economic growth model - saudi arabia

Feb 17, 2012Final Presentation

Saudi Arabia – Beyond Oil

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What We Will Show You Today

■ The Context of Diversification in Saudi Arabia

■ The Economic Opportunities We Have Selected

■ Jumping to the Next Tree – Our Strategy and How To Make It Happen

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KSA’s History of Diversification

1970’s – Infrastructure drive (roads, ports, power)

1980’s/1990’s – Education, health, social services

1990’s/2000’s – Privatization, Saudization, re-modernization

of infrastructure

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Economic Diversification Realized

Source: ISI Emerging Markets Database; 2008 revenues

Telecom & ICTFood & Consumer

Goods

Financial Services

SR 14 Bn SR 5 Bn

SR 12 Bn SR 8.4 Bn

SR 11 Bn

SR 47 Bn

SR 11 Bn

Oil-based Economy

Knowledge-based Economy

Chemicals & Industries

SR 151 Bn

SR 6.5 Bn

SR 15 Bn

SR 6 Bn

Shifting Focus of KSA’s Economy

Transport & Utilities

SR 22 Bn

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Further Room for Diversification

How Saudi Arabia got to 10% Diversification

•Foreign partnerships – a dominant theme through technical support and ownership

• Infrastructure and logistics capabilities

•Knowledge and skills development (e.g. Aramco scholarships)

•Well-established supporting industries (e.g. banking and telecoms)

•Slowly pulling away from the comfort of state support (e.g. privatization)

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KSA’s Product Space

Pharmaceuticals

Organic chemicals

Oil-related engineering

products

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Why Organic Chemicals?

Key Questions

Additional information needed? Market size/potential, competitive landscape, supply chain

Political and government agencies’ support required? Having pool of talent for this industry – most are in petrochem

Private sector engagement required? Partnerships with big chemical companies

Evidence that country took such opportunities? Demand from nearby countries for chemical products from KSA

Length of time to realize potential? 10-15 years

Strong regional demand for exportsGrowing internal demand for

chemicals

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Why Oil-related Engineering Products?(Mechanical Tools for Building)

Key Questions


Political and government agencies’ support required? Developing internal manufacturing capabilities up to scale

Private sector engagement required? Technology transfer from US, German mechanical companies

Evidence that country took such opportunities? Fair level of exports taking place


Diverse export marketStrong demand for mechanical tools

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Why Pharmaceuticals?

High export potentialGrowing demand for

pharmaceuticals

Key Questions


Political and government agencies’ support required? Developing R&D capabilities

Private sector engagement required? Partnerships with big pharma

Evidence that country took such opportunities? Recent growth in exports driven by generics players


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“The Chicken and the Egg”

What’s preventing us from jumping further?•Our comparative advantage is on upstream oil/gas and petrochemicals – not other kinds of chemicals, downstream activities, nor pharmaceuticals

•It’s a small market and we do not have the scale so let’s just import these products from other countries

•We do not have the people, processes, systems (i.e. capabilities) to move to the new industries

•Change is slow in Saudi Arabia, so why bother?

However, the government has the resources to move into other industries in pursuit of diversification, jobs creation and knowledge-based growth

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From One Tree to the Next…

Target State

Acceptance

AbilitiesAuthority

Our Strategic Framework

Diversification Focus

From industrial chemicals to organic chemicals…

From oil-related engineering products importer to exporter…

From polyethylene to pharmaceuticals…

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Our Strategy – Defining Our Sources of Authority

Authority

•Full support of the King for all diversification efforts

•Creation of an empowered industrial zone per target industryLed by Ministry of Commerce

With authority from the King to coordinate with other agencies and get things done

One-stop shop

Industrial Zone Authority

Ministries

UniversitiesForeign Partners

Private Sector

Suppliers

Customers

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Industrial Zones

Jubail, Yanbu, Maaden, Industrial Cities (Riyadh, Jeddah, Dammam, etc.)

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Our Strategy – Developing the Required Capabilities

Abilities

•Deal-making capabilities: look for great deal-makers

•Talent development

•Foreign partnerships focused on R&D and capability building

• Implementation capabilities, monitoring and continuous improvement

Vocational Schools

Saudi Business Families

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Our Strategy – Generating Buy-in from Top to Bottom

Acceptance

•Acceptance at the top – Highlight the benefits: job creation and business opportunities and involve broad groups

•Acceptance at the implementation levels – PDIA to solve accountability, incentives and change management issues

Stakeholder alignment and “roadshows”

Change management required

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Saudi Arabia as a Successful Diversification Case Study

Pharmaceuticals

Organic chemicals

Oil-related engineering

products

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Thank You!

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A Point on Services…

We see significant opportunities to expand existing capabilities and create new capabilities in the service sector to support economic growth

Services30%

Agriculture3%

Industries (incl. oil)67%

Saudi Arabia GDP split

Opportunities in Services

• ICT

• Transportation and Logistics, Shipping, Port Management

• Financial Services

• Real Estate

• …

economic growth model - saudi arabia

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