SAUDI ARABIA LAND OF OPPORTUNITIES

INDUSTRIAL INVESTORS GUIDE

My first objective is for our country to be a pioneering and successful global model of excellence, on all fronts, and I will work with you to achieve that

The Custodian of The Two Holy Mosques King Salman bin Abdulaziz Al Saud Contents Saudi Vision 2030 8

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Why Saudi Arabia? 40

Industrial Clusters (IC) Saudi Vision 2030

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Saudi Arabia Vision 2030

Our Vision for Saudi Arabia is to be the heart of the Arab and Islamic worlds, the investment powerhouse, and the hub beneath our lands. But our real wealth lies in the ambition of our people and the connecting three continents potential of our younger generation. They are our nation’s pride and the architects It is my pleasure to present Saudi Arabia’s of our future. We will never forget how, Vision for the future. It is an ambitious yet under tougher circumstances than today, achievable blueprint, which expresses our nation was forged by collective our long-term goals and expectations determination when the late King Abdulaziz and reflects our country’s strengths and Al-Saud – may Allah bless his soul – united capabilities. All success stories start with the Kingdom. Our people will amaze the a vision, and successful visions are based world again. on strong pillars. The first pillar of our vision is our status as the heart of the Arab and We are confident about the Kingdom’s Islamic worlds. We recognize that Allah the future. With all the blessings Allah has Almighty has bestowed on our lands a gift bestowed on our nation, we cannot help but more precious than oil. Our Kingdom is the be optimistic about the decades ahead. We Land of the Two Holy Mosques, the most ponder what lies over the horizon rather than sacred sites on earth, and the direction worrying about what could be lost. of the Kaaba (Qibla) to which more than a The future of the Kingdom, my dear brothers billion Muslims turn at prayer. and sisters, is one of huge promise and great potential, God willing. Our precious country The second pillar of our vision is our deserves the best. Therefore, we will determination to become a global expand and further develop our talents and investment powerhouse. Our nation holds capacity. We will do our utmost to ensure strong investment capabilities, which we that Muslims from around the world can visit will harness to stimulate our economy and the Holy Sites. diversify our revenues. The third pillar is transforming our unique We are determined to reinforce and diversify strategic location into a global hub the capabilities of our economy, turning our connecting three continents, Asia, Europe key strengths into enabling tools for a fully and Africa. Our geographic position between diversified future. As such, we will transform key global waterways, makes the Kingdom Aramco from an oil producing company into of Saudi Arabia an epicenter of trade and the a global industrial conglomerate. We will gateway to the world. transform the Public Investment Fund into the world’s largest sovereign wealth fund. Our country is rich in its natural resources. We will encourage our major corporations to We are not dependent solely on oil for our expand across borders and take their rightful energy needs. Gold, phosphate, uranium, place in global markets. As we continue to and many other valuable minerals are found give our army the best possible machinery INDUSTRIAL INVESTORS GUIDE 9

and equipment, we plan to manufacture half of our military needs within the Kingdom to create more job opportunities for citizens and keep more resources in our country. We will expand the variety of digital services to reduce delays and cut tedious bureaucracy. We will immediately adopt wide-ranging transparency and accountability reforms and, through the body set up to measure the performance of government agencies, hold them accountable for any shortcomings. We will be transparent and open about our failures as well as our successes, and will welcome ideas on how to improve.

All this comes from the directive of the Our Vision is a strong, thriving, and stable Custodian of the Two Holy Mosques, King Saudi Arabia that provides opportunity for Salman bin Abdulaziz Al-Saud, may Allah all. Our Vision is a tolerant country with protect him, who ordered us to plan for a future Islam as its constitution and moderation that fulfills your ambitions and your aspirations. as its method. We will welcome qualified individuals from all over the world and will In line with his instructions, we will work respect those who have come to join our tirelessly from today to build a better tomorrow. journey and our success.

Our ambition is for the long term. It goes We intend to provide better opportunities beyond replenishing sources of income for partnerships with the private sector that have weakened or preserving what we through the three pillars: our position as have already achieved. We are determined the heart of the Arab and Islamic worlds, to build a thriving country in which all our leading investment capabilities, and citizens can fulfill their dreams, hopes our strategic geographical position. We and ambitions. Therefore, we will not rest will improve the business environment, so until our nation is a leader in providing that our economy grows and flourishes, opportunities for all through education and driving healthier employment opportunities training, and high quality services such as for citizens and long-term prosperity for all. employment initiatives, health, housing, This promise is built on cooperation and on and entertainment. mutual responsibility.

We commit ourselves to providing world- This is our “Saudi Arabia’s Vision for 2030.” class government services which effectively We will begin immediately delivering the and efficiently meet the needs of our citizens. overarching plans and programs we have set Together we will continue building a better out. Together, with the help of Allah, we can country, fulfilling our dream of prosperity strengthen the Kingdom of Saudi Arabia’s and unlocking the talent, potential, and position as a great nation in which we should dedication of our young men and women. all feel an immense pride. We will not allow our country ever to be at the mercy of a commodity price volatility or Mohammad bin Salman bin external markets. Abdulaziz Al Saud We have all the means to achieve our Chairman of the Council of Economic and dreams and ambitions. There are no excuses Development Affairs for us to stand still or move backwards. 10

Introduction leveraging our unique strategic location in The Kingdom of Saudi Arabia is blessed connecting three continents. with many rich assets. Our geographic, Our nation is ambitious in what we want cultural, social, demographic and economic to achieve. We will apply efficiency and advantages have enabled us to take a responsibility at all levels. Our third theme leading position in the world. is built on an effective, transparent, accountable, enabling and high-performing To build the best future for our country, we government. We will also prepare the have based our Vision for the Kingdom of right environment for our citizens, private Saudi Arabia on three pillars that represent our sector and non-profit sector to take their unique competitive advantages. Our status responsibilities and take the initiative in will enable us to build on our leading role as facing challenges and seizing opportunities. the heart of Arab and Islamic worlds. At the In each of these themes, we highlighted same time, we will use our investment power a selection of commitments and goals, to create a more diverse and sustainable as a reflection of our ambition and a economy. Finally, we will use our strategic representation of what we aim to achieve. location to build our role as an integral driver of international trade and to connect three This Vision will be the point of reference continents: Africa, Asia and Europe. for our future decisions, so that all future projects are aligned to its content. Our Vision is built around three themes: a To clarify our next steps, we have already vibrant society, a thriving economy and an prepared the ground and launched some ambitious nation. executive programs at the Council of This first theme is vital to achieving the Economic and Development Affairs. We Vision and a strong foundation for economic will now launch a first portfolio of crucial prosperity. We believe in the importance of programs with the aim to achieve our goals a vibrant society. Members of this society and honor our commitments. live in accordance with the Islamic principle of moderation, are proud of their national Sustainable success can only be achieved identity and their ancient cultural heritage, when built upon solid foundations. Our enjoy a good life in a beautiful environment, Vision, grounded in our country’s strengths, are protected by caring families and are will deliver this stability and create a brighter supported by an empowering social and future for our country and our people. health care system. In the second theme, a thriving economy How to achieve provides opportunities for all by building an education system aligned with market our vision? needs and creating economic opportunities for the entrepreneur, the small enterprise as We have outlined a comprehensive and well as the large corporation. Therefore, we ambitious Vision for Saudi Arabia until the will develop our investment tools to unlock year 2030. It is the first step on our journey our promising economic sectors, diversify toward a better, brighter future for our our economy and create job opportunities. country and our citizens. To achieve our We will also grow our economy and improve aspirations and hopes, we have already the quality of our services, by privatizing launched many transformative programs some government services, improving the that have paved the way for the Vision business environment, attracting the finest and will help us achieve our goals. These talent and the best investments globally, and include, but are not limited to the following:

INDUSTRIAL INVESTORS GUIDE 11

1. The Government Restructuring of Economic and Development Affairs and program: many other government agencies. We also Around the world, governments are set up a central Delivery Unit. organizing themselves with agility, continuously restructuring and aligning 5. The Regulations Review program: their systems to national priorities. We Over the past year, we reviewed many have already started moving along this current laws and enacted new laws that path by eliminating supreme councils and have been years overdue. These include establishing the Council of Political and the company law, the non-governmental Security Affairs and the Council of Economic organizations’ law, the law concerning fees and Development Affairs. These reforms on non-used lands, the General Authority have helped to speed strategy development for Endowments (Awqaf) law, among others. and decision-making, as well as enhance We will continue to review all laws to ensure performance. We will continue this careful they are in line with the Kingdom’s priorities. restructuring, comprehensively and gradually, based on our clear priorities. 6. The Performance Measurement program: 2. The Strategic Directions program: We adopted the principle of performance We have approved the strategic directions measurement, and made sure it is properly determined by our government agencies. used in our evaluation of all government Existing roles have been reviewed to align agencies, their programs, initiatives and with our future economic and social needs. executives. We established the Center for Decisions are based on detailed studies Performance Management of Government and benchmarks, as well as comprehensive Agencies to institutionalize these efforts for the analysis of each agency’s programs, plans long-term and built performance dashboards and relevant performance indicators. to promote accountability and transparency.

