Economic Growth Model - Saudi Arabia

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Develop Productive Capabilities in Saudi Arabia and Economic Growth Model

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Economic Growth Model - Saudi Arabia

  1. 1. Saudi Arabia – Beyond OilFinal PresentationFeb 17, 2012
  2. 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 2
  3. 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 3
  4. 4. Economic Diversification RealizedShifting 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 BnOil-based EconomySource: ISI Emerging Markets Database; 2008 revenues 4
  5. 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) 5
  6. 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 6
  7. 7. KSA’s Product Space Pharmaceuticals Organic chemicals Oil-related engineering products 7
  8. 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 8
  9. 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 9
  10. 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 10
  11. 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 11
  12. 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 inpursuit of diversification, jobs creation and knowledge-based growth 12
  13. 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… 13
  14. 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 14
  15. 15. Industrial Zones Jubail, Yanbu, Maaden, Industrial Cities (Riyadh, Jeddah, Dammam, etc.) 15
  16. 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 16
  17. 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 17
  18. 18. Saudi Arabia as a Successful Diversification Case Study Pharmaceuticals Organic chemicals Oil-related engineering products 18
  19. 19. Thank You! 19
  20. 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 newcapabilities in the service sector to support economic growth 20

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