial strategy, but also on the economic strategy of the government of Saudi Arabia, a country with the mixed blessing of abundant natural resources.
Alcoa is a large multinational aluminum player. Like many of its peers, it is vertically integrated, with interests in bauxite mining, aluminum smelting, and fabrication of engineered aluminum products. Alcoa and the Saudi Arabian mining company Ma’aden are building an integrated aluminum business in Saudi Arabia, the first of its kind in the country. The Saudi economy is dominated by petroleum. It is currently the world’s largest exporter of crude oil, and its proven reserves are second only to those of Venezuela. When countries are dependent to this extent on a single commodity, there can be a disincentive to innovation and entrepreneurship, as well as difficulties in developing other exports at competitive prices. For Saudi Arabia, national income is highly dependent on crude oil prices, and vulnerable to the ultimate depletion of a non-renewable resource. The government has for many years aimed at diversifying its economy, developing its industrial and agricultural potential by means of a high degree of central planning. The project promises benefits for both the country and Alcoa. The production of aluminum will help in diversifying the economy, while Alcoa’s equity in the project will enable it to generate revenue from growing Middle Eastern end-markets for aluminum.
For more, please read our case study – Alcoa Case Study: Benefiting from Saudi Economic Planning