Saudi government reforms to improve infrastructure, and redress regional and gender imbalances

 

The comprehensive reforms taking place across Saudi Arabia’s economy include strategies to nurture the development of a broader industrial sector, while also improving the employment prospects and living standards of citizens. Particular focus is being paid to industries that can provide opportunities for young Saudi citizens and residents of regions with high unemployment. Companies helping to address these issues can access a range of incentives including soft long-term loans, loan guarantees for small and medium-sized enterprises (SMEs), cheap industrial land and readybuilt factories on government-owned estates. According to data from the General Authority for Statistics, in the third quarter of 2018 Saudi unemployment was at 12.8% overall – 30.9% for women and 7.5% for men. However, the employment prospects for Saudis living in some regions are more limited. In the northern Al Jouf region, which borders Jordan, 20% of men and 41.6% of women were unemployed, with an overall rate of 26.6%. Meanwhile, in the Northern Borders region the rates were 9.8% for men, 41.8% for women and 17.9% overall. In the Qassim region, in the centre of the country, they were 9.7% men, 33.1% women and 15.9% overall.

Incentives

A range of government agencies are attempting to redress the regional and gender imbalances in employment and wealth. Since it was founded in 2001, the Saudi Authority for Industrial Cities and Technology Zones (MODON), has invested SR500bn ($133.3bn) in developing industrial cities and zones, with a combined area of 182m sq metres and housing businesses that employ 387,000 workers. Among these sites are a number of MODON Oasis zones, which cater for women-only businesses with parks established in Al Ahsa, Jeddah, Qassim, Al Jouf and Yanbu.

Working alongside MODON to develop and encourage investment is the National Industrial Clusters Development Programme (NICDP). The programme focuses on regional zones and covers a range of industries including automotives, chemicals, pharmaceuticals and biotechnology, minerals and metal production. The NICDP offers significant training and employment-related tax concessions to investors operating in the six less-developed regions of the country: Al Jouf, Northern Borders, Al Baha, Najran, Hail and Jazan. The Saudi Industrial Development Fund (SIDF), which provides long-term project finance, has also increased its focus on industrial activity in these regions. In 2017, 45% of the 137 loans approved were in these areas, accounting for 26% of the total value of SR10.5bn ($2.8bn).

In previous years just 14% of approved loans worth 15% of the total was for projects in these areas. Loan terms have also been extended from 15 to 20 years, with SIDF offering to grant loans to cover 75% of total project cost rather than 50% in other areas of the country. In 2017 SIDF approved two new loans in Jazan and Hail worth SR13m ($3.5m) and SR16m ($4.3m), respectively, as well as two worth a combined SR7m ($1.9m) in Qassim. There were also loans for four projects in Asir and one each in Jouf, Tabuk and the Northern Borders, with a combined value of SR191m ($51m).

Logistics Projects

Saudi Arabia is also investing in initiatives to improve travel within the Kingdom and across its borders. In January 2019 Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud announced infrastructure and industrial development projects that would attract SR1.6trn ($426.6bn) in private sector investment over a decade through the National Industrial Development and Logistics Programme. In the first phase, an expected SR70bn ($18.7bn) will be invested in projects that local media described as “ready for negotiations” in the industrial, mining, energy and logistics sectors. A second phase promises a further $50bn worth of projects targeted at military, chemical and small business sectors. At a press conference marking the launch of the new investments the minister of transport, Nabeel Al Amoudi, said 60 initiatives will be launched in the logistics sector, among them five new airports and 2000 km of railway track.

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The Report: Saudi Arabia 2019

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