Saudi Arabia is not unfamiliar with the idea that if it wants to build a thriving society for generations to come it must not only make the most of its vast hydrocarbon resources, but also look beyond the oil and gas sector to build a multifaceted industrial economy. The launch of Saudi Vision 2030 in April 2016 galvanised the nation with a bold reimagining of how Saudi people could transform the way they live and work. In order to create a clear route to delivery, the government created 13 Vision Realisation Programmes (VRPs) with specific, measurable goals. In January 2019 the National Industrial Development and Logistics Programme (NIDLP) published a comprehensive plan that identified potential growth activities, 2020 commitments and aims for 2030, and a set of overarching enablers that would help drive progress across the industrial landscape. The NIDLP gives investors a clear reference point when assessing Saudi Arabia’s priorities for the sector, and can help them identify opportunities in the local market. It also illustrates the country’s willingness to think big, with the NIDLP underpinned by SR1.7trn ($453.2bn) in financing and a mandate to create 1.6m jobs. “The NIDLP is the largest among Vision 2030 programmes that are positioned to transform Saudi Arabia into an industrial and a global logistics hub in four promising growth sectors — mining, industry, logistics and energy – and focuses on embedding Industry 4.0,” Sulaiman Almazroua, CEO of the NIDLP, told OBG. “The idea behind integrating these four sectors was to leverage the Kingdom’s resources, domestic and regional demand for diversification, and GDP growth by stimulating private sector investments worth $453bn.”
The strategy is to ensure that the four target sectors increase their contribution to GDP, provide more private sector job opportunities, boost exports, support local content, attract non-government investment and produce additional non-oil returns. The programme looked at the supply and demand factors for each sector, considering untapped resource potential on the supply side, and identifying import substitutions that could be made for products and services in high demand in the Kingdom. By maximising local content in this way, major job opportunities will be available for citizens and the country can improve its non-oil trade balance. Industry, specifically, is subject to the National Industrial Strategy (NIS) that has identified several target segments: equipment and machinery; renewable energy supplies; pharmaceuticals and medical supplies; automotives; oil and gas equipment; food processing and aquaculture; chemicals; and military manufacturing.
Commitments for 2020
The NIDLP articulates goals that it hopes to achieve by the end of 2020 and aspirations for 2030 in each of the four sectors. The 2020 commitments within the NIS include securing an agreement with a factory to develop vehicle assembly, and to make two primary investments in companies developing solar and wind energy to assemble necessary parts in the Kingdom. For aquaculture one commitment is to raise fish and shrimp production to 15 times the capacity seen in 2019, while increasing Saudiisation rates for citizen employment. For military industries the plan is to open the sector to local and foreign investors, ease the licensing process for manufacturers, build strategic partnerships with international original equipment manufacturers and restructure military aspects of the offset programme. The overall aim of the NIS is to stimulate production of both primary materials and finished products.
The 2020 commitments for the energy sector, focusing on oil alternatives, are to increase the contribution of renewable sources to the energy mix, encourage greater private sector contribution, reduce emissions from burning fuel by boosting gas production and upgrade distribution networks. In the mining sector the goals are to increase private sector investment, and enhance the service quality of the Deputy Ministry for Mineral Resources and the Saudi Geological Survey, while expediting the distribution of mining licences. The logistics sector has made a number of commitments to improve traffic flow and road safety. Other aims include streamlining Customs processes by digitalising systems at sea ports, cutting the number of mandatory import and export forms, and reducing the time it takes for imports to come through the receiving docks in order to grow into a major global logistics centre.
Aspirations for 2030
By 2030 the NIS hopes to see globally competitive Saudi companies across various industrial segments; increased capacity and production of renewable energy; greater expertise in battery technology; the development of a pharmaceutical, biopharmaceutical and medical supplies industry; greater local content; and the development of industrial clusters for food and automotive industries, including the manufacturing of cars. The objective for the chemicals industry is to localise the supply chain of basic and intermediate chemicals, prioritise 18 specialised chemicals groups, and double production capacity of plastic and packaging products. In aquaculture the goal is to increase its contribution to GDP sevenfold, while creating new jobs for Saudis and replacing imports with locally harvested seafood.
When it comes to military equipment, the NIDLP notes that Saudi Arabia is the third-largest importer of military equipment in the world. The aim for 2030 is to localise 50% of military production, thereby making it one of the country’s key activities in terms of manufacturing and maintenance. The move would also help increase military readiness and transparency in the procurement supply chain. In addition, it is hoped that producing the majority of military equipment at home will increase equipment interoperability between different military and security branches, while enhancing the Kingdom’s strategic autonomy in this area.
The NIDLP focus on the non-oil energy sector in the run up to 2030 is to increase the production and use of natural gas, improve efficiency in energy use and distribution, and develop a renewable energy industry with a highly qualified workforce. In the mining sector aspirations are to increase gold production by 10 times, and to join the ranks of the world’s top-10 aluminium producers and top-three fertiliser producers through accelerating the exploration and extraction of minerals. The NIDLP estimates the country’s mineral reserves to be worth up to SR5trn ($1.3trn) (see analysis). Meanwhile, a multi-agency approach is being used to craft a globally competitive logistics sector by 2030, with fast and efficient movement, tracking and clearance of goods; construction of freight and warehousing facilities; greater collaboration between national and international transport companies; and a fully integrated multi-modal transport network.
Having established the key sectors that can play a prominent role in developing an industrial economy, the NIDLP goes a step further to address issues that may create challenges or prevent growth. In the document, solutions to such hurdles are referred to as enablers. Each sector is examined in detail in the report, with an appraisal of the current situation, and the identification of specific government agencies responsible for devising systems and strategies to capture opportunities and remove obstacles to development. The NIDLP also draws on best international practices to suggest ways to boost local content; support domestic research, development and innovation (RDI); create funding for enterprise; identify target markets for exports; develop education and training for better-equipped human resources; raise standards through regulation and improved governance; tap the opportunities presented by Industry 4.0 technologies, such as artificial intelligence, robotics and big data analytics; and use new strategies to attract foreign investment to the country’s special economic zones.
Public bodies that back the enablers include the Local Content and Private Sector Development Unit (Namaa); the Saudi Industrial Development Fund, which is the primary financial engine of the NIDLP (see analysis); the National Industrial Clusters Development Programme; the Saudi Exports Development Authority; the National Committee for RDI; the King Abdulaziz City for Science and Technology; and the Saudi Authority for Industrial Cities and Technology Zones (MODON).
The NIDLP acknowledges that there are many ways in which industry could improve, stating that its impact on the economy has waned since 2012. The overriding message is that maintaining the status quo is not an option if the Kingdom is to capitalise on the advances it has made on many fronts and move to the next phase of its development. To this end, government policymakers began measuring the roadmap’s progress one year after publication; by 2021 they will know how many of the 2020 commitments the NIDLP reached. At the same time, officials are working on new short-term targets to ensure the 2030 aspirations are delivered on schedule. While the NIDLP is just one of the VRPs to achieve Saudi Vision 2030, it is a leading blueprint for building the economy Saudi Arabia envisions will best support future generations in a rapidly changing world.
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