x Abu Dhabi, UAESaturday 20 January 2018

German engineering still a powerful force

Despite lower-cost competition from Asia, Erick Kaeser, the regional chief for Siemens says his country's presence in the Middle East is secure based on its high quality and long-term commitment.

Erich Kaeser, the Middle East chief executive of Siemens, says the company has a far-ranging strategic cooperation deal with Masdar. Sarah Dea / The National
Erich Kaeser, the Middle East chief executive of Siemens, says the company has a far-ranging strategic cooperation deal with Masdar. Sarah Dea / The National

German engineers have been in the Middle East for perhaps 150 years, but as the region looks East and German goods and services become relatively more expensive, there is recent speculation that their days may be numbered.

Spend an hour or so with Erich Kaeser, and you become quickly disabused of that notion. An old hand in the region, the Middle East chief executive of the German engineering giant Siemens is adamant: "We're here to stay, we don't run away."

He qualifies that immediately to exclude possible life-threatening situations; recently in Libya and Egypt Siemens employees were evacuated at the height of violent revolutions.

"But they were back in a fortnight. We helped turn the lights back on in Misurata overnight," says Mr Kaeser.

Yet it is undeniable that German exporters, the majority of whom are in the engineering business, are facing new competition in the region from lower-cost Asian countries. At the same time, the euro-zone crisis has forced a new cost awareness on traditional customers and on the Germans themselves.

Just a few weeks ago, Siemens said it was planning a cost-saving strategy that would pare US$6 billion (Dh22.03bn) from budgets by 2014 and set new targets for operating margins.

Will that programme affect the Middle East, where Siemens has something like 8,000 employees stretching from Libya to Pakistan?

"It's not in our interest to lay off people here. The Middle East is a growth area. We may need to adjust to market requirements and improve productivity, but laying off thousands of employees? No," Mr Kaeser says emphatically.

On competition with the emerging rivals in Asia, he pulls out what he regards as Siemens', and Germany's, trump card: "Innovation. Germany is the first mover in developing capability in new markets and new technologies. We can always offer customers something better."

In the UAE, this approach has recently pulled in a string of big contracts. Perhaps the most high-profile was that for the maintenance of the Habshan-Fujairah oil pipeline's automation system.

The deal gives Siemens responsibility for the smooth running of the 380-kilometre strategic energy link "in all potential scenarios", and for training employees of the Abu Dhabi Company for Onshore Oil Operations that owns the pipeline.

Siemens was also recently awarded the contract for maintenance of the newest power station in Dubai - the Jebel Ali M-Station - a combined electricity and desalination plant owned by the utilities group Dubai Electricity and Water Authority.

These are both symbolic projects involving the UAE's core industries: oil, power and water.

"The UAE has always been a role model for the rest of the region. Dubai is up there with Singapore as a city with perhaps the best infrastructure in the world," says Mr Kaeser.

In Abu Dhabi, Siemens has a "far-ranging strategic cooperation deal" with Masdar, the government-owned alternative-energy project, and will move into its new Middle East headquarters on the Masdar campus next year.

Siemens announced it was pulling out of the market in solar technology recently after plans to become the world leader proved too ambitious. But it continues to be involved in solar energy distribution systems, including Masdar's plans for developing a "smart grid" distribution system.

Similarly, Siemens is planning to exit the chemical side of the water treatment business, but will retain its existing role in water technology, especially anti-leakage systems.

Elsewhere in the Arabian Gulf, "Qatar has still got it all to come. There is a metro and transport master plan, which is challenging, but I'm sure they'll get there," says Mr Kaeser.

Siemens is involved in the equipping of stadiums in Qatar for the 2022 Fifa World Cup, having helped to build eight of the 10 stadiums for the last competition in South Africa.

Mr Kaeser's experience in Saudi Arabia is extensive, and he still regards the kingdom as one of the core Middle East markets.

"I went first to Saudi as a junior in the eastern region in 1980 and helped install the power supply to a little fishing village called Jubail. That's now at the centre of one of the biggest petrochemical industries in the world," he says with pride.

He sees huge opportunities in the country.

"Cities there are already among the fastest-growing in the world, and population growth is pushing the demand for infrastructure.

"I don't think it's all a reaction to the Arab Spring. Riyadh and Jeddah have had urban transport plans for the past 10 years. The stimulus [for high capital spending by the government] comes from high oil prices, as much as the Arab Spring. The concept of 'integrated traffic' is already there, as well as the needs for health care, power and water."

The other factor that distinguishes Siemens in the region, he says, is that "we are local employers. We employ locals wherever possible".

In Egypt, nearly all Siemens employees are Egyptian. In Saudi Arabia, the proportion is 35 to 40 per cent.

"It's harder in the UAE, where we have only a handful of nationals, and in Qatar it's still extremely difficult. I think maybe we have one."