Industry in Saudi Arabia

Industry in the Kingdom of Saudi Arabia is one of the economic sectors contributing to the non-oil gross domestic product (GDP) of the Kingdom.

The national industrial movement began early in the unification period of the Kingdom. Evidence of this can be seen in the products of the Arab Company for Saving and Economy in Makkah al-Mukarramah, which manufactured military uniforms in 1936.

The discovery of oil is considered the cornerstone upon which modern industry in the Kingdom was built. The industrial development process took its first steps following the discovery and commercial export of oil, thanks to oil revenues and their role in improving economic conditions and directing them.

Saudi Vision 2030 has set several targets for the industrial sector, including achieving 84 percent growth in non-oil sectors, 55 percent in local content in manufacturing, providing 230,000 job opportunities, and reaching SAR460 billion in manufacturing exports by 2030.

The Kingdom has the enablers to achieve a competitive and sustainable industrial economy, starting with its strategic geographic location and rich natural resources, in addition to leading national industrial companies.

With the start of development plans, the industry moved to new horizons. The 1970s marked the beginning of the Kingdom's industrial history with the establishment of the Ministry of Industry and Electricity. Industry later became part of the Ministry of Commerce, and the name was changed to the Ministry of Commerce and Industry. Further development occurred in 2016 when a Royal Order renamed the Ministry of Petroleum and Mineral Resources to the Ministry of Energy, Industry, and Mineral Resources. In 2019, another Royal Order separated the industrial and mineral resources sector from the Ministry of Energy, creating the Ministry of Industry and Mineral Resources.

Based on its resources and manufacturing capabilities, the Kingdom aimed to become an industrial and developmental state. This led to the Council of Ministers' decision in 1974 to establish the Saudi Industrial Development Fund. The fund's purpose is to finance, support, and develop the industrial sector by providing medium- or long-term loans to establish new factories, develop, update, and expand existing ones, and offer advice in administrative, financial, technical, and marketing fields for industrial establishments in the Kingdom.

In 2018, the Council of Ministers approved an amendment to the bylaws of the Saudi Industrial Development Fund. This amendment enabled the fund to expand its support to a number of new and promising sectors in the fields of industry, mining, energy, and logistics.

The Saudi Industrial Development Fund offered a range of services and financial products through the National Industrial Development and Logistics Program (NIDLP) to contribute to achieving Saudi Vision 2030. This includes adding SAR1.2 billion to the GDP, creating job opportunities, improving the balance of payments, and developing local content.

The number of loans approved by the Saudi Industrial Development Fund since its establishment until the end of the second quarter of 2023 reached approximately 5,074 loans. The total disbursed amounts until the end of the first quarter of 2024 amounted to about SAR153.6 billion. Small and medium-sized enterprises (SMEs) accounted for 76 percent of the projects while promising regions supported by the fund represented 23 percent.

The Kingdom has focused on establishing a supportive structural framework for industrial activity development. Alongside the Saudi Industrial Development Fund, the Saudi Authority for Industrial Cities and Technology Zones (MODON) was established in 2001. MODON aims to develop industrial lands and integrated infrastructure and supervises thirty-six existing and developing industrial cities across the Kingdom, housing more than five thousand operating and under-construction factories. In addition to overseeing private industrial cities and complexes, MODON works on enhancing its investment system with the Quality of Life Program standards to meet the aspirations of its private sector partners. MODON also aims to empower women, SMEs, and entrepreneurship.

MODON's strategy to empower industry and increase local content relies on developing more services and products with an innovative vision that meets the needs of private sector partners and enhances their participation in diversifying the national economy in line with Saudi Vision 2030. This includes its contributions to NIDLP initiatives, as well as providing various products such as industrial lands with developed infrastructure and services, service lands designated for investment in facility and service development, ready-made factories with varying sizes between seven hundred m² and 1500m², and logistical solutions distributed across key regions of the Kingdom. Additionally, MODON offers the "Land and Industrial Loan" and "Factory and Loan" products in collaboration with the Saudi Industrial Development Fund, and "Osos" in collaboration with the Social Development Bank. It also supports SMEs and entrepreneurs, promoting factors that contribute to their growth.

As part of the Kingdom's efforts to develop the industrial sector and operate within a regulatory framework that supports growth and maintains the competitiveness of national industrial products and services, the Council of Ministers approved the National Industrial Strategy in 2009. This strategy outlined the targeted path for industrial development until the end of 2020.

The strategy set specific goals for the national industry over ten years, aiming to double the added value of the industry, increase its contribution to the GDP to 20 percent, raise the proportion of technologically-based manufactured products in total industrial production from 30 percent to 60 percent, and increase the share of industrial exports in total industrial production from 18 percent to 35 percent during the strategy's duration.

The strategy focused on specific industries within modern industrial clusters, including five core industries that form the nucleus of the Industrial Clusters Program. These industries are automotive and parts manufacturing, metals processing, general-purpose machinery manufacturing, building materials manufacturing, and plastic packaging manufacturing.

