Nov. 20 (Bloomberg) -- Waleed Osman, a 21-year-old Saudi film director, almost got arrested when he shot his award- winning movie “The Revenge” on the seafront corniche in the Red Sea port of Jeddah.

“What film? We are in Saudi Arabia,” Osman remembers an astonished police officer saying. The director, dressed in jeans and a yellow t-shirt, recalled the incident as he sat in his favorite cafe in Jeddah. The eatery, called Cast and Crew, is themed to a movie set with lighting tripods and pictures of cameramen.

In Saudi Arabia, the only country in the world that bans movie theaters, the desert kingdom’s brand of Islam isn’t stopping homegrown filmmakers from making their voice heard.

Three years after the first-ever Saudi feature film premiered at the Cannes movie festival, “The Revenge” won second prize for best feature title this year at the Gulf Film Festival in Dubai, the region’s leading competition for new filmmaking talent.

Billionaire Saudi Prince Alwaleed bin Talal, whose Rotana media and entertainment empire is the chief backer of the budding film industry, said in February this year he is certain that movie theaters will reopen one day in Saudi Arabia.

In a sign of the advances made already, Saudi Arabia submitted more films than any other country at the Gulf Film Festival, held from April 9 to 15, with 64 films out of more than 200 from the Gulf region as a whole.

Earlier this month, short films and documentaries from Saudi Arabia were showcased at a Saudi culture and arts festival in Alexandria, Egypt.

Criminal World

“The Revenge,” an 80-minute film shot for $1,100 with amateur actors on a Sony Handycam, chronicles the misadventures of four brothers. They discover a consignment of drugs in a car they buy, dragging them into a criminal world.

Osman is part of a new breed of movie directors that is tackling taboo subjects, said the director of the Gulf Film Festival, Masoud Amralla al-Ali. About 40 percent of the Saudi population is under the age of 15.

Badri, a short film by Anggi Makki that also won an award at the Dubai competition, is a story of a young man named Basem secretly in love with his best friend, Maria. In Saudi Arabia, unmarried men and women are forbidden to mix unless they are related by family.

Another entry, “According to Local Time,” by Mohammed al- Khalif, tells the story of a hungry man looking for an open restaurant in the conservative capital, Riyadh, before the call to prayer.

Saudi Talent

“I believe if they open cinemas, the talent now in Saudi Arabia will get the chance to make films, they have a big chance to be a major industry,” al-Ali said in a telephone interview.

With the second-largest population in the Gulf after Iran, Saudi Arabia has 18 million potential moviegoers compared with 6 to 7 million in all the other Gulf states, according to al-Ali.

In recent years, cinema-lovers in Saudi Arabia have seen annual film festivals in Jeddah, where the regional governor, Prince Khaled al-Faisal, is a prominent supporter of loosening clerical controls. The coastal city has the most open environment in Saudi Arabia, with private beach clubs outside the city where women take off their black Islamic robes and wear bikinis.

Rotana last December and in June this year managed to stage screenings of a new Saudi comedy film called Menahi, about a Bedouin goat herder’s adventures in Dubai, in a few cities including Jeddah and Riyadh. Saudi Arabia banned all cinemas and other forms of public entertainment after a 1979 siege by Islamic militants at the Grand Mosque in Mecca in a bid to appease the conservative clergy. The one-off movie shows were seen as a step forward.

Jeddah Festival

In July, these hopes were dashed when the Jeddah film festival sponsored by Rotana was canceled at the last hour, halting what would have been its fourth year of existence.

Senior religious figures have condemned cinema as un- Islamic. Saudi Arabia’s Grand Mufti, Sheikh Abdul Aziz al- Sheikh, in March told students at King Saud University in Riyadh that musical and film performances were against Sharia, or Islamic law.

Afghanistan’s Taliban regime also outlawed cinemas when it ruled the country in the 1990s. Days after the fundamentalist Islamic movement was toppled in 2001 by U.S.-led forces, people showed Arnold Schwarzenegger films in improvised video salons in the capital Kabul, and cinemas reopened soon after.

Ayman Halawani, who is head of film production at Rotana, spends most of his energies making films in Egypt, the traditional film capital of the Arab world. The 30 movies he makes a year in Egypt are the film unit’s “bread and butter,” he said in a phone interview from Cairo.

Cannes Debut

The Saudi film industry is still an important part of his mission. Halawani brought “Keif al-Hal” (“How Are You?”), the first feature film to emerge out of Saudi Arabia, to Cannes in 2006. Shot in Dubai, it had a Saudi female actress, Hind Muhammad, a “controversial” step that gained attention, he said.

Rotana, whose second feature film was “Menahi,” plans to shoot two movies for the first time inside Saudi Arabia next year. This is a difficult task given the lack of qualified technicians, producers and actors, according to Halawani.

“It’s possible, but it’s costly,” he said. “A lot of creative elements and equipment need to be brought in from outside.”

Osman, who is a geology student at King Abdulaziz University in Jeddah, spent his $9,500 prize money from Dubai on a computer and a new 35-millimeter movie camera, a Sony 25. His ambition is to attract the sponsorship of Prince Alwaleed.

“It is difficult here in Saudi Arabia, but we have one chance,” said Osman. “We just have one company, Rotana.”

-- With assistance from James Rupert in New Delhi. Editors: Mark Beech, Farah Nayeri.

To contact the reporter on this story: Henry Meyer in Jeddah through the Dubai newsroom at 1022 or hmeyer4@bloomberg.net

Last Updated: November 20, 2009 01:52 EST