Saudi Arabia to spend 100bn riyals over two years on industrial strategy
On Monday the kingdom launched an industrial programme and signed 37 new agreements worth $53 billion
Saudi Arabia plans to spend 100 billion riyals (Dh97.9bn) in 2019 and 2020 as part of a massive new industrial strategy aimed at weaning the kingdom off oil, creating 1.6 million jobs and attracting as much as 1.6 trillion riyals in investment by 2030.
The National Industrial Development and Logistics Programme (NIDLP) covers 42 initiatives for creating local commercial activity in key sectors that include mining, logistics, and various other industries, the kingdom’s energy minister, Khalid Al Falih said on Monday in his keynote address at a conference in Riyadh to reveal the programme, where he was accompanied by Crown Prince Mohammed Bin Salman.
The programme “is one of the most important … for achieving Vision 2030, as it moves the kingdom into a new era of sustainable development, prosperity and economic diversification. The mining sector will become a third pillar of the Saudi economy alongside oil and petrochemicals, while we continue to develop renewable energy and explore the diverse opportunities presented by the fourth industrial revolution through research and innovation”, Mr Al Falih said.
During the event, 37 agreements worth $53 billion were signed and 29 other agreements worth $960 million were announced. These are in addition to more than 25 agreements that were signed during the Future Investment Initiative 2018, with a total value of around $210bn, of which $165bn are under the NIDLP program.
By 2030, the programme aims to boost the contribution of these four sectors to $320bn and increase the volume of non-oil exports to over $260bn, according to a statement from Saudi Arabia’s Council of Economic Development Affairs.
The minister called upon the government entities and private sector investors to join Saudi Arabia’s development journey and invest across sectors.
“Those who bet on the kingdom never lose,” Mr Al Falih noted.
Deals signed on Monday include a pact between Saudi Aramco, the world’s biggest oil producing company, and Saudi Basic Industries Corporation to continue to the next phase of studies for an oil-to-chemicals plant in the kingdom.
It also signed a deal with Dubai-base DP world, among the top five ports operator globally to build operate and transfer a container terminal at Saudi Arabia’s Jeddah port. Two military deals were also signed with France’s Thales and international defence company CMI to manufacture armoured vehicles in the kingdom. Further details or the size of the deals was not revealed at the conference.
Abed Al Saadoun, kingdom’s deputy minister of energy, industry and mineral resources earlier told the conference that what Saudi Arabia is trying to achieve from programme is to triple the contribution of these the four sectors to the gross domestic product.
"Private sector jobs will rise by two times to 3.1 million. Exports from the four sectors will grow five times from levels today,” he noted.
Saudi Arabia, the biggest Arab economy, is undertaking a slew of measures to help boost the contribution of the non-oil sector to the economy under Vision 2030, the overarching road map for the kingdom’s overhaul.
Under Vision 2030, the private sector’s contribution to the economy is set to increase to 65 per cent by 2030 from the current 40 per cent of gross domestic product.
The kingdom will sign agreements worth 235bn riyals on the side-lines of the conference that include big deals to create military industries, Energy Minister Khalid Al Falih earlier told Al Arabiya TV channel.
"To the extent these are export-oriented projects, they should reduce the dependence of the economy on government spending and hence on oil revenues," said Robin Mills, chief executive of Qamar Energy.
The kingdom will provide a total of 105bn riyals in an "financial enablement" package, and be the main financier for NIDLP sectors of mining, industry, logistics and energy, according to a brochure distributed at the conference. It didn't specify the timeframe for dispensing the funding.
In addition, the Saudi Industrial Development Fund will provide up to 75 per cent of the capital invested in the NIDLP projects.
Of the deals offered to private investors, 29 are in the industrial sector and the rest divided among mining, logistics and energy.
In the industrial sector, NIDLP expects to attract $300bn of investments, including a 4.4bn riyals adhesive plant.
Among the mining projects on offer is a 28bn riyals integrated steel plant. The kingdom has so far invested $40bn in mining over recent years in partnership with the private sector, allowing the industry to contribute $17bn to the Saudi economy.
In the logistics sector, the kingdom aims to develop and operate logistics zones close to major ports with investment opportunities worth 7bn riyals.
Under NIDLP, the energy sector will see 60 gigawatts of capacity to come online by 2030 by executing 35 renewable projects. The projects on offer include a 3.5bn riyals solar cells and modules plant and a 2.5bn riyals gas turbine manufacturing plant.
Saudi Arabia wants to expand some of the country’s ports and airports and plans to involve the private sector in a few of its projects, Rumaih Al Rumaih, chairman of the Public Transport Authority said at the conference.
The authority is spending 74bn riyals on rail projects, he said. It is also expanding some of its ports, including King Abdullah Port, Jeddah and Dammam by investing 10bn riyals. There are five airports that are being expanded or being built with as much as 3bn riyals in investment.
“We have 12 logistics zones in the kingdom and we are planning to float some opportunities for the private sector,” Mr Al Rumaih said. “We are enhancing capacity to be more efficient for the private sector to grow exports from the country.”
Updated: January 28, 2019 10:22 PM