Interview: Abdulrahman Al Zamil
What steps are being taken to diversify industry and help develop the country’s different regions?
ABDULRAHMAN AL ZAMIL: The Kingdom is focusing on non-oil natural resources such as bauxite, limestone, gypsum, phosphates and iron ore, which will be utilised for export as raw materials, as well as inputs for the country’s industrial sector. The government is committed to increasing the participation of the private sector, particularly by incentivising firms to establish industrial operations in the Kingdom. Saudi Industrial Property Authority, for example, has overseen the creation and management of new industrial cities, not only in developed regions but also in underdeveloped ones, such as Jizan, Najran, Ha’il, Tabuk, Arar, Al Jouf, Asir and Al Bahah.
Industries set up in these regions will receive up to 75% of the project cost from the Saudi Industrial Development Fund (SIDF). This arrangement saw roughly two-thirds of total loans issued by the SIDF in 2013 going toward projects in lesser developed regions and cities.
Such loans are especially attractive because investors are given a grace period of 20 years for repayment. This offers improved employment opportunities for Saudi nationals in these regions and will help lower the cost of manufacturing. Thus, Saudi products will become more competitively priced for export. More attention is also being paid to logistics and services in preparation for the planned expansion of railroad infrastructure linking up Saudi cities domestically and with the wider region. This will enable the Kingdom to better handle the millions of containers arriving from Europe and the US bound for countries such as Iraq, Qatar and Kuwait. Likewise, thousands of jobs will be created.
What role are small and medium-sized enterprises (SMEs) playing in the Kingdom’s industrial development, and what other opportunities exist for SMEs?
AL ZAMIL: SMEs offer employment opportunities for the growing young population as well as help improve productivity and diversify the economy. Although SMEs already make up 90% of all businesses in the Kingdom, their contribution to GDP remains low. The government is aiming to expand SME support further by increasing the ability of specialised funds and financial institutions to provide credit to small businesses. One such initiative is the Kafala programme, which is supported by the Ministry of Finance and local banks. This scheme is tailored to guarantee the lending bank a percentage of the finance credit given to SMEs, incentivising banks to lend to these businesses.
With billions of Saudi riyals allocated for infrastructure development, such as metro and rail projects, ancillary industries will consequently expand, and we expect SMEs to comprise a large portion of this growth.
The government’s industrial cluster programme is also offering opportunities, as it allows SMEs to enter at the ground level. More government support and private sector interest is set to push investment in the Kingdom’s SME segment up to $70bn by the end of 2015.
How can labour skills be enhanced to meet growing demand in the Kingdom’s industrial sector?
AL ZAMIL: The government has created the Technical and Vocational Training Corporation, which has built modern training centres for the petrochemicals, plastics and automotive sectors, as well as for instrumentation, welding, electronics and process technologies.
Technical colleges and institutes such as Jubail Technical Institute and Riyadh Technical Institute are also being developed. These institutions are geared mostly towards secondary school and university graduates. The Human Resources Development Fund pays the trainees of these institutions a monthly stipend, and the private sector is encouraged to send potential employees to these training centres. In return, they should pay part of the cost of the training and agree to hire these trainees following the end of the training. Further, private industrial houses are also setting up technical training centres. Training and hiring women is also being encouraged, and a growing proportion of the private sector is now hiring skilled female staff.
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