Saudi industry goes global after reforms spark growth

Pandemic impact

The intention was clear: to improve the environment in the Kingdom to do business. Then came the global challenge that no one anywhere in the world could have foreseen: Covid-19.  

Just as the ministry was setting out to draw in investment from the world, the pandemic shut airports, shocked financial markets and changed the day-to-day conditions of business and general life everywhere.

The effects on the Kingdom in general  – and the industrial sector in particular – were immediate and profound. The government reacted quickly with a very large package of support and stimulus measures and economic and financial reforms.

The measures protected the economy by helping factories continue to operate and helping keep the plan for growth on track, with a range of reforms and initiatives. 

Made in Saudi

One of them set up Made in Saudi, as a unified industrial brand. Such a tool can be powerful in highlighting the national ambitions of producers and encouraging consumers both locally and globally.

The Made in Saudi programme was introduced in March 2021 – just as the global industrial sector was grappling with Covid – to set up a platform for industry to reach its share of the Kingdom's wider Vision 2030 goals.

It was launched by the Saudi Export Development Authority as part of the National Industrial Development and Logistics Programme (NDLP). It's meant to boost national industries and encourage consumers to buy locally-made goods and develop and enhance the Kingdom's exports to global markets.

Opening the way for the industrial sector to grow, it has helped drive a rise in the number of factories and the inflow of foreign investment. It heralded a new phase for Saudi industry to help power economic growth and diversification.

Growth of foreign investments

The Ministry of Industry and Mineral Resources revealed in late May that the volume of foreign and joint investments in the industrial sector reached the $144.5bn landmark or 542bn riyals.

The figure constitutes 37% of total investments in the sector and covers 17% of the total number of existing factories as of last month.

The number of factories with foreign investment in the Kingdom reached 930, according to the ministry, representing 9% of the total in the Kingdom, with investments exceeding $18.9bn or 71bn riyals.

The number of factories with joint investment amounted to 924 factories, constituting 8% of the total number of factories, with investments estimated at more than $125.3bn, or 470bn riyals. The total number of factories in the industrial sector reached about 10,910, with investments exceeding $385.3bn, or 1.455tn riyals.

Industrial scope

Foreign investments are concentrated in a number of major industrial activities, including: formed metal products (156 factories), rubber and plastic products (106 factories), other non-metal products (97 factories), chemical products (78 factories), and food products (73 factories).

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Joint investment activities are concentrated in chemicals and chemical products (161 plants), formed metal products (112 plants), rubber and plastic products (83 plants), and other non-metallic metal products (83 factories).

Small factories are responsible for the largest percentage of total foreign and joint investments in the sector with 874 factories, followed by medium factories (754), and large factories (225).

Growing industrial power

The Saudi Ministry of Industry and Mineral Resources aims to promote the industrial and mining sectors and contribute to achieving sustainable development, in line with Vision 2030, which adopted these two sectors as strategic in the process of diversifying the national economy.

The ministry also wants to raise the sectors' share in the GDP through the implementation of NDLP initiatives – the NDLP is one of the programmes put in place to achieve Vision 2030; its aim is to transform the Kingdom into a leading industrial and mining power, and a global logistics platform.

Andrei Cojocaru

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Alongside the newfound autonomy of the ministry, the sectors it covers share a long history of supporting the national economy.

The state has attached great importance to industrial development for decades. The Saudi Industrial Development Fund (SIDF) was set up in 1974 to provide medium- to long-term loans to establish new factories or to develop, modernise, and expand existing ones.

SIDF also provides advice in administrative, financial, technical, and marketing fields for industrial facilities in the Kingdom.

It helped set the stage for the remarkable growth now underway and speeding up. The National Strategy for Industry also targets various sectors, including the petrochemical and renewable energy industries, the food industry, pharmaceuticals and medical devices, military industries and mining, among others.

The march to one million industrial workers

The Kingdom's factories now employ over 1 million people. Around 300 new factories started production in the first quarter of this year, lifting investment by $2.18bn, or 8.2bn riyals.

The National Strategy for Industry aims to provide 800 new investment opportunities with investments of $266.7bn, or 1tn riyals. It also works to ensure that the Kingdom's human resources have access to appropriate job opportunities in this vital sector. Around 28,000 new workers entered industry in March.

Riyadh was the Kingdom's top region for new factories receiving approval in March, followed by the Eastern region and then the Qassim region. Data show that 73.17% of the factories operating in the Kingdom as of the end of March did so with national capital and 15.45% with foreign capital. Joint investments in the industrial sector account for 11.38% of the factories.

The K-Mile programme

The new ministry and the National Industrial Development and Logistics Programme's policies are designed for more than big-name foreign investors.

Its K-Mile programme harnesses the power of young, innovative and promising start-up businesses by enabling entrepreneurship in the sectors of industry and logistics, not least helping them make the most of the Kingdom's unique geographical location and commercial ties for access to local and international markets.

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When the Minister of Industry and Mineral Resources and NDLP chairman, Bandar Alkhorayef, launched the second version of the K-Mile programme, he described it as a dream for the economy and the homeland.

He pointed out that young people and entrepreneurs have a range of opportunities in the industrial and logistics sectors, which are not just the province of major investors.

"In NDLP, we're keen to create a business model that helps passionate and ambitious entrepreneurs start their projects through a group of advisors and a set of incentives that help them execute these projects," Alkhorayef said.

"When the programme was launched, I didn't expect the ideas presented by young people to be qualitative as they proved to be today."

The second version of the programme is expected to bring in quality opportunities and greater investments.

K-Mile's first version produced 39 promising projects ready for investment, according to Alkhorayef, including 32 industrial projects and seven logistical projects.

He emphasised the ability of young people and entrepreneurs to use technology and advanced manufacturing and artificial intelligence in their work and implement and develop them easily.

Participants in K-Mile's first version benefited from qualitative incentives for the best projects, including support in licenses and procedures, provision of land developed and equipped with the necessary facilities, ready factories at competitive prices, discounts of up to 50% of rental fees and for varying periods of time, and easy credit facilities with convenient financing programmes.

They also accessed training, specialised consultations, pre-sponsorship, joint work spaces, salary support for Saudi entrepreneurs and technicians, and connections with major companies.