How did you coordinate with other parts of the government on the pandemic response, and what role did SIDF play?
SIDF was established in 1974 with a capital of USD133 million, thus SIDF has been supporting the Saudi manufacturing industry for 46 years by providing medium and long-term financial loans, advisory solutions and human capital development of the ecosystem. Today, as a financial enabler of the industrial transformation, SIDF has expanded its bylaws to extend its support to several promising sectors, raising its capital to USD28 billion in 2019 which allowed the fund to provide new tailored packages of financial services that meet the needs of the private sector in industry, mining, energy and logistics sectors under (NIDLP) the National Industrial Development and Logistics Program. SIDF is the financial enabler of NIDLP, which is one of the largest programs of Vision 2030, aiming to attract investment and transform the kingdom into a leading industrial powerhouse and a global logistics hub. When the pandemic occurred, the government was quick to respond and took decisive safety measures. We see the commitment to human life today in the low infection and fatality rates. In terms of economic measures, the government also acted quickly and early by launching urgent financial stimulus packages to ensure companies sustainability through the crisis. In line with these efforts, SDIF proactively supported small, medium, and large companies and offered financial initiatives tailored to their specific needs during these difficult times. These efforts resulted in three urgent financial initiatives aid that exceeded USD1.3 billion; the aid was in the form of restructuring installments of 546 loans due in 2020 amounting to USD1 billion. The financial liquidity of the companies was augmented by credit instrument to finance the operating expenses of the companies, especially the ones impacted by the lockdown, out of which 86 companies have benefited from the initiative for a total amount of USD127 million. Finally, launching an accelerated working capital loan amounting to USD172 million directed to finance the raw material requirements of the companies involved in the medical sector to help in boosting the local medical content and kingdom's pharmaceutical security. We have also focused on investing in human capital SIDF Academy has managed to train around 2,000 participants from employees, clients and employees of other entities serving the industrial ecosystem from both the private and public sectors. These specialized training programs are organized with leading international organizations such as Stanford University, London Business School, and Fitch Learning.
Does your recent capital increase reflect a strategic reorientation in line with the Vision 2030 goals?
That was exactly the point; pre-2015, our capital was USD11 billion, in 2017 it has been increased to over USD17 billion, then two years later it got raised to USD28 billion. The successive increases of capital show the government's commitment to the sectors we serve. In order to transform the Kingdom and have a vision destination, SIDF had to change in three ways. We delivered and introduced new sectors in late 2019 and 2020, as we had focused mostly on manufacturing for more than 40 years. In 2019, we expanded our sectors offerings to include the whole mining process, logistics, and renewables with project financing. We also introduced the working capital loan, which proved to be extremely useful in 2020. We also introduced acquisition financing to support companies to consolidate or bring technologies into the Kingdom. To create packages and programs that proactively nudge the private sector, so we introduced packages on competitiveness and created programs that fund digitalization, automation, energy efficiency, and increasing local content. We signed with the likes of Aramco, Ma'aden, and SABIC to localize their supply chains in addition to having curated programs to help SMEs scale up.
SIDF recently completed a far-reaching digitalization drive for its internal processes. What did this achieve?
Our process had not changed significantly since the 1970s, so in 2019 we introduced a major overhaul. We rewrote the process, changed the organizational structure to align with that process, and built a new digital system. We also anticipated the need to embrace the idea of working anywhere and shifted to laptops. The process of digitalization took a long time, as our activities, such as project finance, do not look at the financials of a company but their business plans. Asking a private company to only communicate online a system is difficult, but it is essential if we are to address the need in the market. Now one can apply for and sign a loan on an online system, even factory visits can be carried out through our app. This provides transparency on the challenges and issues we have with the process and address clients' needs.
What technologies are you prioritizing in the manufacturing sector, and where do you see that effort in the broader goals of Vision 2030?
We took a path where our efforts should be guiding the private sector to where that industry is heading. For Industry 4.0, we created financing programs that provide additional incentives in terms of the tenure, loan terms, or amount we finance. Instead of financing up to 50% of CAPEX, for example, we finance up to 75% and give a tenure of 20-30% longer if companies get into specific projects or improve the way they manufacture. One example would be a smart warehouse that was built recently. Because it was utilizing robotics and automated processes, we financed up to 70% and gave the company a grace period of at least 10 years. This is a crucial direction for Saudi Arabia, as cheap labor is losing to automation globally. By automating, we create better jobs and can hire more Saudis even though the number of overall jobs might fall. We will not have the resistance other countries have, and we have the capital to support that transformation.