3. The Fiscal Balance program: To ensure the realization of Saudi Arabia’s After the Council of Economic and Vision for 2030, we are preparing to launch a Development Affairs was established, group of executive programs that will have a we began examining our existing capital significant impact on implementation. These expenditures, their approval mechanism and include, but are not limited to the following: their measureable economic impact. We have formed committees and introduced new 6.1 The Saudi Aramco Strategic departments tasked with reviewing relevant Transformation program: regulations and taking the necessary action We believe that Saudi Aramco has the ability on the expenditures. As a consequence, last to lead the world in other sectors besides year, we increased our non-oil revenues by 30 oil, and it has worked on a sweeping percent, and we plan to continue diversifying transformative program that will position it our non-oil revenues in the coming years, by as a leader in more than one sector. introducing new measures. 6.2 The Public Investment Fund 4. The Project Management Restructuring program: program: Having worked on restructuring the fund, we The Kingdom’s agencies are currently are now refining its investment capabilities undergoing a wave of reforms and and enabling the fund to manage a broader transformation. To manage this momentum portfolio of current and new assets. We aim and ensure all efforts are coordinated, we to transform it into the largest sovereign adopted an effective approach to project wealth fund in the world and will announce a management and established expert project comprehensive plan to achieve this goal. management offices (PMOs) in the Council 12

6.3 The Human Capital program: of Economic and Development Affairs, we Because human capital is a crucial factor will establish a strategic management office in the success of any substantial project, to focus on coordinating all government we aim to launch a thorough program for programs and ensuring their careful nurturing our human talent. This program will alignment with the national Vision. The measure, assess and analyze the efficiency office will also prevent gaps, duplication of our civil service. It will also support our or contradiction between agencies’ government agencies with staff, studies, policies and programs, and ensure that consultations, and strategic partnerships all components of the Vision are detailed related to human capital. in proper sectoral strategies. We will also establish a Decision Support Center at the 6.4 The National Transformation program: Royal Court to support decision-making In a new approach, our government through analytical and evidence-based agencies have been working through information and reports. numerous workshops to examine their role in implementing the initiatives necessary Our commitment to achieving the goals of for delivering on national priorities. We are these pivotal programs and our collective identifying opportunities for partnering with contribution shall be the first step towards the private sector, as well as innovative achieving Saudi Arabia’s Vision for 2030. administrative and funding approaches. We will continue to launch new programs We are detailing specific initiatives that have in the upcoming years as required, and we clear performance indicators. will continuously review and assess our performance in achieving this Vision. 6.5 The Strategic Partnerships program: We are working with our economic partners around the world to build new strategic partnerships for the twenty-first century, in harmony with our national Vision, so that we can be a trade hub connecting three continents and enhance our exports

6.6 The Privatization program: We are in the process of determining additional sectors suitable for privatization. Our goal is to create a comprehensive privatization program. We will make use of international best practices, transfer knowledge and achieve our goals in a balanced and scientific manner.

6.7 The program for Strengthening Public Sector Governance: We will work on restructuring our government agencies continuously and with flexibility. We will eliminate redundant roles, unify efforts, streamline procedures and define responsibilities. We shall also enable our agencies to deliver on their mandate, to be accountable, to ensure business continuity and to show adaptability in the face of new challenges. Under the Council INDUSTRIAL INVESTORS GUIDE 13 Saudi Arabia

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serves as a stable economic and political Why Saudi platform, and efficient launch-pad, to the more than 2 billion consumers who live Arabia? within three hours by air. Saudi Arabia shares its borders with eight countries: Saudi Arabia is considered economically Jordan, Iraq, Kuwait, Qatar, Bahrain, United a strategic location to start a business for Arab Emirates, Oman and Yemen. It is also industrial sectors. Saudi Arabia has great bordered by the Red Sea to the west and comparative & competitive advantages in by the Arabian Gulf to the north-east, two of terms of the following aspects: the world’s busiest shipping routes. • Plentiful, readily available natural resources, raw materials and energy Natural Resources needed for manufacturing and industrial Covering 2 million km², Saudi Arabia is the development (contrasting with the largest country in the Middle East and the shortages and rising prices found in 14th largest country in the world. Saudi many other countries). Arabia’s size and geology make it rich in minerals, oil, gas, key raw materials for • A welcoming home and efficient manufacturing and industrial development. springboard for energy-intensive Saudi Arabia has the largest mineral industries such as minerals and metal deposits in the Middle East. In the west of processing, automotive production, and the country, the Arabian Shield is a major petrochemical industries. source of precious and basic minerals such • A thriving, fast-growing industrial sector as gold, silver, copper, zinc, chromium, (one of the largest in MENA & globally). manganese, tungsten, lead, tin, Aluminium and iron. Mainly in the east, extensive • The largest economy and market in sedimentary formations contain industrial MENA, and 23rd largest in the world minerals such as gypsum, feldspar, mica, Sulphur and salt. Saudi Arabia is also • A strategic location at the crossroads of Europe, Africa and Asia

Strategic Location Strategically located at the crossroads of three continents - Asia, Africa and Europe - the Kingdom of Saudi Arabia is one of the world’s most important commercial, trading and religious hubs. Saudi Arabia is the largest market in Middle East-North Africa. An economic powerhouse itself, Saudi Arabia also stands at the heart of a fast-growing region of over 424 million Saudi Arabia consumers. On a wider level, Saudi Arabia INDUSTRIAL INVESTORS GUIDE 17

a source of highly prized rare earth elements such as tantalum - for which it has a quarter Government Incentives of the world’s reserves - and niobium. Saudi for Industrial Investors Arabia,s deeper sedimentary formations contain most of its 266.4 billion barrels of Industrial investors in Saudi Arabia enjoy proven and recoverable oil. This vast natural all the benefits, incentives, guarantees and resource represents up to 22% of global oil support offered to local companies by the reserves, more than any other country. Saudi government. Arabia oil production began in 1933 and oil exports in 1939. Some eight decades later, Regulatory incentives Saudi Arabia has enough oil to last another 80 years at today’s extraction rate of 10.2 Saudi Arabia constantly million barrels a day. Each day Saudi Arabia improves investment environment major extracts over 7.5 billion standard cubic feet regulatory incentives including of natural gas. More than 8588 billion m³ of natural gas are available. • Equal benefits, incentives and guarantees for foreign investors and domestic companies. Basic Materials Supply Companies in Saudi • 100% property ownership for foreign Arabia (some of them but not limited to) investors. • The ability for foreign investors to Saudi Aramco (ARAMCO) sponsor foreign employees.

Saudi Arabia Basic Industries Corporation • The promotion of Saudi non-oil exports (SABIC) by the Saudi Export Development Authority. Saudi Mining Company (Ma’aden) • Limited Liability Companies are not Sadara Chemical Company (SADARA) required to Minimum Capital. Low-cost lands leasing in 34 MODON Saudi International Petrochemical Company • (SIPCHEM) cities and King Abdullah Economic City, and Royal Commission Industrial zones Rabigh Refining and Jubail, Yanbu & Jazan Economic City. Petrochemical Company (Petro Rabigh) • Competitive industrial utility rates for Water, Gas, Power and Land. Saudi Chevron Phillips Company • Customs duties exemption on imported machinery, equipment, raw National Industrialization Company (Tasnee) materials and spare parts if they are for industrial use. • Few restrictions on currency Saudi Arabia conversion, exchanges and transfers. • Preferential treatment for national products in Saudi government procurement. 18

Financial incentives • Low-cost loans from the Saudi • Financial support for the training and Industrial Development Fund, Public employment of Saudis by Human Investment Fund and Saudi Industrial Resources Development Fund, where Investments Company. HRDF contributes in Saudi employees training cost and salaries for a couple • Benefit from corporative/collateral and of years. massive agreements regarding taxation and investment with other countries. Specific tax incentives • Export credit, financing, guarantees Saudi government is offering conditioned and insurance through the Saudi Export extra incentives to investors in specific Program. regions (Hail, Northern Border, Jazan, Al-Jouf, Najran, Al-Baha) the incentives • No personal income tax, no value- include: added tax, no sales tax, no land tax and no property tax. • Up to 50% tax credit on Saudi national worker’s payroll & training cost for 10 • Taxes are 20% from total profits years. on companies. • Duty drawback, a customs refund for • Up to 75% Capital investment funding raw material imports that are processed & 20 years’ maximum loan term. and exported as finished goods. • A one time industrial capital investment credit of 15% carried • Full repatriation of capital, profit nda forward up to 10 years. dividends allowed, subject to a 5% withholding tax. INDUSTRIAL INVESTORS GUIDE 19

Logistics & Accessibility to Saudi Arabia:

Seaports Saudi Arabia has the largest marine network in the Middle East, consisting of ten ports (six of which arecontainer ports): • King Abdulaziz Seaport • Jubail Commercial Port • King Fahad Jubail Industrial Port • Ras Al-Khair Port • Jizan Port • Jeddah Islamic Port • Dhiba Port • Yanbu Commercial Port • King Fahad Yanbu Industrial Port • King Abdullah Port at KAEC All ports are managed, operated and maintained by private sector companies under long term contracts. As part of Saudi Arabia’s export development initiatives, it makes exemption of export goods from storage fees for 10 days and 50 percent reduction in port fees on all exports. www.ports.gov.sa 20

Road Network Total length of roads maintained by the Ministry of Transport in 2014 is 627000 km, of which 151000 km were main roads linking major regions of Saudi Arabia with international borders and serving major urban area, 102000 km secondary roads linking major cities with regions and 374000 km feeder roads branching out of secondary roads and serving towns, villages & agricultural area. Total roads under construction stood at 204000 km at the end of fiscal year 2014. For more information, visit the Ministry of Transportation website: www.mot.gov.sa Air Travel There are 27 airports across Saudi Arabia of which four, at Riyadh, Jeddah, Dammam, and Al-Madinah Al- Munawarah, are international. In 2015, over 81 million passengers passed through Saudi Arabia with rising of 9.5% from 2014, with aircraft operations reaching 646,693 in number. Cargo & mail handled was 1.16 Million tons with rising of 14.1% over the preceding year, Air travel is the preferred method of passenger travel within Saudi Arabia, because of the distances separating the main cities. Several major international airlines offer services in and out of Saudi Arabia. More information about Airports in Saudi Arabia available at General Authority of Civil Aviation: www.gaca.gov.sa Railways The Saudi Railways Organization (SRO) provides services over a network of 1,423 kilometers of track between Dammam and Riyadh, either direct or via Abqaiq and Hofuf, with branch lines to Dammam Port, Dhahran, Al-Judaidah, Ain Haradh and Al-Kharj. SRO organizationis available at carries 1.1 million passengers and handles www.saudirailways.org over 3.4 million tons of cargo annually. The total investment for the development Planned expansions of the railway network of the railway network 2005 - 2040 is included new track from Riyadh to Jeddah, estimated at USD 100 bn. from Al-Jalamid phosphate deposit in the The Saudi Railways Company (SAR) has far North Via Hail and Buraidah to Riyadh, been founded to provide transportation between Dammam and Jubail and between services for the passengers, minerals and the bauxite deposit at Al-Zubirah and Jubail. general freights. More information about Saudi Railway INDUSTRIAL INVESTORS GUIDE 21

02 Ratio of Non- Non-oil Oil Goods private sector Exports to contribution to FACTS & FIGURES Goods Imports: GDP: 39.46% 28.35% Saudi Arabia has a rapidly growing economy with a real GDP growth rate of 3.35 percent in 2015. Moreover, Saudi Arabia is the largest free market economy in the region, accounting for 18 percent of total Arab Gross Domestic Product (IMF, 2012). Exports GDP per capita contribution to (US$) 2015: According to the Ease of Doing Business GDP: Ranking by the World Bank and the Global 33.33% 20,723 Competitiveness, Saudi Arabia is by far the best location in whole Middle East for investment.

