INDUSTRIAL
SAUDI ARABIA’S INDUSTRIAL REVOLUTION
Investment in the Kingdom’s burgeoning industrial sector is proving to be a win- win opportunity for both eager investors and the Saudi economy as Government inducements offer added incentive to the private sector and job creation helps guarantee a sustainable future.
An industrial revolution is underway in Saudi Arabia with the aim of
replacing the country’s historic reliance on the import of raw materials and finished products with a diverse portfolio of industrial and manufacturing capabilities. Saudi Arabia’s industrial sector investments rose to US$10 billion in 2010,
up from US6.6 billion in 2009. Te country is also investing heavily in the importation of industrial machinery to the tune of US$15 billion per annum. With production of oil and its derivatives dominating industrial-
related sector activity, this offers ample opportunity for ongoing sector investment. A wealth of other industries is also driving investor interest, from industrial gases, plastics, fertilisers, cement and metals to commercial ship and aircraft repairs. Modon, the Saudi Industrial Property Authority, which is responsible
for the development and supervision of industrial land in the Kingdom, is midway through an ambitious development programme, targeting the establishment of 40 industrial cities within the Kingdom by 2015. From just 14 such cities in 2007, Modon’s current tally stands at 22
projects, and its director general, Tawfiq bin Fawzan Alrabiah, credits this impressive growth to the growing industrial sector demand from both local and international investors. “Industrial growth in the last 20 years is nearly twice that of economic
growth in the country,” he remarked earlier this year. In the last four years, Modon has already racked up project costs of more than US$1.9 billion and is pushing for substantial involvement from the private sector and Saudi Arabia already has some 3,000 industrial projects underway or operational within the country. Te siting of future industrial cities is extremely important, and Modon
is creating entire new communities and expanding existing town facilities in order to boost local industry and drive employment opportunities with some 320,000 direct jobs already connected to the country’s growing number of projects. According to Alrabiah, the total expenditure on industrial city projects includes delivery of services such as road projects, water and electricity supply and infrastructure development, which covers network requirements, lighting, electricity, drainage systems, sanitation and water projects and wastewater treatment plants. It also establishes administrative offices as well as developing facilities and support services in residential, commercial and logistics areas. To drive interest, the Government also offers a number of incentives
for industrial initiatives including nominal rent for land, the provision of water and energy at subsidised rates, the granting of loans of up to 50 per
cent of capital, as well as custom duty exemption for machinery and raw materials.
A number of big deals have made the headlines in recent months as the
country works on developing its industrial capability with plans to build new refineries and upgrade existing plants, as well as expand steel and aluminium production. A US$1 billion deal between Saudi Arabian Mining Company and Alcoa, the global aluminium giant will see the first aluminium production facility for the region, in Rabigh. And Dammam will see a second automotive manufacturing company bring 800 new jobs to the region with a capital investment of US$133 million, with the aim of transferring automotive technology and skills. Other plans include expansion of the Riyadh-headquartered Saudi
Steel Pipe Company, which is working with Saudi and German partners to develop its Dammam production line. Te growing number of projects also includes plans for a third industrial city to the south of Riyadh, which will accommodate more than 120 factories on a one-million-square-metre site, valued at US$6.5 million, while ongoing demand has prompted the announcement of a second industrial project for Jeddah. With the chemical and petrochemical sector accounting for more than 10
per cent FDI inflows, this is reflected in industrial development with projects such as Ras Tanur, a combined refinery and petrochemicals project with an estimated cost of US$22 billion, and the under-development PetroRabigh complex, with an estimated current value of US$10 billion. One of Modon’s most high profile projects is Taif Industrial City – a first for the province - that will eventually cover an 11-million-square- metre area, with phase one accommodating 150 factories. Te basic infrastructure development is already underway, for the provision of a road network, electricity and lighting supply. In another coup for Riyadh, Mawten Real Estate is developing a major mixed-use industrial project – the US$293 million Industrial Gate City, which will be constructed on a 6.5-million-square-metre site close the existing industrial city. Te project will provide a series of plots for industrial usage, warehousing,
commercial centres and residential zones, in addition to public service areas supported by high quality infrastructure which includes a power network, water and sewage systems and water treatment plant. According to Mawten Real Estate Company CEO, Dr Raeyed Al Dakheel, Industrial Gate City is being developed in tandem with the Government’s commitment to encouraging private sector participation and reinforcing the role of industrial development as a key strategic component for economic development l
14 I CITYSCAPE I NOVEMBER 2011
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