3. Saudi Arabia Economy
• One of the world’s 25 largest economies (23rd )
• The largest economy in the MENA region.
• Represents 25% of total Arab GDP
• It has 25% of worlds oil reserves
• The industrial sector: 13% of the GDP. Projected: 20% by 2020.
• Ranked 4th world wide for fiscal freedom.
4. NIS, manufacturing identified as a key
development sector
Goal is to diversify away from oil and gas and develop human capital
"Manufacturing is our strategic choice to
diversify the economy"
Vision Key strategic goal
"A globally competitive industry, based on "To increase the contribution of the
innovation and acting as a major tool in manufacturing sector to the GDP
transforming national resources into sustainable to 20% … "
wealth"
Source: KSA Natinal Industrialization Strategy document, Factiva
5. Reaching NIS strategic goal
would position KSA in the league of Germany and
Japan
Manufacturing as percentage of GDP (2009)
40
35%
30
27%
25%
21% 21% 20% GDP contribution by 2020
20
17% 16%
13% 13% 13% 12% 12%
10% 10%
10
5%
3%
2%
0
Thai- Singa- Korea Japan Ger- South Egypt United UK KSA France Turkey Greece Norway Algeria Hong Canada
land pore many Africa States Kong
1. Manufacturing defined as all activities under ISIC classification, Code D
Note: Manufacturing value added (MVA) measures contribution of an entity to the whole manufacturing GDP of economy. MVA =
Manufacturing GDP – taxes + subsidies on manufacturing
Source: Nation master; BCG analysis
6. NIS strategic goal to be achieved by
reaching four targets
Four targets help reach strategic goal of 20%
manufacturing contribution by 2020 Four targets are interrelated
1
1
GDP Increasing manufacturing GDP Grow Man.
3x threefold GDP
3 4
More export
More value
oriented
add sectors
2 More jobs sectors
Manufacturing
Increasing share of Saudi labor
Saudization
in manufacturing to 30%
-> 30% More
Saudi Employment
involve- More
3 Increasing share of ment "nice Saudi
Share of tech
"technology"/value add jobs" More jobs involveme
man products
manufacturing products for Saudis nt "int'l
-> 60%
to 60% jobs"
2
Saudi
4 employment
Share of exports Increasing share of exports
in man revenues versus domestic
-> 35% revenues to 35%
Source: KSA National Industrialization Strategy document; BCG analysis
7. Eight improvement axes identified to achieve
NIS targets
NIS axes Description
1 • Improve macro-economic policies (i.e., monetary and fiscal policies, wages)
Overall business
• Stabilize micro-economic indicators (to attract local and foreign investments)
environment
• improve trade policies and market competition
2 • Stimulate industrial diversification and achieve balanced development
Industrial complexes • Important factors behind industrial development
• Stimulate innovation and development by sharing skills
3 • More attention should be devoted to SMEs (i.e., industrial SMEs support, industrial SMEs
Business community
incubation, business resources center, competitiveness development and industrial
and SMEs
modernization center, industrial financing mechanisms)
4 • Link R&D efforts with development processes (i.e., linking science and technology network
Industrial innovation
with innovation in industrial companies, linking educational output to labor market needs)
and productivity
• Promote innovation in small and medium scale industrial facilities
5
• Ensure the availability of technically and scientifically qualified and well-trained resources
HR development
• Train personnel to deal with, develop, and maintain modern machinery and equipments
6
Infrastructure and • Develop infrastructure in the traditional industrial regions and the new industrial cities/zones
logistics support • Enhance provision of industrial services and supportive activities (i.e., handling, shipping, storage)
7 • Move the Kingdom towards higher technology-content industries
New industry
• Provide continuing support for the development of existing industries which have earned
verticals
successful comparative and competitive advantages (i.e., petrochemicals)
8
Governance mechanism • Manage the implementation of NIS
Source: NIS; BCG analltsis
8. MODON In Brief
• History
Established in 2001.
Independent, self-funded public organization.
• Roles
Regulate, develop and promote industrial properties
and technology zones.
• Facts
Overseas 75 million m2
34.5 million m2 developed during the last 3 years.
More than 300,000 Jobs.
More than 3,000 factories
9. MODON In Brief
Increase Industrial Lands to 150 million m2 in 2015
160,000
140,000
120,000
Thousand m2
100,000
80,000
60,000
40,000
20,000
0
10. Investment Incentives
Incentives Competitive Advantages
SAR 1 / square meter Integrated Infrastructure
/ year
Biggest Attractive Market
in ME
Electricity rates:
$0.04 / KW Governmental Services
Centers
Custom exemption
(for equipments & Housing & Commercial
raw materials) Centers
Least Rental Rates in
Government GCC
financing up to 75%
Center of ME
Industrial Cities
widespread
Modern Industrial Cities
24. Infrastructure projects in the next
5 years
Study / Survey 80,000,000 $
Development 1,330,000,000 $
Rehabilitation 270,000,000 $
Utilities & services Setup 1,400,000,000 $
Total 3,080,000,000 $