GDP (Million US$)

GDP (Million US$)

GDP (Million US$)

GDP (Million US$)

Note: Other Sectors include: Wholesale and Retail Trade, Restaurants and hotels and Transport, Storage and Communication and Finance, Insurance, Real Estate and Business Services and Community, Social and Personal Services, Producers of Government Services and Import Duties - (Imputed Bank Services Charge) Source: General Authority for Statistics 22

Saudi Arabia currently has in total more than 40 industrial and economic cities managed BUSINESS by the Saudi Industrial Property Authority (MODON), the Royal Commission for Jubail ENVIRONMENT and Yanbu (RCJY) and by The Economic Cities Authority (ECA). In addition, private industrial cities offer further options in Investment Support different locations.

The Saudi Arabia Government has aimed The Industrial and Economic Cities offer to to create a hospitable climate for their tenants significant advantages in terms investment by establishing several of cost efficiency, infrastructure and services authorities and agencies, dedicated to through their integrated business models, providing the best and most convenient and constitute a major part of the Saudi support for businesses. Arabia Government’s efforts to encourage the diversification of the Saudi economy. Business Ownership Industrial Zones The laws of Saudi Arabia do not distinguish between local and foreign investors. A MODON foreign industrial investor possesses The Saudi Industrial Property Authority the right of 100 % ownership of their (MODON) is responsible for developing and projects including land, plant and buildings supervising industrial lands in Saudi Arabia. (residential as well as commercial). Real- MODON’s mission is to undertake, as an estate necessary for the project can be independent public agency, the regulation owned with the exception of two cities and promotion of Industrial Estates and of Holy Makkah and Al-Madinah Al- Technology Zones in Saudi Arabia on both Munawarah. Foreign investors are also able public and private industrial lands, and to to hold investment licenses in more than one encourage the private sector to become type of activity. involved in the development, operation and maintenance of Industrial Estates and Technology Zones. Industrial Infrastructure MODON has been developing 34 industrial cities, with an area of more than 178 million m², Real estate for industrial usage is available with an area of more than 50%, which has at different industrial cities around the already been rented. MODON has also kingdom at competitive lease costs. committed to the development of more than INDUSTRIAL INVESTORS GUIDE 23

5 additional cities during the coming five However, RCJ still working to upgrade and years. In addition MODON has introduced a expand the infrastructure to allow the private readymade factories concept in most of the sector to participate in the growth and industrial cities regions targeting the small- development of the city. medium enterprises (SMEs). Additionally, Jubail has been able to Current MODON industrial areas consist of attract the necessary Saudi operations and 7011 factories (as of 1st Quarter 2016). Each maintenance manpower, which has in turn, industrial city has an on-site administration led to the establishment of a community to handle the day-to-day needs of investors from the various areas in Saudi Arabia. and oversee the site development process. Jubail indeed is a result of the efforts of www.modon.gov.sa/ all the people of Saudi Arabia under the leadership of the Custodian of the Two Holy RCJY Mosques, King Salman bin Abdulaziz. The Royal Commission for Jubail and Yanbu (RCJY) manages four world class industrial Royal Commission Yanbu (RCY) cities located on Saudi Arabia; Jubail, Ras Yanbu possesses the good features and Alkhair on the East coast, Jazan Economic merits of cities although the period lapsed City and Yanbu on the West coast. Jubail since its establishment. and Yanbu are fully developed, stand-alone Yanbu is a typical industrial fortress, a work of cities, hosting widely diversified industries art in architectural engineering or a platform from petrochemical, mineral and synthetic with unlimited capabilities among civilizational material producers to downstream and cities. It is a good evidence of what has been finished products. achieved on the welfare and awarding land under the rational leadership strategy. Due to their offshore location, Jubail and Yanbu are excellent places for families and • More than 90% of the private sector each possesses ample amenities, including investment is in Industrial sector. many sport and leisure facilities and • The volume of investments reflects that activities developed to meet the needs of there has been 26% (US$ 16 billion) of their residents. participation by RC Yanbu and 74% (US$ www.rcjy.gov.sa/ 46 billion) of the private sector as of the 3rd quarter 2015. Royal Commission Jubail (RCJ) • Over USD 1.6 billion Investment is being Jubail Industrial City is a Saudi model that made on an 11 Km long waterfront project tells the story of planning combined with along the Red Sea. the desire to achieve the comprehensive civic and industrial development seen Ras Al Khair Industrial City (RIC) today at all local, regional and international While Saudi Arabia is known primarily levels. There is no doubt that the advanced for its oil and gas, the Kingdom also has infrastructure of Jubail is the cornerstone substantial mineral resources, and has set which has allowed the various industrial, an objective to become a global leader in commercial and social sectors to establish a new sector. Building on its success in themselves through integrated action. Jubail Jubail and Yanbu, Saudi Arabia is building infrastructure has the capability to operate a city dedicated to the processing of continuously without failure of power or mineral resources. supplies in any of the existing facilities while meeting community requirements The Ras Al Khair Industrial City (RIC) within modern, high living standards where located approximately 60 km northwest all the necessities of life and tourist and of Jubail, will be a significant global and recreational facilities are available. world-class “metals and minerals city”, 24

with integrated industrial complexes, that A plan was made to localize heavy leverage the key mineral resources of the industries, petrochemical industries, mining Kingdom of Saudi Arabia, the existing low industries and downstream industries in fuel/power competitive cost advantages, Jazan Economic City, provide bio-energy and the industrial city development and supply, localize ship manufacturing and management expertise of the Royal to take advantage of minerals, agriculture, Commission. wildlife and fish resources. RIC is being built on the accomplishments of the Royal Commission at Jubail Industrial Waa’d Al Shamaal City «Northern City. RIC already has Ma’aden Phosphate Promise» Company and Ma’aden Aluminum Company In February 2012 the Council of Ministers industrial complexes. approved the establishment of Waa’d Al Shammal (Promise of the North) which is RIC will provide a strong strategic link and located in the northern part of Saudi Arabia synergies to existing industries in Jubail. with a total area of 440 KmÇ.The Saudi RIC, as a city for metals and minerals Arabia Mining Company (Ma’aden), as an industries, and Jubail, as a city for major expansion to its phosphate operations, petrochemical industries, together will is developing a project that includes constitute one of the most significant phosphate mining operation (located in integrated industrial regions in the world.​ Umm Wu’al area about 40 kilometers northeast of Turaif city,10 kilometers Jazan Economic City (JEC) from Jordan border security zone and 26 On the 26th of July 2015 the Custodian kilometers to the southwest of the Iraq of the Two Holy Mosques King Salman bin border.) as well as seven large world class Abdulaziz Al Saud issued a Royal Order plants and associated facilities. to assign the Royal Commission for Jubail and Yanbu RCJY to manage and operate The total production capacity of these plants Jazan Economic City to become the fourth will be approximately 16 million tons per industrial and economic city managed year and will include phosphate concentrate, and operated by the Royal Commission sulphuric acid, phosphoric acid, dicalcium to join Jubail, Yanbu and Ras Al Khair and monocalcium phosphate used in animal Industrial Cities. feed, purified phosphoric acid used in food industries, and sodium tripolyphosphate Jazan region is one of the Kingdom’s most used in manufacturing detergents and for vibrant and promising provinces. Jazan industrial purposes. Economic City (JEC) is strategically located Additionally, in collaboration with the along an important sea route connecting Ministry of Energy, Industry and Mineral major continents; it overlooks the traffic Resources, Industrial Clusters Program, of maritime transport on the Red Sea Ma’aden have developed an industrial connecting Europe, East Africa, and Asia. and community master plan for Waa’d Al The City will offer connectivity with national Shamaal which covers Ma’aden’s project road network, railroad network, and access as well as potential industries that will be to Jazan’s King Abdullah airport. targeted in the area. These industries are based on the availability of resources (such Jazan Economic City has an area of nearly as energy, minerals and required input 103 million square meters. It has the materials), market and competitiveness. advantage of workforce availability, and proximity to the new international airport and the planned railway to connect Jazan area and Jeddah city with a total distance of 660 kilometers. Work is currently ongoing to establish Jazan oil refinery. INDUSTRIAL INVESTORS GUIDE 25

King Abdullah Economic City (KAEC) Private Industrial Cities KAEC is strategically located on the Red There are a number of private industrial Sea coast with access to the world by sea, cities, the largest being Rabigh Conversion land, rail and air. The City is located between Industrial Park (CIP). major shipping routes to Europe and Asia. It has access to over 250 million consumers Conversion Industrial Park (CIP) across the MENA region. Rabigh CIP is a petrochemical conversion KAEC is Located 88 km north of Jeddah, park, located just 15 km north of King a cultural center and the Kingdom’s second Abdullah Economic City (KAEC) on the Red largest city, and located between the two Sea, known as one of the best diving areas Holy Cities of Makkah and Al-Madinah in the world. It will include an international Al-Munawarah with direct access to the port, through which products from Rabigh Haramain Highspeed Railway (HHR) and CIP can be transported across the globe. King Abdullah University of Science and Supply of feedstock will be provided by Technology (KAUST). Haramain railway a neighboring company (Petro Rabigh). station is located in KAEC and it transports Locating plastics company at CIP site, will passengers to and from King Abdulaziz allow for the advantage of economy of scale International Airport in Jeddah, as well in terms of utilities, labour, security and even Makkah and Al-Madinah Al-Munawarah knowledge transfer. Due to the extent of in 25 - 60-minute timeframe. KAEC interest from investors, Saudi Aramco and established some facilities within the city to Sumitomo have already begun the planned support business development, growth and second phase expansion of Rabigh CIP. sustainability such as the following facilities:

• Industrial Valley with capacity to host Project Finance over 2,500 manufacturers and logistics companies, and Bonded Reexport zone. Saudi Arabia offers a wide range of • Central Business District: with high competitive financing opportunities funded density living option and commercial by the Government. In addition, there are spaces, and residential zones with fully the typical range of commercial banks integrated communities and modern life- and private equity firms. The next section style amenities. will provide information relating to finance. • World Academy School: the first integrated school for boys and girls at KAEC, operated by GEMS. www.kaec.net

Industry Major Costs in Saudi Arabia

Water Gas Diesel Land Electricity M³/Month MBTU per barrel SIDF M²/Year Kwh Loan Transpor- Potable Industrial Methane Ethane Industrial tation

0% interest 0.27 - 4.4 0.048 0.03 -2.40 0.03 - 0.80 1.25 1.75 14 19.1 indicative cost* US$ rate

* Range indicative price 26

Saudi Industrial Development Fund The Public Investment Fund (PIF) (SIDF) The Saudi Arabia Public Investment The Saudi Industrial Development Fund Fund (PIF) was originally established in (SIDF), a government financial institution, 1971 to provide financing support for was established in 1974, with a mandate projects of strategic significance to the to finance, and support the development national economy, and it is role evolved to of the private industrial sector by providing encompass a number of different areas. medium- and long-term loans for the setting These include holding and managing the up of new factories, expansion, upgrade government’s stakes in some of Saudi and modernization of the existing ones. Arabia’s largest and most important blue This in addition to the SIDF’s consultancy chip companies. The institution has also set services to the local industrial projects in up and managed a number of companies the administrative, financial, technical and to support innovation, diversification and marketing fields. SIDF, along with other non-oil sector development within the industry-related government agencies, plays Kingdom. Furthermore, the institution has a pioneering role in achieving the objectives, been responsible for holding and managing policies and programs of the industrial the government’s stake in bilateral and development that are designed to support multilateral companies abroad as well as the private sector in the various fields of investing selectively in a range of other asset manufacturing industries. SIDF’s finance to classes internationally. Today PIF has a the industrial investments is one of the most diverse portfolio made up of approximately essential tools in supporting the Kingdom’s 200 investments, of which around 20 industrial development.

SIDF Project Financing Categories First Category Second Category

Major Cities Cities Of Some 50% Major Cities: Riyadh, Jeddah, 60% Economic SIDF Loan Dammam, Jubail, Makkak, SIDF Loan Percentage (%) Yanbu And Ras Al-Khair. Percentage (%) Advantages Namely Qassim, Al-Ihssa, Rabigh, Taif, Kharj Industrial City, Sudair Industrial City, Madinah, (Except Yanbu) Years Years 15Maximum Loan 20Maximum Loan Terms Terms

Third Category

Economically Less

75%SIDF Loan Developed Cities Percentage (%) Such As Hail, Northern Boarders, Jouf, Tabouk, Jizan, Najran, Al-Baha And Assir. In Addition To Cities That Are Located No Less Than 150 Kilometers From The Centers Of Major Cities And No Less Than 70 Kilometers From The Years Nearest Industrial City Of The Second Category. 20Maximum Loan Terms INDUSTRIAL INVESTORS GUIDE 27

are listed on Tadawul, the Saudi Stock based on long-term investment strategies Exchange. In March 2015, oversight of PIF built on diversification of investments, was moved from the Ministry of Finance to optimization of risk management and careful the Council of Economic and Development selection of investment opportunities. Affairs (CEDA). As part of this process, a The company’s investments are new Board was appointed, chaired by HRH concentrated in direct equity investments, the Deputy Crown Prince Mohammad bin primarily in the Kingdom, and in funds, as Salman Al Saud. Following these changes, well as in diversified investment portfolios. the Board is taking steps to clearly define These investments support the growth of the institution’s vision and objectives and to the Kingdom’s economy while building implement a new strategy for PIF, taking into international investment capability, and account its important role in the Kingdom’s transferring expertise to local Saudi talent. economy, and ensuring that it is aligned with The investment types which are targeted the government’s Vision 2030. by Sanabil are Industrial, Acquisitions, New www.pif.gov.sa Ventures and Infrastructure.

Saudi Arabia Industrial Investments Saudi Technology Development and Company (SAIIC) Investment Company (TAQNIA) In March 2014, The Saudi Council of TAQNIA is a multi-strategy technology Ministers licensed the establishment of development and investment company Saudi Industrial Investments Company owned by the Public Investment Fund (PIF) (SAIIC) with capital of USD 5.3 Billion which of Saudi Arabia. TAQNIA was founded in represents 50% of PIF share & 25% of each 2011 to drive accelerated diversification of Aramco & SABIC shares. SAIIC aims to the Kingdom’s economy through knowledge- achieve economic & income diversification based industries thereby creating value- by investing in different Industrial sectors. adding jobs, and to help create an innovative The main objectives of SAIIC establishment ecosystem in Saudi Arabia it promotes can be summarized as follows: technology and knowledge transfer through 1. Exploitation of natural resources & basic partnering with leaders in industry, venture locally produced materials/products capital, and academia to add maximum of Saudi strategic corporations in strategic value to Saudi Arabia while conversion & support industries. maintaining attractive returns on investment. 2. Investing in strategic economical TAQNIA covers three main investment areas sectors in order to develop several which are Industrial, Investment and Service. secondary industries. • Industrial: Define and fund new and/ 3. Establishment of Conversion Industries or mature corporations in specific which based on petrochemicals, technology sectors ensuring fertilizer, aluminum, steel and sustainable enterprises. other basic industries that achieved • Investment: invest internationally with anomic diversity. aim of transferring technologies to Saudi Arabia and invest nationally in seed and early stage venture projects. Major Enterprises driving Service: Provide professional services Economic Growth related to commercialization and utilization of R&D centers in Saudi Arabia. Sanabil Investments Company www.taqnia.com Sanabil Investments is a closed joint stock company with a share capital of USD 5.3 Billion, wholly owned by the Public Investment Fund (PIF). Sanabil Investments seeks to realize sustainable superior returns 28

Saudi Credit & Saving Bank providing political risk insurance to Arab Saudi Credit & Saving Bank (SCSB) & non-Arab investors and lenders. Also, it provides interest free loans for citizens, enhances Arab exports through providing small enterprises, employers, and emerging political and commercial risk insurance to trades to encourage them to run their own Arab exporters. businesses independently. In collaboration More information can be found at: with SCSB, MODON recently launched www.iaigc.net Small Medium-Enterprises’ (SME’s) financing targeted at the promising regions Islamic Development Bank of Hail, Al-Jouf, Tabuk, Najran, Jazan and Islamic Development Bank participates Ar’ar, with the express aim of promoting in equity capital and grants loans for economic development and creating productive projects and enterprises in 56 employment. These projects are required member countries. to be constructed in MODON’s industrial More information can be found at: cities. SCSB finances up to USD 800,000 www.isdb.org per project and during 2012, the amount of outstanding loans reached USD 6.74 billion, Local Financing Options rising by 19.6% over 2014. Saudi Arabia is home to the leading Arab More information can be found at: investment banks, such as Samba, SABB www.scb.gov.sa and Al Rajhi, all of which are included in the list of the largest one thousand banks in the Arab Fund for Economic and Social world. Eleven of the twelve leading Saudi Development banks have an aggregate Tier 1 capital of The Arab Fund for Economic and Social USD 37.9bn, with four of the local banks are Development (AFESD), based in the among the top 10 Arab banks by assets. State of Kuwait, participates in financing In addition, and as a result of several policy economic and social development projects measures in the second half of the 20th in Arab countries. century, many foreign banks chose to More information can be found at: conduct their business in Saudi Arabia from www.arabfund.org other Gulf Cooperation Council (GCC) hubs such as Bahrain and Dubai. Thirteen foreign Arab Monetary Fund banks licensed to operate in Saudi Arabia by The Arab Monetary Fund, located in the Saudi Arabia Monetary Agency (SAMA): the United Arab Emirates, promotes the • Gulf International Bank(GIB) development of Arab financial markets and • Emirates NBD trade among member states and advises • National Bank of Bahrain (NBB) member states on investment of resources • National Bank of Kuwait (NBK) through Arab Trade Financing Program • Muscat Bank (ATFP). ATFP’s mission is to contribute • Deutsche Bank to the promotion of trade exchanges of • BNP Paribas commodities of Arab origin through the • J.P. Morgan Chase N.A provision of a financial facility. • National Bank Of Pakistan (NBP) More information can be found at: • State Bank of India(SBI) www.atfp.org.ae • T.C.ZIRAAT BANKASI A.S. • Industrial and Commercial Bank of Inter-Arab Investment Guarantee China (ICBC) Corporation • Qatar National Bank (Licensed - Inter-Arab Investment Guarantee has not started yet ) Corporation, based in the State of Kuwait, promotes the flow of foreign direct investment (FDI) into Arab countries through INDUSTRIAL INVESTORS GUIDE 29

highest health care standards and become Government Entities the most regulated country in the region. Related to Business & www.sfda.gov.sa Economy Import & Export Support Logistic, Re-export and Bonded Zones Licensing & Set-up Business Saudi Arabia has bonded zones where the Saudi Arabia for General Investment goods, spare parts, and raw materials are Authority (SAGIA) imported and stored, located Alongside to Ministry of Commerce & at King Abdulaziz Port in Dammam (www. Investment (MCI), SAGIA was established reexport.com) and at Jeddah Islamic Port in 2000 to mandate as a central agency (www.tusdeer.com). Two new bond zone for inward investment in Saudi Arabia and will be located at King Abdullah Port (www. to help attract investments to serve the kingabdullahport.com.sa) and in Jazan development goals and participate in the Economic City in the near future (www. diversification of the Saudi economy. SAGIA jazancity.com). Industrial Projects inputs facilitates introductions for investors to may be eligible for totally or partially key stakeholders that include access to exemption from customs duties in capital, industrial land, commercial premises accordance with GCC Unified Industrial and funding support. SAGIA can organize System. Investors are eligible for exemption fact-finding visits to possible locations/ from import duties on new machinery, partners/contacts, SAGIA offer advice and equipment, tools and spare parts used for services to support companies from the the manufacture of industrial products, as initial planning stage through to after care well as on any imported material used for once establishment in the kingdom. SAGIA manufacturing products intended for re- has created a network of dynamic Business export at the economic cities bonded zones. Centers throughout the country. Each center provides resources to help companies Saudi Export Development Authority set up quickly and efficiently by providing The Saudi Export Development Authority representatives of all related government (SEDA) was incepted by the Council departments such as the Ministry of Labor of Ministers Resolution No. 259 in & Social Development, General Directorate 2007. SEDA is an independent semi- of Passports, Ministry of Commerce and government organization with financial and Investment, Zakat and income taxation administrative autonomy. department and notary public. SEDA has a board of directors represented www.sagia.gov.sa by both public and private organizations, and is chaired by the Minister of Commerce Saudi Food and Drug Authority and Investment. SEDA’s mandate is to The Saudi Food and Drug Authority (SFDA) undertake the development of nonoil has the authority to ensure safety of food exports of the Kingdom, including, but not and drug for man and animal, and safety limited to: of biological and chemical substances as 1. Participation in the preparation of State well as medical devices. The main purpose policies on development and promotion of the SFDA is to set mandatory standard of non-oil exports. specifications thereof, whether they are 2. Setting up necessary programs for imported or locally manufactured. development and enhancement of the Moreover, the SFDA is in charge of competitiveness of exports. consumer’s awareness on all matters related 3. Continuous development of policies to food, drug and medical devices and all and legislations to ensure achievement other products and supplies. Furthermore, of the objectives of export development Saudi Arabia aims to meet the world’s programs and plans. 30

