There are several initiatives in the Kingdom designed to diversify the economy away from its dependence on oil and increase the contribution of manufacturing to GDP.
The National Industrial Development and Logistics Program (“NIDLP”)
In January 2019, the NIDLP was launched with the goal of “transforming Saudi Arabia into an industrial powerhouse and a global leader in logistical services”. This would be accomplished by growth in the following sectors:
- Industrial – the government wishes to build a sustainable and competitive manufacturing sector to increase its share of GDP and employment opportunities. Sectors targeted for development include chemicals (particularly specialty chemicals), military, commercial, automotive manufacturing, pharmaceutical and medical supplies, and food processing;
- Mining – the National Transformation Plan aims to increase the mining sector’s annual GDP contribution half to SAR97.5billion and to create 25,000 new jobs in the sector. The Kingdom is rich in mineral resources, and the local mining industry covers aluminium, alumina, ammonium phosphate fertilizer, ammonia, gold, and industrial chemicals;
- Energy – the NIDLP has targeted an increase in renewables to increase the range of local energy possibilities, increase economic development and sustainable growth, and reduce pollution. Further information on the Kingdom’s energy market is available here and
- Logistics – the Kingdom wishes to become a logistics hub through improved infrastructure, transport networks, and logistics standards. There are plans to build five airports, 20 rail stations, and 200 kilometres of rail line, and to expand three air freight stations. In October 2019, the General Authority of Civil Aviation (“GACA”) approved executive regulations for a Special Integrated Logistic Zone at King Khalid International Airport in Riyadh following the issuance of the main regulations for such zones by Royal Order. Such zones will have a number of tax benefits for companies using them, including not treating non-residents as having a permanent establishment for tax purposes in the Kingdom and goods being free of customs duties and VAT whilst in the zone. In addition, it has been reported that the issuance of special work and residence permits for the zone’s employees will be permitted, and that the Ministry of Labour will have a specific ‘Saudization’ programme for the zone. Further zones in other Saudi airports are expected to follow once they receive the necessary governmental approvals.
The program has the stated aim of generating more than SAR1.7 trillion of private sector investments, raising non-oil exports to more than SR 1 trillion, and creating 1.6 million jobs.
National Industrial Cluster Development Program (“NICDP”)
The NICDP is a governmental authority that is supervised by the Ministry of Commerce and Investment and the Ministry of Energy, Industry and Mineral Resources, and it has an objective of supporting industrial investment. This shall be achieved through developing industrial clusters in the following sectors: