30/06/2015 12:08 AST
As Saudi Arabia looks to add diversity to its oil-based economy, the government has prioritised the development of manufacturing.
According to the Saudi Industrial Development Fund, the number of industrial units in the kingdom has increased from 198 in 1974 to 6,471 today.
Capital investment in manufacturing has risen more than seven-fold during the same period to SAR883 billion ($222 billion) in 2013, up from SAR12 billion in 1974. Manufacturing currently contributes about 10 per cent to Saudi Arabia’s GDP, but it has the potential to make up a much larger share of the kingdom’s wealth.
Saudi officials have long recognised that fact. Around 25 years ago, they launched a Made in Saudi Arabia branding campaign, aimed at “developing a strong manufacturing base in the country,” says Abdullatif Al Abdullatif, CEO of the family-owned Al Abdullatif Industrial Investment Company.
The government-backed initiative offered Saudi businesses incentives, including financial ones, to transform companies that merely bought and resold products into manufacturers that produce finished goods.
With the leg-up from the government, Al Abdullatif Industrial Investment Company moved from importing and selling finished products, mainly carpets, to manufacturing products itself and then exporting them – often to the same firms from which Mr Al-Abdullatif’s father used to buy finished products.
Today, the Saudi government continues to support manufacturing by investing in infrastructure, building manufacturing hubs labelled industrial cities, and setting up the Saudi Industrial Development Fund (SIDF), which provides loans and advisory services to promote the industrialisation of the kingdom.
In its Comprehensive Growth Strategy, released at the G-20 meetings in Australia last year, the government also acknowledges the “need to adopt a set of serious steps, including the development of educational and training curricula guided by international standards” to try to improve the quality of the workforce.
Indeed, lack of expertise among Saudi workers is a problem, says Mr Al Abdullatif. To rectify this, his company has set up centres “to provide training to locals who can then take that expertise to develop their own responsibilities over the longer term.”
Another company, Zamil Industrial – a regional, if not global leader in the manufacturing of air conditioning systems and pre-fabricated steel structures – offers training opportunities that focus on instilling a strong discipline and work ethic, says CEO Abdulla M. Al Zamil.
“We don’t need nuclear physicists or biochemists,” he explains. “Most of the workers that we need are in semi-skilled roles. We need to start working on ethics and discipline as a priority over skills sets.
If you create a foundation in work ethic and discipline, teaching skills on the job is a relatively straightforward process.”
Saudi Arabia already has a foothold in midstream manufacturing: it produces plastics and petrochemicals, as well as aluminium.
But just as the country is trying to diversify away from all things petroleum-related, it is also trying to develop new areas of manufacturing and move even further downstream in the manufacturing life-cycle.
In other words, the Saudis are looking at turning the plastics they produce into containers and the aluminium into automobiles and aeroplanes.
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