4. Improvement of export environment by More information about SEP can be found devising programs and offering incentives at: www.sep.gov.sa to exporters and protecting investments. 5. Close cooperation with commercial Standardization representatives abroad and chambers of Saudi Standards, Metrology and Quality commerce and Investment to determine Organization (SASO) the best means of exporting products, SASO seeks to provide consumers with find new opportunities for exporters and the best services, maintain their health improve the export environment. and safety and develop and update Saudi 6. Extending administrative, technical and standards and technical regulations consultative assistance and incentives continuously in order to protect Saudi to exporters to market exports and markets from counterfeit, low-quality attract foreign clients. and fraudulent products, in addition to 7. Preparation of studies on export supporting the national economy. SASO opportunities and potential looks forward to taking more steps in the foreign markets. coming period towards the development of 8. Devising plans and programs for SASO’s laboratories, improvement of our the promotion and development of technical staff and enhancement of quality, products and services. measurement and calibration activities, 9. Training Saudis and promoting export in addition to broadening the scope of awareness necessary for international standards and technical regulations to cover marketing and export, in cooperation most of the goods and products to achieve with domestic and international training consumer’s safety and prevent commercial institutions, for a charge to be collected fraud. SASO also seeks to strengthen by the Authority from interested private cooperation and coordination with companies and establishments concerned government sectors and different 10. Organization of symposia, conferences sectors benefitting from standardization, as well as domestic and international quality and calibration activities as well trade exhibitions, and participation as mutual recognition. Moreover, SASO in international and regional trade makes its utmost efforts to keep up with exhibitions to promote Saudi exports the scientific and technical development and enhance their competitiveness. related to different standardization fields For more info about SEDA please visit its and to serve the comprehensive, balanced website: www.seda.sa development that will contribute, eventually, to the achievement of SASO’s vision Saudi Fund for Development which’s to be an excellent referential body The Saudi Fund for Development in the field of standards, measurement provides guarantee, financial services for and quality at the national, regional and exporters and foreign importers of goods international levels. In addition, such efforts from Saudi Arabia. aim at enabling SASO to achieve the Please find more information at: goals determined in its mission to protect www.sfd.gov.sa consumers, public health, safety and environment and ensure the public interest Saudi Export Program by publishing standards and activating and Saudi Arabia has formed the Saudi Export implementing quality, measurement and Program (SEP), under the Saudi Fund for calibration systems. Development, to assist Saudi exporters More information about SASO can be found and foreign buyers (importers) by providing at their website: financing and insurance to facilitate the www.saso.gov.sa development and diversification of non-oil exports from Saudi Arabia. INDUSTRIAL INVESTORS GUIDE 31

Competitiveness investment program in the education sector to The National Competitiveness Center meet the demands of industrial diversification (NCC) was established recently under and sustainable growth respectively. SAGIA umbrella to assess and support the development of competitiveness in Education Saudi Arabia. NCC’s mission is to achieve The Ministry of Education (MOE) organizes a sustainable increase in the standard of and plans higher education in Saudi Arabia living and prosperity of the population of and is responsible for both public and the Saudi Arabia, encouraging growth in private universities, as well as overseeing productivity and diversifying of the economy scholarship programs. Currently, there are away from oil sectors, which in turn leads to more than 250,000 Saudi nationals taking increased employment, increased business their university education locally and at formation and growth in FDI. international universities around the world. More information can be found at: The scholarship program was extended in www.saudincc.org.sa 2013 for another five years.

Human Resources Technical and Vocational Training The development of human capital is the In addition to higher education, Saudi key of success and necessary element for Arabia has a strong commitment to competitiveness in the industry. technical training for its workforce through Saudi Arabia provides the best human the Technical and Vocational Training capital through an ambitious and intensive Corporation (TVTC). TVTC is the driver

Statistical Summary of Higher Education Students 2015 Education Training

of vocational and technical training in Saudi Arabia and works to provide skilled manpower to the industrial sectors. Through its colleges spread throughout the Kingdom, TVTC provides 2-year courses to educate students on production technology, electronics, manufacturing mechanics, control technology, industrial electronics, and computing. They also offer industrial institutes with 3-years programs for courses in English, Mathematics, Physics, and Chemistry. www.tvtc.gov.sa 32

Saudi Workforce Development Funding Social Insurance Human Resources Development Fund There are three components of social (HRDF) was established to aid those insurance charges in Saudi Arabia: the companies involved in the preparation, Occupational Hazards Component to cover training and employment of the national work related injuries, illness and death, workforce in the private sector. The HRDF Annuities Component to cover pensions and shares the cost of training and employment «Saned» component. of the trainees by providing the below table. • The Occupational Hazards component is applied to all workers without any Labor Regulations discrimination as to gender, race, Saudi Arabia’s labor regulations are nationality, and age. The contributions derived from the international labor for the Occupational Hazards system and are managed by the Ministry components is fixed at 2% of the of Labor & Social Development. The contributory wages of the employee regulations cover the rights of workers and and is payable by the employer. employers in all aspects of employment, • The Annuities component is applied to Non-Saudis employment, training and all Saudi workers. The contribution for rehabilitation, contracts, work environment the Annuities Branch in respect of the and conditions, part time work, work risk, contributing workers is fixed at 20% female employment, teenager employment, of contributory wage, of which 9% maritime working, quarries and mines for GOSI and 1% for Saned which is working and inspection, and settlement of payable by the employer, in addition to disputes. The Ministry of Labor & Social 9% for GOSI and 1% for Saned which Development also provides free recruitment is payable by the employee. services for Saudi nationals. • The Saned component is applied for More information about Ministry of Labor the Saudi workers who lose their jobs & Social Development is available at their due to unfortunate circumstances website: www.mol.gov.sa such as employer bankruptcy.

Training Programs

* During theoritical training ** During practical training INDUSTRIAL INVESTORS GUIDE 33

Saned compensates the worker for King Abdullah University for Science & a maximum of one year till he/she Technology(KAUST) is a globally renowned secures another job. graduate research university that makes • These contributions are computed on significant contributions to scientific and the basis of the basic monthly wage technological advancement, and plays a + home allowance received by the crucial role in the development of Saudi contributor. The maximum contributory Arabia and the world. wage is set at USD 12,000 per month, www.kaust.edu.sa beyond which no contribution is levied. More information is available at: Badir Program Technology Incubators is www.gosi.gov.sa a technology incubator program launched by King Abdul Aziz City for Science and Innovation Technology (KACST). ‘Badir’ is a word The Development Plan of the Kingdom of that means (initiate). Badir is a national Saudi Arabia aims to accelerate the national program aimed at accelerating the growth base of science and technology to foster of emerging technology based businesses innovation and sustainable economic growth in Saudi Arabia. BADIR vigorously strives to through the establishment of King Abdulaziz advance, promote and support technology City for Science & Technology (KACST) innovation and entrepreneurship across as an independent scientific organization, Saudi Arabia. It offers various business on par with the Fraunhofer-Institute in consultancy services, office/laboratory Germany and the Massachusetts Institute of space provisions, secretarial/administrative Technology in the USA. support, as well as many other services aimed at transforming technology ideas into promising projects. The incubators and programs that belong to Badir are: • Biotechnology • Information and Communication Technology • Advanced Manufacturing Technology • Market Access and Soft Landing Program www.badir.com.sa

Riyadh Techno Valley (RTV) is one of the contributions of King Saud University in building partnership. The RTV is dedicated to attracting local and global investment in the field of technological research. The RTV project will facilitate dynamic research activity within the university and enable the existing economic institutions in the Kingdom to harness innovation to generate or transfer advanced technology, in accordance with the government’s aim of establishing Saudi Arabia as a leading knowledge-based economy. www.ksu.edu.sa 34

Dhahran Technology Valley (DTV) (DZIT) is responsible for the administration is a major undertaking initiated by King and collection of Zakat (often compared to Fahd University of Petroleum & Minerals the system of tithing and alms) and Tax on (KFUPM) in 2006. It is envisioned to be the Income. DZIT operates ten field offices in Middle East’s most prestigious industrial addition to its headquarters in Riyadh. research and development (R&D) and More information about Zakat can be found technology nucleus. The DTV also provides at their website at: development, production, and marketing www.zakat.gov.sa support services for innovation that originates from academic research, but Duties within a business environment. It has been The general rate of import duty is 5%. Some established to provide infrastructure for limited numbers of products have tariff rates industrial R&D to flourish in the Kingdom. of either 12% or 20%. Furthermore, numerous Saudi research However, customs duty exemption is centers and universities have signed available on all authorized imports for agreements with international companies industrial establishments, equipment, such as Schlumberger, Intel Corp, CIBA machinery, tools, spare parts, raw materials Especially Chemical and JCCP to establish (whether primary or semi manufactured) or mutually beneficial relationships with DTV. packaging materials if local supply does Academia support from KFUPM will serve not exist or the local supply is not up to the as a catalyst in the development of industrial specifications of the manufacturers. R&D in Saudi Arabia. More information about exemptions The faculty at KFUPM is designed to and duties can be found at Ministry of match the leading international facilities at Commerce & Investment website: Singapore, Hong Kong, Cambridge, Oxford, www.mci.gov.sa Aston, Warwick, Sheffield, Aberdeen, New York, North Carolina and Silicon Valley. Duty Drawback for Export www.kfupm.edu.sa “Duty Drawback” is a refund available in Saudi Arabia to importers/exporters of Taxation, Duties & Foreign Exchange raw material imports that are processed in Saudi Arabia and re-exported as more Taxation finished goods. To trigger Duty Drawback The tax environment in Saudi Arabia is very status, importers or their agents must favorable according to World Bank “Ease inform Customs at the point of entry that of Doing Business” 2014 report. Globally, the imported goods are raw materials that Saudi Arabia stands at 3 in the ranking of will be further processed and re-exported. 189 economies on the ease of paying taxes. The importer will pay the duty assessed on The rankings for comparator economies importation, but the amount is kept in bond and the regional average ranking provide and refunded on re-export of the goods. other useful information for assessing the Prior to re-export, the exporter must submit tax compliance burden for businesses in all export documentation together with a Saudi Arabia. copy of the Customs Import Declaration, Saudi Arabia has no personal income tax. a receipt for payment of duty on the raw The corporate tax rate on profits for foreign materials, the Certificate of Origin, and countries is 20% and Saudi Arabia is one of a copy of the invoice to the buyer certified the few countries in the world which allow by the Saudi Chamber of Commerce and companies to indefinitely carry forward Industry. Customs use a standard formula losses on their balance sheets, effectively to determine how much of the imported relieving companies of the tax burden until raw material is used in the final exported they become profitable. product. The same formula is applied to The Department of Zakat and Income Tax every product. INDUSTRIAL INVESTORS GUIDE 35