With the launch of the programs and initiatives of Saudi Vision 2030, the industrial sector has taken a more effective and advanced path. NIDLP was launched at the beginning of 2019 to transform the Kingdom into a leading industrial power and a global logistics hub. The program aims to maximize value in the mining and energy sectors, with a strong focus on local content and the Fourth Industrial Revolution.

The program includes four pivotal sectors, including national industries, logistics services, mining, and energy, and contributes to achieving integration between them in order to achieve maximum added value from them, enhance and diversify their economic impact, in addition to creating an attractive investment environment, while taking care of the two axes of local production and the Fourth Industrial Revolution.

Since its launch, NIDLP has successfully achieved several of its goals in developing the national industry. Notable accomplishments include the launch of the Geological Survey Program, significant progress in the Maritime Navigation Network Connectivity Index with global shipping lines, the inauguration of the first locally manufactured fast interceptor boat, the establishment of renewable energy stations, a rapid increase in investment in the industrial sector, support for the localization of the military industries sector, and the launch of the "Made in Saudi" program.

The program continues to enhance the economic impact of Saudi industries by contributing to increasing its competitiveness and its attraction as an ideal destination for investment, in addition to optimizing the use of all resources, improving policies and legislation relevant to the sector, thus allowing it to achieve its goals, as well as empowering local and foreign private sector investments. It also improves the trade balance and creates a local industry that is able to compete in global markets, in addition to creating sustainable competitive advantages based on innovation, stimulating investments, and creating job opportunities.

Known as "Saudi Exports," it is a government authority that began its activities in 2013. It is dedicated to increasing Saudi non-oil exports and opening up to global markets, utilizing all its economic capabilities to improve the efficiency of the export environment by developing programs and offering incentives to exporters. It encourages Saudi products in international markets, enhances their competitive quality, and ensures their access to international markets, reflecting the status of Saudi products and contributing to the national economy.

Saudi Exports focuses on five main objectives: facilitating the comprehensive journey for exporters by improving the export environment; developing exporters' capabilities and readiness to face global challenges and enhance their competitiveness in markets; elevating the image and brand of Saudi exports and strengthening their position in global markets; identifying and promoting international business opportunities and connecting exporters with buyers; and establishing a culture of institutional excellence, collaboration, customer-centricity, and digitalization to provide the best innovative services.

Among the projects of the authority is the launch of the "Made in Saudi" program, which aims to stimulate national industries, encourage consumers to buy local goods, and develop and enhance Saudi exports to global markets. Additionally, the establishment of the Saudi Export-Import Bank, an independent bank with a capital of SAR30 billion, aims to finance both local exporters and foreign importers, thereby bridging the financial service gaps in the import and export sector.

The "Made in Saudi" program, launched by the Saudi Export Development Authority in March 2023, contributes to achieving the goals of Saudi Vision 2030 in the industrial sector. It plays an important role in promoting local industries, enabling Saudi products to compete locally, regionally, and globally, and supporting efforts to increase the share of Saudi non-oil exports from 16 percent to 50 percent of the total non-oil GDP by 2030.

The "Made in Saudi" program is supported by a number of national institutions that contribute to its success. The Saudi Center for International Strategic Partnerships, which specializes in unifying the Kingdom's efforts in its international partnerships, supports the program by helping it reach global markets and collaborating in organizing seminars, conferences, and workshops.

"Made in Saudi" continues to achieve its strategic objectives of strengthening Saudi Arabia's industrial value by increasing private sector participation from 40 percent to 65 percent, boosting foreign direct investment in the GDP from 3.8 percent to an international average of 5.7 percent, and helping to create more than 1.3 million jobs in the industrial and mining sectors.

The program also aims to penetrate international markets with high-quality Saudi industries, as the Kingdom's products have reached more than 178 countries worldwide.

The Saudi industrial sector has demonstrated its ability to face challenges and economic fluctuations, such as the COVID-19 pandemic in 2020. Despite the pandemic, 903 factories were licensed with investments exceeding SAR23 billion, the sector created 39,000 jobs, and more than 515 factories began operations.

The products of Saudi factories have diversified to cover both local and international markets. By the end of December 2020, there were 9,681 factories. By the end of the fourth quarter of 2021, this number had increased to 10,293 factories, with a capital of SAR1.33 trillion. By the end of the first quarter of 2022, the number had risen to 10,489 factories, with a capital of SAR1.34 trillion. By July 2022, the number had reached 10,685 factories, with investments amounting to SAR1.367 trillion. By the end of the first quarter of 2023, the number of factories had increased to 10,819, with total investments exceeding SAR1.43 trillion.

The Ministry of Industry and Mineral Resources continues to empower national industry through various avenues to support industrial investors with financing packages provided by the Saudi Industrial Development Fund. In 2020, the fund approved approximately 212 loans, amounting to an unprecedented total of around SAR17 billion since its establishment. The ministry is also working to expedite procedures and prepare the infrastructure needed by the industrial sector through the Saudi Authority for Industrial Cities and Technology Zones (MODON).