Interview: Saleh Al Rasheed
How can the government work with the private sector to keep value-added processes local?
SALEH AL RASHEED: There has been a major push from the government to encourage the growth of the Kingdom’s industrial sector and support greater economic diversification. From 1967 to 2007, 40m sq metres were developed for industrial cities. Between 2007 and 2012, we tripled this, leading to a total of over 160m sq metres of land. Likewise, the number of factories has increased from 1950 in 2007 to over 5000 in 2013. We have been focusing on developing light-clean industry, attracting international firms and facilitating the growth of local companies. Factories run by multinational corporations are now producing components domestically to support their operations in Saudi Arabia, further adding value to their operations. Much of this industrial growth has also come from the construction of factories for small and medium-sized enterprises (SMEs), which are helping to generate jobs and wealth that will stay inside Saudi Arabia. Even though some of these jobs will not directly employ Saudis, industrial growth will create employment that supports these factories and, indirectly, service companies as well.
The key to success has been the plug-and-play model for creating industrial cities. MODON provides factories in the industrial cities, which are connected to infrastructure links. In addition, land has been set aside to support logistics needs and leading companies have been brought in to manage logistics services. We are also providing ready-built residential areas to house factory employees. By taking care of the facilities, the logistics and the labour housing, we are enabling manufacturing companies to focus on their products.
What is the perception of the “Made in Saudi” brand abroad, and how is the image being developed?
AL RASHEED: Throughout the region, the “Made in Saudi” brand is well known and highly respected. Saudi standards are high and there are several manufacturing areas in which the country is a world leader in terms of quality. Products like electric sockets, manufactured carpets and air conditioning units are known for rivalling the quality of those produced in Europe and North America. The key now is to expand both the scale of output and the reach of this reputation.
This can partly be accomplished simply by increasing the output of Saudi Arabia’s manufacturing sector. The more exposure Saudi products get, the more people will recognise their quality, generating greater respect – and therefore demand – for our goods. The Kingdom must also undertake efforts to better brand and market itself, to make people aware of the high standards to which locally manufactured products are held. The opening of factories in the Kingdom by international firms helps boost the overall perceptions of locally produced goods by showing the quality of inputs and high standards enforced.
What can Saudi Arabia offer to firms looking to establish manufacturing facilities in the region?
AL RASHEED: The competitive advantages and incentives provided by establishing factories here continue to attract foreign automotive firms to the Kingdom. Isuzu, for example, opened a plant in 2012 that will produce over 20,000 vehicles for the Saudi market in the next three years. This local market is substantial; a large population with high purchasing power and high levels of political and economic stability. The Kingdom’s position in the heart of the Middle East and in close proximity to Europe, Africa and Asia also make it attractive. Furthermore, input costs remain relatively low allowing Saudi Arabia to compete with other manufacturing economies. Electricity, water, and gas are cheap and land is a very good value proposition. Labour costs are low, thanks to access to cost-effective expatriate labour and financial incentives from the government to hire Saudi nationals. For instance, manufacturing firms that hire Saudis receive government assistance for salaries and training costs. This strategy keeps labour costs low as the national economy is diversified.
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