More information can be found at Ministry of mind when considering arbitration are that Commerce and Investment at: the arbitrators must be Saudi nationals or www.mci.gov.sa Muslims, the proceedings must be conducted in Arabic, and Sharia law must Foreign-Exchange Regulation be followed. The chairman of the arbitrators The Saudi Riyal is freely convertible must be an expert in Sharia or Saudi and pegged to the US dollar at a rate of commercial law. Furthermore, Saudi Arabia 3.75 SAR: 1 USD. For current account requires a court to approve the arbitration transactions, Saudi Arabia does not have award. For more information, please visit: specific legislation on the regulation and www.moj.gov.sa the control of foreign exchange. As part of inter GCC cooperation, the GCC plans Saudi Center for Commercial Arbitration on establishing a unified currency. The (SCCA) prospective date for the unified currency Based on the internationally recognized launch was initially set for 2010 and no new and trusted UNCITRAL Arbitration Rules, target date has been announced. Policy Saudi Center for Commercial Arbitration decisions regarding exchange rate, form, (SCCA) Rules, effective on Shaaban 1437H use and application, and bearing standard – May 2016, have been created to provide still have to be fixed. More information can parties with a clear, concise and efficient be found at SAMA website: dispute resolution procedure. Arbitration www.sama.gov.sa under SCCA Arbitration Rules is a formal procedure leading to a binding decision Resolving Legal Disputes from a neutral arbitral tribunal, susceptible Resolution of disputes involves three to enforcement pursuant to both domestic important considerations: whether to use arbitration laws and international treaties Saudi courts, courts of other countries such as the 1958 New York Convention. In (similar type of Saudi tribunals in which the keeping with the approach adopted by many dispute will be resolved) and the possibility of the world’s premier arbitral institutions, of arbitration. If a commercial dispute arises SCCA Rules define a structured, institutional between a foreign company and a Saudi framework intended to ensure transparency, party, the foreign party should consider efficiency and fairness in the process. They suing the party in Saudi Arabia. In regards are ordered in a progressive manner that of government agencies, the Saudi law follows the case from filing to issuance of prohibits to bring them to court in another the final arbitral award. In addition to the country. Therefore, bringing a suit directly primary features of the UNCITRAL Rules, in Saudi Arabia provides best assurance SCCA Rules have features reflecting the key that a favorable judgment will be enforced. benefits of, and most recent innovations in Before suing a Saudi in another country, it institutional arbitration. SCCA Rules adopt should be checked whether Saudi Arabia the best practice standards of leading has a reciprocal enforcement treaty with international arbitral institutions, particularly that country. If company sues a Saudi AAA-ICDR and respond to the needs of in a non-treaty country and attempts to modern international trade Practices. enforce a judgment in Saudi Arabia, the Innovations include the availability of Board of Grievance would review the emergency arbitration procedures for cases judgment to make sure that it does not which demand instant solutions. SCCA violate Saudi public policy. For example, Rules have been drafted to be consistent no such treaty exists between the United with the current Saudi Arbitration Law issued States and Saudi Arabia. Arbitration in 1433H – 2012G, which is also based on presents a viable alternative to resolving the internationally recognized and trusted disputes through Saudi judicial system. UNCITRAL Arbitration Rules. For more However, some important rules to keep in information, please visit: www.sadr.org 36

Government Entities have sectors, especially those related to the job market, and strengthening the relations been formed recently between them relating to job creations and to support the growth combating unemployment. It’s working on sectors that can generate employment of Business & Economy and motivate the labor market to create Sector jobs and competition in different areas of the Kingdom for new employment, and Small & Medium Enterprises Support develop capabilities and create a national Authority labor force that can become productive SMEs support Authority is newly formed and able to deal with the nature of the gov. entities approved by the Council of labor market that changes and leads to Ministers on December 2015 will help in in sustainability. The commission has its own creating jobs for young Saudis and boost responsibilities and can recommend policies the economy, according to experts. and plans for job creation in government One of the most important functions of this and private sector projects, and it will study new body would be to facilitate funding for the problems of unemployment of the state these small and medium enterprises (SME). and recommend what it considers to be SMEs Support Authority would remove appropriate. The commission will continue several obstacles facing SMEs, which is to recommend “motivational policies” inside crucial for the country’s economic growth. the labor market, increase job opportunities This authority would ensure that SMEs for nationals in the government and private become more competitive and innovative, sectors, and follow up on mechanisms, and attract investments. SMEs authority coordination between programs, and would help grow the sector, which makes those linked to employment, recruitment, up over 99 percent of commercial firms in rehabilitation and training. the country. It would oversee the sector and fulfill the goals of the government’s economic The commission will have a role in plans. SMEs Authority will have financial developing policies and regulations for and administrative independence, and be employment at the national level and overseen by the Ministry of Commerce and forward these to the Council of Economic Investment. SMEs authority would regulate Development Affairs. It will also support and grow the small and medium enterprise field studies in the labor market to identify sector in the Kingdom, so that it makes a challenges facing national and migrant substantial contribution to the country’s workers. The commission will support Gross Domestic Product, and create jobs. coordination between educational and training institutions to create the right Job Creation and Combat Unemployment outputs and what is needed by the private Commission* sector; it will apply the right policies related The Commission will for the time being to that sector and evaluate them with receive a 20 percent allocation from the regards to unemployment and provide Human Resource Development Fund This is appropriate opportunities while limiting in addition to the commission’s investments recruitment, in coordination with the and other aids it receives as well as tax concerned parties. The commission is exemptions from the General Customs required to coordinate, follow up and create Department. This will be the case until a a wide database, and support the woman’s budget for the commission can be created program related to learning, training and through a royal decree. A law of article has rehabilitation. In addition, the commission been introduced by the Council of Ministers, will annually work with the Human defining its goals and including activating Resource Development Fund when there coordination between the public and private is renewal of residency and work permits INDUSTRIAL INVESTORS GUIDE 37

of foreign workers, to take necessary and Vocational Organization, HRD Fund, action. It also will represent the Kingdom in head of the Council of Chambers, and international organizations relating to labor three members from the private sector also and unemployment. The system states chosen by the Council of Ministers which that 18 members will be appointed to the will also set their bonuses. commission. The president of the Council * Commision official name has not confirmed yet of Ministers will appoint the chairman who will appoint its governor and vice chairman in addition to 14 members from the government sector at no less than a grade 15 ranking from the ministries of finance, economic and planning, labor, education, health, trade and industry, the Economic Cities Commission, Industrial Cities and Technology Areas Commission, Investment Authority, Insurance Organization, Training Industrial Clusters (IC) Pharmaceutical & Biotech

Minerals & Metals Processing

Energy & Desalination Industry 40

The Saudi Arabia Automotive cluster’s other advantages include: Industrial • Readily available raw materials such as aluminum, plastics, and glass Clusters (IC) • Availability of developed low cost commercial land and electricity The government, through its long-term • A pro-business tax and regulatory Strategy and other initiatives such as Saudi environment Vision 2030, has enacted to diversify the • Lower labor costs than in Europe economy and increase the manufacturing or the USA share to the GDP. To support in achieving • Relatively large family units, creating this goal the government identified five strong demand for higher-margin cars industrial sectors to focus on as a starting such as people carriers and sport utility point for its industrial diversification. As vehicles a consequence of diligent assessment • Some of the lowest petrol prices in following industrial sectors were identified: the world, helping to sustain vehicle Automotive 1. demand during regional and global Minerals and Metals Processing 2. economic cycles 3. Chemicals & Polymers • Government Procurement policy giving Energy & Desalination industry 4. preference to locally produced vehicles “Recently established” The Available opportunities in the Auto Pharmaceutical &Biotech 5. Cluster include: The Industrial Clusters (IC) is also • OEM manufacturing projects to supply responsible for providing support in Saudi and global markets identification and activation of key enablers, • Tire plants for Saudi and export markets driving processes and coordinating with (totaling 8 million-10 million tires a year) other government agencies. • Powertrain projects for Middle East and Furthermore, the IC facilitates and helps global markets potential companies (investors) evaluating • Major tier 1 suppliers (systems and investment opportunities. modules) • Small- and medium-sized tier 2 IC Board of Directors suppliers (sub-systems, sub-assemblies Industrial Clusters Program (IC) is managed and components) by a Board of Directors chaired by the • Smaller tier N suppliers (standard parts Minister of Energy, Industry and Mineral and materials) Resources as the Chairman. IC Board • Major Aftermarket components consists of wide spectrum of industry- suppliers related Saudi Government entities • New Technological Industrial Projects representatives, and Saudi and international businessmen. The IC Board of Directors Industrial Growth & Development is the highest authority responsible for the Several major projects have been Program’s affairs, management, and setting implemented in the Kingdom already. In its general policies. Dammam, Isuzu Motors started operations in late 2012 with a capacity of 25,000 trucks a year by 2020 with a plan to export 40% Automotive Cluster of its production at its peak volumes. In addition to Isuzu, Saudi Arabia has 3 other The IC goal is to develop a sustainable major global OEM producing Heavy Duty automotive cluster with Multiple OEM’s Commercial Vehicles. Mercedes, Volvo and supported by key Tier 1 and Tier 2 supplier. MAN have operations set up in the Western regions. The current total production INDUSTRIAL INVESTORS GUIDE 41

