Industrial Clusters in Saudi Arabia

Industrial Clusters in the Kingdom of Saudi Arabia refer to a range of core, support, and manufacturing industries that form the central focus of the National Industrial Strategy of the Kingdom. They encompass several industrial sectors, such as pharmaceuticals and biotechnology, energy and renewable energy, food industries, and the automotive sector.

The construction materials sector in Saudi industrial clusters aims to respond to the local market demand for increasing exports of high-value-added semi-finished and finished mineral products, leveraging local content, optimizing national resources, encouraging and supporting Saudi and foreign investments by creating investment opportunities in the construction materials sector, creating sustainable job opportunities for citizens, and supporting competition and innovation through talent development.

The contribution of the building and construction sector to the gross domestic product (GDP) amounted to 13 percent of the total contribution of other non-oil sectors. It accounted for 35 percent of work permits. The prices of basic construction materials, dependent on imported resources, such as reinforcing steel and cables, increased by 27.7 percent and 40.5 percent between September 2010 and August 2021. On the other hand, locally sourced materials, such as cement and blocks, were not affected by the price rise. Rather, they maintained their price range, which does not exceed 7.2 percent.

Thanks to its geographical location and export of medicines to the Middle East, North Africa, and the member states of the Organization of Islamic Cooperation, the Kingdom was able to increase pharmaceutical exports by a total amount exceeding USD140 billion. In 2018, the Saudi pharmaceutical market grew to reach a value of USD9 billion. The pharmaceutical market in the Kingdom is expected to grow to reach a cumulative value of USD40 billion in 2028.

The sector offers many promising investment opportunities in the pharmaceutical and biotechnology industry in the Kingdom. The localization rate is estimated at 29 percent of the market value and 42 percent of the size of the pharmaceutical market.

The food industry sector in the Kingdom is witnessing continuous growth. In fact, the Kingdom's share of the global sector was valued at about SAR176 billion in 2021. The Kingdom is a hub for dairy products, dates, halal meat, and poultry, which make the largest food industries. The Kingdom's market for foodstuffs is expected to grow in all sectors to reach SAR214 billion by 2030. This is due to population growth, increased consumer spending on food and beverages, and the high number of visitors to the Kingdom, including tourists as well as Hajj and Umrah performers.

The chemicals sector seeks to develop manufacturing industries through establishing new value chains in specific sectors, such as advanced plastics applications, oil and gas field chemicals, mining chemicals, rubber products, construction chemicals, medical and pharmaceutical products, personal care products, and human and animal food additives.

The Kingdom's manufacturing industry is varied, where its productions range from basic products to more sophisticated products generated thanks to fiscal incentives and the national policy. The manufacturing industry is part of the country's overall economic diversification program, where its expansion has been driven by low domestic energy costs, population increase, a ready supply of raw materials, and the government's commitment to industrial diversification through foreign investment.

The Kingdom has been ranked first worldwide in the manufacturing of ethylene glycol and MTBE. It ranked second in ethylene and polycarbonate production and third in methanol and polypropylene production.

The total number of existing factories in the Kingdom amounted to 11,549 by the end of December 2023, with total investments estimated at SAR1.541 trillion. The number of existing factories increased by 10 percent in 2023 compared to 10,518 in 2022.

The Kingdom strives to increase the mining sector's contribution to become the third core industry in the Kingdom. Industrial clusters exert efforts to expand the manufacturing of raw materials and enhance the manufacturing of sustainable and globally competitive metal industries.

The minerals and mining sector focuses on developing and integrating the Kingdom's mineral value chains, such as aluminum, iron, base metals, specialty metals, as well as industrial minerals such as quartz, silica, and ferroalloys, among other precious metals.

The metal value chain contributed SAR64 billion to the GDP and created 250,000 job opportunities. In addition, the total value of exports reached SAR26 billion.

In the machinery and equipment sector, the Kingdom aims to create industrial machines and equipment that are regionally competitive. It also seeks to increase contribution to in-country value, increase job opportunities across the Kingdom, and enable citizens to compete globally in emerging technologies.

The vision of the machinery and equipment sector is to achieve 50 percent of local financing in machinery and equipment products, as well as new technologies, by 2030. Furthermore, a wide array of policies, initiatives, and recommendations were elaborated to promote additional local financing within the machinery and equipment sector ecosystem.

The machinery and equipment sector is working in two key dimensions: supporting local manufacturers, helping them to expand their capabilities and enhance their revenues, and supporting foreign investors to build a manufacturing base in the Kingdom.

