Develop Productive Capabilities in Saudi Arabia and Economic Growth Model

1. Saudi Arabia – Beyond Oil
Final Presentation
Feb 17, 2012

2. What We Will Show You Today
■ The Context of Diversification in Saudi Arabia
■ The Economic Opportunities We Have Selected
■ Jumping to the Next Tree – Our Strategy and How To Make It Happen
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3. KSA’s History of Diversification
1970’s – Infrastructure drive
(roads, ports, power)
1980’s/1990’s – Education,
health, social services
1990’s/2000’s – Privatization,
Saudization, re-modernization
of infrastructure
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4. Economic Diversification Realized
Shifting Focus of KSA’s Economy
Telecom & ICT
Food & Consumer
Chemicals & Goods
Industries Knowledge-based
SR 47 Bn Economy
SR 151 Bn
SR 14 Bn SR 5 Bn
SR 11 Bn
Financial Services Transport &
SR 6.5 Bn Utilities
SR 12 Bn SR 8.4 Bn
SR 15 Bn
SR 11 Bn SR 22 Bn
SR 6 Bn
Oil-based Economy
Source: ISI Emerging Markets Database; 2008 revenues 4

5. Further Room for Diversification
How Saudi Arabia got to
10% Diversification
• Foreign partnerships – a
dominant theme through
technical support and
ownership
• Infrastructure and logistics
capabilities
• Knowledge and skills
development (e.g. Aramco
scholarships)
• Well-established
supporting industries (e.g.
banking and telecoms)
• Slowly pulling away from
the comfort of state
support (e.g. privatization)
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6. What We Will Show You Today
■ The Context of Diversification in Saudi Arabia
■ The Economic Opportunities We Have Selected
■ Jumping to the Next Tree – Our Strategy and How To Make It Happen
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7. KSA’s Product Space
Pharmaceuticals
Organic
chemicals
Oil-related
engineering
products
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8. Why Organic Chemicals?
Growing internal demand for
chemicals Strong regional demand for exports
Key Questions
Additional information needed? Market size/potential, competitive landscape, supply chain
Political and government agencies’ support required? Having pool of talent for this industry – most are in petrochem
Private sector engagement required? Partnerships with big chemical companies
Evidence that country took such opportunities? Demand from nearby countries for chemical products from KSA
Length of time to realize potential? 10-15 years
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9. Why Oil-related Engineering Products?
(Mechanical Tools for Building)
Strong demand for mechanical tools Diverse export market
Key Questions
Additional information needed? Market size/potential, competitive landscape, supply chain
Political and government agencies’ support required? Developing internal manufacturing capabilities up to scale
Private sector engagement required? Technology transfer from US, German mechanical companies
Evidence that country took such opportunities? Fair level of exports taking place
Length of time to realize potential? 5-10 years
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10. Why Pharmaceuticals?
Growing demand for pharmaceuticals High export potential
Key Questions
Additional information needed? Market size/potential, competitive landscape, supply chain
Political and government agencies’ support required? Developing R&D capabilities
Private sector engagement required? Partnerships with big pharma
Evidence that country took such opportunities? Recent growth in exports driven by generics players
Length of time to realize potential? 10-15 years
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11. What We Will Show You Today
■ The Context of Diversification in Saudi Arabia
■ The Economic Opportunities We Have Selected
■ Jumping to the Next Tree – Our Strategy and How To Make It Happen
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12. “The Chicken and the Egg”
What’s preventing us from jumping further?
•Our comparative advantage is on upstream oil/gas and
petrochemicals – not other kinds of chemicals, downstream
activities, nor pharmaceuticals
•It’s a small market and we do not have the scale so let’s just
import these products from other countries
•We do not have the people, processes, systems (i.e.
capabilities) to move to the new industries
•Change is slow in Saudi Arabia, so why bother?
However, the government has the resources to move into other industries in
pursuit of diversification, jobs creation and knowledge-based growth
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13. From One Tree to the Next…
Diversification Focus Our Strategic
Framework
From industrial chemicals to Acceptance
organic chemicals…
From oil-related engineering Target
products importer to exporter… State
Authority Abilities
From polyethylene to
pharmaceuticals…
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14. Our Strategy – Defining Our Sources of Authority
Authority
• Full support of the King
for all diversification
efforts
• Creation of an
empowered industrial Ministries
zone per target industry Foreign
Universities
Partners
- Led by Ministry of
Commerce Industrial Zone
Authority
- With authority from the
King to coordinate with Private
other agencies and get Customers
Sector
things done Suppliers
- One-stop shop
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15. Industrial Zones
Jubail, Yanbu, Maaden, Industrial Cities (Riyadh, Jeddah, Dammam, etc.)
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16. Our Strategy – Developing the Required Capabilities
Abilities
• Deal-making capabilities:
Saudi Business Families
look for great deal-
makers
• Talent development Vocational
Schools
• Foreign partnerships
focused on R&D and
capability building
• Implementation
capabilities, monitoring
and continuous
improvement
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17. Our Strategy – Generating Buy-in from Top to Bottom
Acceptance
Stakeholder alignment and “roadshows”
• Acceptance at the top –
Highlight the benefits:
job creation and
business opportunities
and involve broad
groups
Change management required
• Acceptance at the
implementation levels –
PDIA to solve
accountability, incentives
and change
management issues
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18. Saudi Arabia as a Successful Diversification Case Study
Pharmaceuticals
Organic
chemicals
Oil-related
engineering
products
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19. Thank You!
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20. A Point on Services…
Saudi Arabia GDP split
Agriculture Opportunities in Services
3%
• ICT
• Transportation and Logistics, Shipping,
Services Port Management
30%
• Financial Services
• Real Estate
•…
Industries (incl. oil)
67%
We see significant opportunities to expand existing capabilities and create new
capabilities in the service sector to support economic growth
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