between these 4 OEM’s are in the range of of available liquid aluminum utilizing high 12k and is expected to reach 39k by 2022. amount of energy. In particular, Auto cluster In addition, many Tier 2 and Tier 3 suppliers is focusing on a Powertrain and other die already exist in the Kingdom. The major cast structural components to set up a of these suppliers include Petrochemical manufacturing plant right next to MA’ADEN Conversion Company (PCC) for Plastic utilizing the savings of ingot vs. liquid Injection Molding, Saudi Lamino Industries aluminum and high energy savings. for Windshield Production, Saudi Filter supplying Volvo in Sweden, Middle East Organizational and Government Support Batteries Company MEBCO JV with Industrial Clusters is the designated agency Johnson Controls. to provide, evaluate and recommend the form of assistance to automotive related Industrial Clusters has worked and investors and companies. This support continues to work with major Saudi partners could include: such as SABIC, MA’ADEN, TASNEE, • Support with carrying out market ARAMCO to produce advance mobility research and providing market data materials, including the production of • Support with identifying the best carbon black and synthetic rubber (for tires), possible locations, sites, suppliers and carbon fiber, Nylon 66, ABS, polyurethane, staff composites, automotive steel sheets, • Help evaluating business model options automotive aluminum sheets, automotive such as foreign direct investment, joint molten aluminum, etc. venture and licensed operations The private sector has already invested • Assessing eligibility for extended in downstream industries to utilize this support raw material advantage and has begun • Assisting with applications and set ups producing oil filters, circuit boards, batteries, Industrial Clusters can also advise on cabling, sensors, adhesives, paints, accessing finance such as Public Investment composites, trim and seats. Fund loans, Saudi Industrial Development Fund loans and private venture capital. In Auto cluster is also focusing on areas of Saudi Arabia, foreign companies enjoy all particularly strong advantage, such as parts the benefits, guarantees and incentives produced using relatively large amounts offered to Saudi-owned companies. 42

If Saudi-based automotive manufacturers industry spans very wide and covers many find that certain products are not available other adjacent industries and hence creates from domestic suppliers, they are exempt a multiplier effect much higher than any from customs duties on imported raw other industry. This multiplier factor ranges materials used for production, associated between 57- between direct OEM jobs and equipment, and spare parts for that the eco-system jobs. Global automotive equipment. Once an automotive project market is projected to grow from 86 million is operational, capital and profits can be (2014) to 104 million (2022) vehicle/year repatriated without restriction. with 80% of the growth coming from the Other Investment incentives and emerging markets. The global turnover support includes the Human Resources of the industry is estimated to be around Development Fund, which provides financial $2.41 Trillion with 11.252 Million direct jobs. support for training and employment; With a multiplier factor of 5, the relevant and innovation grants for joint industrial- job creation from automotive industry is academic research. estimated to be around 50 million+ globally.

Key Advantage & Investment Kingdom of Saudi Arabia Automotive Market Opportunities Against this strong background, the Global Auto Market automotive cluster is committed to The automotive industry is a key pillar developing a Saudi Arabia Automotive of the global economy, a main driver of industry, encompassing car, truck and bus macroeconomic growth and technological manufacturing, research & development, advancement in developing and developed design, components, sub-systems and countries. The value chain for automotive sub-assemblies manufacturing, full vehicle INDUSTRIAL INVESTORS GUIDE 43

assembly, and logistics. This initiative fits the and SUV styles. The GCC has annual car overall KPI’s of the Kingdom; which are to sales of over 1.56 million, highlighting the create highly technological employment and potential of KSA as being the regional hub of diversification into non-oil based industries. car production. At the heart of this drive, the automotive There is strong demand for commercial cluster is aiming to: vehicle market also, supported in part by 1. Encourage and support further Saudi the country’s booming construction sector. Arabia and foreign investment in the GCC Trucks and buses sales are around sector 131K and is growing at 82% annually. Saudi 2. Make KSA a major player in vehicle Arabia is the biggest market of truck and development and production busses with current market size of 21k 3. Reduce imports and increase exports and 11k yearly respectively. This market is 4. Create and sustain employment expected to grow to 32K and 20K by year 5. Assist with national economic 2022 with overall growth of 62%. diversification The GCC is one of the fastest growing tire 1. IBIS World Industry Report Global Car and Automobile markets at approximately ~ 6% CAGR and Manufacturing 2014 is forecasted to reach 41M tires by 2020. 2. OICA.net (Organization International des Constructers d Saudi Arabia is the largest market in GCC ‘Automobiles) at 62% of the sales by units and a world- Saudi Arabia is also a major consumer of scale tire manufacturing plant in Saudi cars and trucks, all currently imported. Sales Arabia would be the first in the region and in 2015 for Light Vehicle reached 774,0001 will gain a competitive access in the GCC units. This number is expected to grow to market, GAFTA markets and Near East and 800,000 units in 2016. Toyota is the sales African markets. Currently there are around leader with around 34% of the total sales 11 million cars (PARC) on the roads in the followed by Hyundai-Kia, General Motors, Kingdom and hence, there is strong increase and Nissan-Renault. Saudi Arabia is the in demand for automotive aftermarket parts largest car market in the Gulf Cooperation such as tires (Market size of 20 million) and Council (GCC) which includes Bahrain, other aftermarket automotive components. Kuwait, Oman, Qatar and the United Arab Emirates. The strongest segments to be sold In addition to the strong local market in Saudi Arabia are C and D for both Sedan demands of Saudi and GCC, Saudi Arabia offers access to over 400 million consumers Figure 2. in Middle East-North Africa. MENA has Saudi Arabia total annual car sales of around 2.3 million, 2015 Sales mostly imported from outside the region. Distribution Greater Arab Free Trade Agreement (GAFTA) gives duty free access to 17 countries in Middle East and Africa if local value add is

Toyota 40% or greater. KSA could serve an even wider area due Hyundai-Kia to its central location between Europe, GM

Nissan-Renault

Ford

Isuzu

Honda

Suzuki

Mitsubishi

Mazda

Other

1. IHS 2015 Sales Forecast 2. Frost & Sullivan Report 44

Africa and Asia covering more than 2 billion tubes and others. The development of consumers are within three hours by air. the Titanium metal, Tantalum, Niobium, Saudi Arabia’s population of around 30 Rare Earth Elements and Quartz / Silica million and is increasing by 2.3% a year. The will leverage the local availability of these number of households is rising by 3.7% a mineral resources and the Kingdom’s year. KSA’s consumers are relatively affluent, competitive landscape. having an GDP per capita of $24,252. The The Minerals and Metals Cluster is currently country’s GDP is rising by 5% - 6% a year, directing its efforts towards expanding the much faster than in Europe and North Aluminum, Steel, Copper and Phosphate America. industrial base and creating Titanium metal, Tantalum, Niobium, Rare Earth Elements and Minerals and Metals Quartz / Silica industries. The objectives of the Minerals and Metals Cluster Cluster include: • Creating investment opportunities in In recent years, Saudi Arabia has witnessed the mining sector and metals industries, remarkable growth in exploration and mining and encouraging and supporting Saudi activities and in the production of primary, and foreign investments. intermediate and downstream metallurgical • Maximizing the economic impact of products for both local and export markets. national resources through taking full advantage of local content, value chain Now, Saudi Arabia strives to strengthen integration and creating sustainable job the role of its mining sector and the related opportunities for the national workforce. downstream industries so that it becomes • Enhancing competitiveness and the third pillar of the national economy, after innovation through talent development. the oil and petrochemical sectors. Therefore, • Satisfying the local market demand and the Industrial Clusters, along with its strategic increasing exports of high value added partners, aim to expand mining activities semi-final and final metal products (exploration and mining) and primary materials • Contributing to the growth of the less industries (such as metallic ores) that are developed regions in the Kingdom. produced from the Kingdom’s own natural resources, and to develop sustainable and globally competitive value-added semi- finished and finished metal industries that support the Kingdom’s vision of developing advanced industries such as automotive, aerospace and ship building, oil and gas, water desalination and others.

The availability of competitive primary and semi-finished aluminum products in the Kingdom establishes a solid foundation for developing high value aluminum products for automotive, aerospace and other advanced industries. Moreover, the large and growing local demand for Steel and Copper products presents exceptional opportunities for the production of Iron Pellets, Steel Plate, Specialty Steel products, Primary and Semi-Finished Copper products such as cathodes, INDUSTRIAL INVESTORS GUIDE 45

Industrial Growth & Development (400) thousand ton of ammonia. Furthermore, Saudi Arabia is rich in the natural resources Ma’aden is also planning significant expansion and raw materials needed for manufacturing of its phosphate operations through a second and industrial development. Studies integrated fertilizer complex in Wa’ad Al have confirmed the availability of vast Shamal industrial city (in the northern region mineral resources in Saudi Arabia such as of Saudi Arabia) with a (16) Million total precious metals (Gold and Silver), base annual production capacity. This complex metals (Iron, Copper and Zinc), and other will include, phosphate mining, production of industrial minerals such as Kaolin, Gypsum, sulphuric acid, phosphoric acid, ammonia, Limestone, Silica, Feldspar, and other dicalcium and monocalcium phosphate, minerals like Phosphate and Bauxite. purified phosphoric acid, and sodium During the past few years, Saudi Arabia Tripolyphosphate and phosphate based witnessed remarkable growth in the fertilizers. The Industrial Clusters is targeting development of these resources such as the additional opportunities in Wa’ad Al Shamal development of phosphate based fertilizers, that can benefit from the availability of raw primary and semi-finished aluminum materials, energy and infrastructure. products from bauxite, expansions of gold exploration and exploitation activities, Titanium metal is one of the strategic ceramics, glass and many other products for developments that the Kingdom is local and export markets. targeting. The Industrial Clusters is currently The Industrial clusters is currently directing working with a global Saudi company its efforts towards expanding the Aluminum, on the development of an integrated Steel, Copper and Phosphate industrial Titanium metal project which includes base and creating Titanium metal, illuminate mining, Titanium slag, titanium Tantalum, Niobium, Rare Earth and Quartz / sponge and semi-finished and finished Silica industries. titanium and high performance metals for advanced industries such as aerospace, The Industrial Clusters has worked, under turbines, water desalination, oil and gas the guidance on the Ministry of Petroleum and petrochemicals. Further, pig iron, a & Mineral Resources, on the development byproduct from the slag operation, will be of the largest fully integrated aluminum utilized to produce semi-finished specialty complex globally which was established in steel products. The Industrial Clusters is Saudi Arabia in 2014. The complex, which is targeting investments in aerospace and a Joint Venture between Ma’aden and Alcoa, industrial applications that will leverage on has an annual production capacity of (760) the availability of Titanium and Specialty thousand tons and include bauxite mining, Steel primary and semi-finished products. alumina production, production of primary aluminum, in addition to rolling mills for the Today, Saudi Arabia produces more than production of beverage can, automotive (8) million tons of primary steel annually and commercial grades sheet. Building on which provides good basis for developing this success, the Industrial Clusters is now Iron Pellets where iron ore is available in large targeting the development of high value quantities in the Kingdom. Additionally, the cast, stamped, machined and fabricated production of semi-finished and finished steel aluminum products. products grew substantially in the kingdom which is driven by the growth of Oil and Gas, Ma’aden Phosphate Company (MPC), Construction, Power, Water Desalinations, in 2011, established a fully integrated and other industries. This growth will phosphate based fertilizer complex in the continue to increase as the ship building and eastern region of Saudi Arabia that include automotive industries get developed in the phosphate mining, production of (3) million Kingdom which brings a good opportunity ton of Ammonium Phosphate (DAP) and for the production of steel plates and automotive sheet. 46