The Ministry of Industry and Mineral Resources heads a pool of committees in the Kingdom, including the Industrial Equipment and Mining Committee for Industrial Investment Promotion (National Investment Promotion Committee) and the Industrial Council for Addressing Investor Challenges and Streamlining the Existing Ecosystem.

The aviation and aerospace sector aims to attract international investors to enhance foreign investment in the Kingdom. This covers three key areas: enhancing research, development, and innovation, localizing aerospace-grade materials production, and developing the aerospace supply chain.

The Kingdom has dedicated spaces to conduct advanced space research. These are supplemented with advanced higher education systems such as King Abdulaziz University, King Fahd University, and King Abdullah University of Science and Technology (KAUST).

A partnership was also established between AMIC and Toho Titanium Metal, the world's fourth-largest producer of titanium sponge, for the establishment of a 15.6 kt capacity for the production of high-quality titanium sponge in Yanbu Industrial City. In 2009, Ma'aden partnered with Alcoa, the world's third-largest aluminum producer, to develop a bauxite mine, refinery, and smelter of a value of USD10.8 billion.

The General Authority for Military Industries launched a project to enhance the maintenance, manufacturing, and localization of unmanned aircraft systems. The project has a total investment of SAR750 million and an estimated localization rate of 60 percent of the overall business value. The project also succeeded at creating five hundred job opportunities and achieving foreign exports valued at 60 percent of the overall business value.

The automotive sector is the key driver of national economic growth. Therefore, it aims to develop the local automotive industry across the Kingdom. It seeks to enhance Saudi and foreign investments in this sector, reduce imports and raise exports, create job opportunities, and contribute to diversifying the national economy..

It also aims to attract original equipment manufacturers (OEMs) to produce about 400,000 vehicles in the Kingdom by 2030 and acquire 40 percent of the in-country value. This will support the automotive ecosystem across the Kingdom.

The Kingdom's automotive industry is expected to grow by 12 percent by 2030, capitalizing on the Kingdom's strategic location and investment in advanced technologies.

An investment agreement was concluded between the Royal Commission for Yanbu and the Arab EV Metals Group. The agreement related to building a factory for electric battery chemicals by producing lithium, zinc, and nickel.

Industry clusters have collaborated with Saudi companies such as SABIC, Ma'aden, Tasnee, and Saudi Aramco for the creation of advanced transportation materials, such as black carbon, synthetic rubber (for tires), carbon fiber, vehicles, automotive steel plates, and automotive aluminum plates. The private sector also took part in manufacturing, invested in the automotive industry, and produced oil filters, circuit boards, batteries, cables, adhesives, and composites.

Industrial clusters also deployed several assistance efforts, where they supported investors and car companies. Their efforts included conducting market research, identifying the appropriate possible locations, sites, suppliers, and staff, supporting applications and settings, and assessing eligibility for extended support.

The Kingdom's Global Tire Factory is a fierce competitor within the markets of the countries of the Gulf Cooperation Council, the Greater Arab Free Trade Area (GAFTA), the Near East, and Africa, where 62 percent of its sales are generated by these units. The National Industrial Development Center was able to standardize the truck manufacturing coding process, which contributed to doubling production and developing the automotive industry in the Kingdom.

A key benefit of the automotive sector in the Kingdom is reaching four hundred million consumers in the Middle East and North Africa. This is where annual car sales are about 2.3 million, imported from abroad. It also reaches seventeen countries in the Middle East, exempt from customs duties.

Renewable industries strive to enhance their manufacturing capabilities, ultimately increasing and supporting renewable energy generation projects. They seek to create a government system to improve the renewable energy sector in the Kingdom and promote cutting-edge technologies.

The renewable energy industry's vision seeks to achieve regional leadership and global competitiveness in the manufacture of solar and wind equipment, ultimately meeting the regional requirements for renewable energy sources.

The renewable energy industry in the Kingdom is expected to amount to about SAR6.7 billion by 2035 in five sectors, being wind turbine towers, wind turbines, solar PV modules, PV system components, and energy storage.

The Sikaka Solar Power Plant Project is the first renewable energy project in the Kingdom. It is connected to the electricity grid and has a production capacity of three hundred MW. It encompasses a power purchase agreement for seven other renewable energy projects related to the generation of electricity from solar energy. These projects are to be established in various provinces of the Kingdom. In addition to the Dumat Al-Jandal Wind Energy Project, the projects have a total capacity of 3,670 MW. The projects provided electricity to six hundred thousand residential units and were able to reduce seven million t of greenhouse gas emissions. The project enjoys an investment volume of SAR60 billion.