Interview: Khalid Al Salem
What are some of the key advantages of investing in Saudi Arabia’s industrial cities?
KHALID AL SALEM: As the largest economy in the MENA region, Saudi Arabia has a huge internal market. Our industrial cities offer added value, as many of them are located amidst the Kingdom’s most important cities. This means that investors who choose to invest in the country will gain access to a centrally located, vibrant market, which serves as one key advantage in regards to enhancing domestic trade. As the Kingdom is located on the main east-west trade route, investors also enjoy easy access to the global market via its three most active ports: Jeddah Islamic Port, the new King Abdullah Port and King Abdulaziz Port in Dammam.
MODON supervises 35 industrial cities, including 200 sq km of development land. As an industry enabler, the core emphasis is on developing diversified agreements and memoranda of understanding, which are structured to make it easier to do business in targeted industries such as food manufacturing, agriculture, construction, mining and logistics.
How are investors benefitting from the low operational costs in Saudi Arabia?
AL SALEM: Operational costs are surprisingly low and serve as a great incentive to invest here. For example, MODON offers distinct economic advantages for industrial, technical, service, and residential and commercial projects. Competitive annual rents are available for the development of industrial land, sometimes as low as SR1 ($0.27) per sq metre. Electricity rates can also start as low as SR0.18 ($0.05) per KW, while water for industrial use starts at a rate of SR2.5 ($0.66) per cu metre.
The government is supporting the development of industrial cities, and has established a system to help investors make use of many financing opportunities via government financing funds and banks which lend to industrial projects. There are also other programmes that support export trade through the provision of export guarantees, including Saudi Customs exemptions for raw material and machinery imports.
How can high value-added industries underpin nonoil growth in the long term?
AL SALEM: Diversification is vital for sustainability.
While oil and gas will continue to be essential pillars of the Saudi economy, strategic investments and longterm proposals are being implemented to expand and grow various non-oil sectors.
In line with Vision 2030, the National Industrial Development and Logistics Programme has over 300 initiatives and focuses on transforming Saudi Arabia into an industrial powerhouse and a global leader in logistical services by overseeing and guiding growth in four key sectors: industry, mining, energy and logistics. MODON is involved in 29 initiatives. More than 50% of these initiatives develop and enhance the infrastructure of industrial cities, while the rest develop incubators and an industrial oasis that is targeting small and medium-sized enterprises (SMEs).
In what ways can industrial-oriented SMEs be further integrated into local industrial cities?
AL SALEM: Further integration will come from continued dialogue with SMEs, as we continue to develop the right ecosystem for them to thrive. For instance, we have established a 10-day timeframe for land allocation licensing. This should have a very positive effect on SMEs, as these businesses usually cannot afford to wait months to begin their operations.
SMEs are a very important component of economic diversification. In order to encourage start-ups and SMEs, we are collaborating with public and private bodies to develop an incubation system in the industrial and logistics sectors. An initial system has already been constructed in Dammam through the assistance of the Prince Sultan Fund, and we certainly expect more collaborations like this to be established in the future.
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