Geological studies indicated the availability needs of various mining and metals of large tantalum, Niobium and Rare Earth manufacturing industries prospects in the Kingdom. The Industrial The Industrial Clusters is working on the Clusters and the Saudi Geological Survey, development of several opportunities under the guidance of the Ministry of which include: Petroleum & Mineral Resources, are • Iron ore mining and pelletizing. currently evaluating these prospects in • Titanium and aluminum aerospace and terms of their quantity, quality and potential industrial gas turbines components. downstream development. • Specialty Steel components for oil & As for copper, Saudi market has seen gas, water desalination, aerospace, exceptional demand growth for copper automotive, power and petrochemicals products driven by the production of wire machinery. rods, cables, conditioning equipment and • Mining and beneficiation of Tantalum, other industries. Copper primary and semi- Niobium and Rare Earth Elements. finished products demand is estimated • Automotive and galvanized steel sheets. around (250) thousand tons which provides • Steel foundry for the production of an opportunity to develop a copper smelter pumps and valves housing and other and expand into final products. industrial products Exploration work conducted by the Saudi • Aluminum foundry for the production Geological Survey on several Quartz of automotive and other industrial sites indicated that potential prospects products. exist that can be used for producing • Copper products (cathodes, plates, several advanced products including tubes and sheets) silicones, EMC fillers, optical glass and • Quartz mining and silicon metal others. There is an opportunity to explore production. additional locations. The Industrial • Production of silica fillers, silica Clusters is working to attract investments chemicals and silicon Carbide from in the quartz value chain with a focus on mined silica sand. Silicon Metals and Silicones industries.

Key Advantage & Investment Chemicals & Polymers Opportunities Cluster Saudi Arabia’s Minerals and Metals industries leverage on its competitive The Chemicals & Polymers Cluster strategy advantages that include: is focused on fostering the growth of • Availability of a wide range of mineral specific value chains that support the resources including precious metals, realization of 2030 Kingdom’s vision base metals and industrial minerals. capitalizing on the advantages of the • Availability of financial incentives, available natural resources and the qualified integrated infrastructure and national workforces. support industries Since late seventies the petrochemical • Strong Government support for the industry in the Kingdom has been focusing mineral and metal sectors. on converting natural gas into petrochemical • Availability of competitively products with the highest specifications to priced energy. compete globally. Now, the focus is shifted • Strong and growing local and towards developing further downstream regional demand industries through specific value chains • Ease of transportation to Europe, taking into consideration the need for Africa, India, GCC countries and other replacing the enormous amounts of export markets imported materials, parts and components. • Trained workforce that meets the The Chemicals & Polymers Cluster INDUSTRIAL INVESTORS GUIDE 47

continues to support realizing the Kingdom’s Industrial Growth & Development 2030 vision through developing new value The development of Saudi Arabia’s plastics chains in certain sectors such as oil field industry is part of the country’s overall chemicals, mining chemicals, rubber economic diversification program away additives, construction chemicals, natural from hydrocarbons. gas treatment chemicals, lube oil additives, The expansion of Saudi Arabia’s plastics medical and pharma related products, industry can be attributed to low domestic personal care products, human and animal energy costs, a ready supply of raw nutrition additives. materials, a rapidly increasing population, and the Saudi Government’s commitment 48

to industrial diversification through foreign Industrial Growth & Development investment. With increased investment The Pharma industrial growth is mainly and technological know-how, the plastics in line with the country’s National industry in the Kingdom has undergone a Transformation Program vision of major diversification from basic to more transferring the economy from oil dependent sophisticated products. Through a number to innovation and life-science economy. of financial incentives and a supportive The Industrial Clusters (IC) strategy is to national policy, the Saudi Government push toward more privatization, quality jobs, encourages industrial joint ventures or and exports. Furthermore, it is imposing on licensing technology and has helped self-reliance medications and sufficiency the industry to move away from import as a National Security aspect. The fact of substitution to actual growth in domestically having mass chronical diseases growth in manufactured plastic products. medium aged papulation (namely diabetes, hypertension and cardio) is justifying the Pharmaceutical & continuous efforts of meeting the country’s national mandate. Therefore, IC has initiated Biotech Cluster market assessment studies in coordination with the Ministry of Health (MOH) to The global pharmaceuticals market is undertake the development of Saudi worth more than US$300 billion a year, a pharmaceutical industry. figure expected to rise to US$400 billion within the next three years. The global To reach such targets, the Kingdom today pharmaceutical industry is generating is more focused toward foreign direct total revenues over a trillion US$ annually. investments (FDIs). The sector has already The industry is a major contributor to the attracted leading global pharmaceutical world’s knowledge economy. The Saudi players like GlaxoSmithKline (GSK), Pharma market is looked at as one of the Sanofi, Pfizer and AUROBINDO, with fastest growing markets today with strong many others to come. Currently, there are export potentials to serve MENA and more than 40 business opportunities of troubled areas in the region. was reported nearly US$20bin in the health care sector at US$8.5 billion in 2015 growing at a rate including pharmaceutical investments, of 12% with expectations to reach US$15 vaccination, Biosimilars, automating health billion by 2020. care systems and R&Ds. INDUSTRIAL INVESTORS GUIDE 49

The Pharma & Biotech Cluster (PBC) is developing plans aiming to enable entry for Saudi Arabia in new segments like vaccines, biologics and biosimilars, and becoming a reliable source of pharma chemicals (solvents, reagents, protective groups, intermediates, key starting materials (KSMs), building blocks for Active Pharmaceutical Ingredients (APIs), and excipients) for global pharma industry. Priority is given to those products which either are consumed highly in Saudi Arabia or derived from locally produced commodity chemicals.

Therefore, part of IC mandate is dedicating specialized resources to enhance the fundamental infrastructures of the industry for more FDIs to come. This would include building local talents and encouraging academia to contribute more in developing strong ECO systems to establish the right environment grounds for life-science economy and innovations that would lead to better health care services and quality employments for years to come.

Key Advantage & Investment Opportunities

A. Biologics and Biosimilar KSA Mar- There are many opportunities in Partial Proposed ket size ($ engineering, bulk manufacturing and CapEx ($ Job Million) Millions) fill & finish of off-patent biological 225 drugs with primary focus on insulin 390 375 analog, autoimmune, pandemics and oncologypandemics. Our aim is to build know-how and capabilities to manufacture biosimilars under Contract Manufacturing Organizations (CMOs) set-up. Also become Saudi Arabia’s and MENA Nat’l Security Center for pandemic outbreaks. 50

KSA Mar- B. Vaccine Formulation Fill and Finish (FFF) Proposed ket size ($ CapEx ($ Job Localizing vaccines synthesis will create Million) Millions) opportunities in Formulation, fill & finish 1000 of generic/mass vaccines with focus on 270 100 pediatric and therapeutic vaccines. Our aim is to develop capability to become a regional hub for vaccines, research & development as well as formulation fill and finish.

KSA Mar- C. Sterile Injectable (SI) Proposed ket size ($ CapEx ($ Job With its high consumption rate, sterile Million) Millions) injectable like vaccines will generate 750 opportunities in Formulation, filling 770 80 and packaging for chemical drugs to address segments such as oncology, anti-infective(s), cardiovascular and musculoskeletal. The target is to become a full scale SI manufacturer undertakes development and formulation and packaging.There is a number of potential opportunities, up to four Sterile Injectable plants, in Saudi Arabia to meet local demand and export the rest to Middle East and North Africa (MENA) region.

KSA Mar- D. Solid Oral Dosage (SOD) Proposed ket size ($ Job Formulation and packaging of generic CapEx ($ Million) Millions) SODs for high volume products, niche/ 400 new off-patent products and products with 850 75 shortages. Potential for up to 5 additional medium sized plants to serve local demand and export to the Middle East and North INDUSTRIAL INVESTORS GUIDE 51

Africa (MENA) region. KSA Mar- E. Active Pharmaceuticals Ingredients (API) Proposed ket size ($ CapEx ($ Job Active pharmaceuticals ingredients are Million) Millions) the chemical entity in the drug that is 120 responsible for treating the disease. A drug 130 100 is composed of a small amount of APIs and a large amount of excipient. The excipient is the inactive part of the drug which is used as a carrier or diluent of the active pharmaceutical ingredients. Setting up state-of-the-art technology driven API facilities that can meet the future’s most stringent regulations and niche products requirements. Opportunities rises to fill global technology gaps mainly in India and China for DMF requirements in both backwards and forwards integrations.

KSA Mar- F. Plasma Production Proposed ket size ($ CapEx ($ Job Plasma is the clear, Straw-colored liquid Million) Millions) portion of blood that remains after red blood 320 cells, white blood cells platelets and other 120 250 cellular component are removed. It is the single largest component of human blood, comprising about 55% and contains water, salts, enzymes antibodies and other proteins. Producing the needed plasma related to albumin, immunoglobulin and clotting factors. Requires a fully integrated system including national blood collection mechanism.

G. Bioequivalence Testing Center KSA Mar- Proposed Biological equivalence (BE) is ensuring two ket size ($ CapEx ($ Job products are pharmaceutically equivalent Million) Millions) 500 and is typically a service offered by a 100 Contract Research Organization (CRO). N/A The center aims to become a regional hub of excellence for assuring the safety and efficacy of generic pharmaceutical products for human use. It shall be affiliated with University Hospitals to provide the clinical facilities needed for testing the availability of drugs in volunteers. Contact Information: Kingdom of Saudi Arabia, Ministry of Energy, Industry & Mineral Resources Industrial Clusters (IC)

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