Nov. 15, 2019
From an industrial perspective, Vision 2030 tackles the perennial problem of insufficient capacity to reduce a product lifecycle while marketing local products competitively. And so, across the industrial matrix, a sharper focus is made on RDI, the research, development, and innovation demanded by the task. In the KSA, this involves both project financing, but of perhaps greater importance, the incentivizing of a local entrepreneurial class. Indeed, Vision 2030 targets a private sector contribution to the economy of 65% of GDP by 2030 from today's 40%. In-country manufacturing is fostered by such schemes as In Kingdom Total Value Added (IKTVA) to create local talent and jobs. And meanwhile, as of July 2019, the Saudi Industrial Development Fund (SIDF) was gearing up to further stimulate the private sector.
Getting with the Program
The Strategic Management Committee approved the NIDLP program in July 2017 to create integrated industrial value-chains in the four key sectors of industry, mining, energy, and logistics. The goal, simple in the saying, is nothing short of sustainable industrial diversification. By 2030, the Kingdom hopes to have boosted its non-oil exports to north of USD260 billion. NIDLP encompasses their financing—to the tune of SAR105 billion—and the ensuring of adequate infrastructure and land allocation plus the all-important stimulation of RDI. It is a program in step with the efficiencies of Industry 4.0, oversight for which is given to King Abdulaziz City for Science and Technology. With the country having opened up to foreign investment some years back, the national program welcomes the know-how still required to ultimately build its own capacities. Indeed, with USD210-billion worth of agreements signed at the Future Investment Initiative 2018, of which USD165 billion was under NIDLP, the Kingdom targets total investments of around USD427 billion by 2030 and the creation of no less than 1.6 million new jobs.
The Logic behind Logistics
A brief glance at just one of the four target sectors, logistics, provides ample insight into the issues pertaining to all four. What's more, it is at the heart of the commercial flexibility required by Vision 2030. Given Saudi Arabia's ideal location at the East and West crossroads on the vital Red Sea commercial route, it is ideally placed to capitalize on the MENA and West Africa regions. And yet official figures cited in the NIDLP Delivery Plan 2018-2020 indicate that in 2016, the KSA—home to 12 logistics zones—ranked 52nd on the Logistics Performance Index (LPI), falling short on human capital and efficiency benchmarks.
NIDLP is also a hard taskmaster in assessing the efficiency of state entities, which are to pursue the same international benchmarks as their private-sector counterparts. The potential for improvement has galvanized relevant bodies—as in other sectors—to move in unison. Accordingly, the Ministry of Transport (MoT), Saudi Ports Authority (SPA), Saudi Customs, and the Ministry of Economy and Planning (MEP) have drafted a plan of action, fueled by SAR7 billion of investment opportunities, addressing core issues including the ease of arranging international shipments, efficiency issues such as 24-hour clearance, infrastructure readiness, and the ability to track shipments. Billions are also earmarked for enhancement of the Kingdom's roads and airports, with the scope for private sector participation.
In short, the race is on to develop the nation's sustainable core capacities. The Kingdom, a leading diplomatic player in a highly turbulent region, is also a major military spender. Its ambitious goal of localizing half of its military and security spending by 2030, from under 5% today, is emblematic of the wider reaches of the NIDLP.