OUTLOOK BRIGHT FOR SAUDI MANUFACTURING SECTOR

A number of new manufacturing initiatives are being pursued by the Saudi government as part of the National Industrial Development and Logistics Program (NIDLP), focusing on industry, mining, energy and logistics to realise Saudi Vision 2030.

In October, the Saudi Arabian General Investment Authority (SAGIA) signed a memorandum of understanding with South Korea’s GL Rapha Co., which will result in significant localisation of the company’s pharmaceutical products, health supplements, biotechnology and medical devices operations in the kingdom.

As part of the USD 320 million agreement, GL Rapha – the parent company of Hankook Korus Pharm – plans to establish a facility in Saudi Arabia to manufacture 30 biotechnology products and launch five innovative products over the next five years.

“GL Rapha seeks to be one of the multinational biopharmaceutical companies to have manufacturing facility in Saudi Arabia,” said Jae-Gan Whang, the company chairman. “GL Rapha is willing to innovate and support Saudi Arabia vision for 2030 to increase local manufacturing and biotechnology products and foster local talent.”

The MoU aims to start GL Rapha’s local manufacturing in the “bio-similar, monoclonal antibody, growth factor, pharmaceutical raw material” and reinforces its commitment to work with the Saudi government for a sustainable ecosystem that encourages innovation and investment in healthcare and Saudi talent development.

The company aims to invest SAR 1.2 billion in the initiative and create more than 300 high skilled jobs over the next few years.

Meanwhile, Sadara Chemical Company and Baker Hughes signed agreements wherein Sadara will supply feedstock chemicals to a Baker Hughes chemical manufacturing facility in PlasChem Park.

“We are excited to have signed these supply agreements with Baker Hughes, a step that will help them establish a strong presence in the booming industrial sector in Saudi Arabia. The competitive benefits that this relationship is going to bring to chemicals manufacturing in the kingdom are significant, and in complete alignment with our efforts at Sadara to enable downstream manufacturing opportunities in the kingdom, and with Vision 2030,” said Dr Faisal M. Al-Faqeer, chief executive officer of Sadara.

“PlasChem Park is uniquely positioned to enable and support these opportunities for diversification of the manufacturing industry in Saudi Arabia, and we look forward to welcoming Baker Hughes as one of the park’s first tenants.”

The Saudi Arabian General Investment Authority (SAGIA) also signed a deal with a French solar tracker company Optimum Tracker to invest SAR 200 million in designing and manufacturing advanced solar panels. The rapid development of renewable energy sector has introduced a brand new high-tech manufacturing industry in the kingdom and created a demand for high-paying jobs.

The National Industrial Strategy, part of the National Industrial Development and Logistics Program (NIDLP), also aims to stimulate industrial growth by moving beyond developing primary products. It seeks to explore projects that add value and go beyond the export of raw materials.

“This represents a major transformation in industrial policy and methodology, which aimed at driving progressive growth of production through public investments across the value chain, knowing that the previous methodology was no longer sufficient,” according to the NIDLP Book. “In the future, focus should be on the end of the value chain (i.e. final products), especially on complex products, such as vehicles and renewable energy sources, as well as medical and aviation supplies.”

SAGIA issued 45 manufacturing foreign investor licenses in the second quarter of 2019, out of 291 licenses, as investors eyed the kingdom’s industrial bases and vastly improving infrastructure.

“These figures demonstrate the clear momentum we are seeing in foreign investment in Saudi Arabia,” said Majed Al Qasabi, minister of commerce and investment. “We continue to pursue further reforms to make it easier for international investors to play a role in our economic transformation in the years to come – bringing jobs, growth and opportunity to Saudi citizens.”

The Saudi Industrial Development Fund (SIDF) also expanded financing for the mining sector, which is a key and promising development area for the government. SIDF will contribute to financing mining projects for all types of minerals with a financing rate of 75% of the project's costs.

The funding has also been expanded to include the final stage of the delineation process, which includes drilling and mining, in addition to backing support services companies that add value to the sector.

Investments in manufacturing are vital as the sector is among the biggest segments of the economy and employ a large number of workers.

The manufacturing sector contributed nearly 840,000 jobs in the second quarter of 2019, making it the fourth largest job creator in the economy after construction, wholesale and retail trade, and administrative and support service, according to the General Authority for Statistics.

There were more than 100,000 Saudi manufacturing establishments by the second quarter of 2019, the second biggest concentration of companies in the kingdom after wholesale and retail trade.