On how local manufacturing, technology investment and human capital development are strengthening industrial competitiveness
What role can manufacturing play in Saudi Arabia’s long-term economic transformation?
AHMED ZAATARI: Manufacturing has a central role to play because it creates a deeper and more sustainable economic impact than many service activities. When a company invests in manufacturing, it is committing capital over a long period. The depreciation cycle is long, the employment base is more stable and the skills that are developed inside the company compound over time. Saudi Arabia has strong companies across building materials, petrochemical byproducts, pharmaceuticals, food supplies and other industrial segments. The leaders in these sectors are the most natural candidates to become not only national champions but also regional and, eventually, international players.
However, policy objectives and market execution must be aligned. Vision 2030 has strong pillars around localisation and local content but these objectives must be measured and enforced consistently. When the market remains fully open to imported products without sufficient preference for local manufacturing, domestic producers face pressure to change their business model. Instead of investing in factories, developing skills, creating long-term employment and increasing economic value, they may become traders or service providers.
That would weaken the productive base of the economy. A producing economy creates wider social and economic benefits, while a consumption-led economy can lead to higher inflation and more concentrated wealth. The opportunity is clear but the implementation of local-content policies needs to support the companies that are investing in domestic production, long-term jobs and industrial capability.
How are construction-related manufacturers adapting to changing project dynamics in the Kingdom?
ZAATARI: Construction is the lifeblood of infrastructural development and the long-term outlook in Saudi Arabia remains promising. The Kingdom still has significant development needs and this creates opportunities for building-material companies, construction firms and industrial suppliers.
Nevertheless, companies must be selective and risk aware. Projects should be economically sound, supported by reliable liquidity and underpinned by genuine local demand. While some developments may be high profile and generate considerable attention, unclear project economics, payment structures or end-user liquidity can create significant risks for suppliers. Publicly listed companies, in particular, are accountable to shareholders through regular financial reporting and must therefore maintain disciplined risk management and prudent project selection.
This is especially important for multi-year commitments. A short-term order is easier to manage: if input costs rise, the price can be adjusted and the product can be delivered and invoiced. Long-term projects are different. Geopolitical developments, funding delays, joint-venture issues and supply-chain disruptions can affect costs and timelines for months. Contracts therefore need terms and conditions that reflect and address these risks.
Local manufacturers also compete with global suppliers. In some cases, international engineering, procurement and construction contractors bring complete packages with imported materials, which can limit opportunities for domestic producers. This is why project selection, payment terms, local-content alignment and risk mitigation are all critical for construction-related manufacturers.
In what ways can Saudi manufacturers compete with global suppliers in industries such as heating, ventilation and air conditioning (HVAC), steel and insulation?
ZAATARI: Manufacturers have to understand where they can compete effectively. In standard products, global producers – particularly from China – have enormous advantages. Their plants are very efficient, supply chains are deep and production volumes are extremely large. For highly standardised products, it is difficult to compete with that scale.
The optimal approach is to focus on areas where engineering, customisation and service create value. In HVAC, for example, standard consumer units are difficult to differentiate. However, project-specific systems that require customisation, application engineering and adaptation to the local environment create opportunities for domestic manufacturers. In steel, fabricated products require design, engineering and optimisation. Every hospital, plant or commercial building is different, so the ability to engineer a solution locally becomes a competitive advantage.
Insulation has different dynamics. It is a light product and it is not efficient to ship large volumes of air across long distances. That naturally supports local production. Barriers to entry are also higher because the manufacture of insulation products is capital-intensive and requires specialised technical know-how.
Technology is becoming an increasingly important driver of competitiveness across the construction sector. Investment in advanced engineering tools, digital modelling, design capabilities, automation and robotics is improving productivity and operational efficiency. The automation of repetitive manufacturing processes enables higher output with a leaner but more highly skilled workforce, while also enhancing quality, reducing rework and strengthening the ability to deliver projects in line with contractual commitments. This is how local manufacturers can become more competitive while maintaining service and engineering advantages.
Which role do human capital and sustainability play in building a stronger industrial base?
ZAATARI: Human capital is the most important long-term investment. Capital investment in equipment, robotics or systems can have a clear payback period but people create compounded knowledge. The more you invest in their skills, the more value they create over time.
Development should be viewed in stages. First, there is functional development. Engineers, procurement teams, manufacturing teams, project managers and service teams all need continuous training and better tools. Then, as people move upward, they need management capabilities. After that comes leadership development.
Leading companies are increasingly investing in structured leadership programmes to cultivate high-potential employees while establishing clear development pathways that enable the wider workforce to progress into leadership roles over time. External recruitment is sometimes necessary but developing internally is more effective because they understand the company, its culture and its operating environment.
Closer collaboration between industry and universities is also gaining prominence, particularly in engineering and computer science. The goal is to help align academic programmes with the skills industry needs, while offering internships and early exposure to industrial careers.
Sustainability should be viewed through a broad lens, encompassing commercial viability, career progression for local talent, reliable supply chains for strategic national projects and enduring value for customers. Increasingly, the sector is moving beyond product delivery alone towards integrated solutions that include commissioning, ongoing technical support and lifecycle services. That is essential if Saudi Arabia’s industrial ecosystem is to translate long-term vision into operational reality.
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