0 | P a g e M a n u f a c t u r i n g O p p o r t u n i t i e s i n K S A

November 2018 | By: Ameer Yousif, Jaffer Al Hamad, Adel Al Banna

Manufacturing Opportunities

In The Kingdom of Saudi Arabia

Actionable Market Intelligence Report

A market intelligence report looking into the opportunities within

the manufacturing sector in the Kingdom of Saudi Arabia, in view

of the local content policy. The report also outlines the landscape

of the sector and the various support & stimulation programs.

With the objective to support the Bahraini private sector to expand

and grow in the region, Tamkeen is developing a series of

actionable market intelligence reports on various areas and

sectors in the Saudi Market.

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TABLE OF CONTENTS

1. INTRODUCTION ............................................................................................................ 2

2. LOCAL CONTENT POLICY ............................................................................................ 3

3. MANUFACTURING MARKET IN KSA ............................................................................ 5

MANUFACTURING LANDSCAPE ........................................................................... 5

MANUFACTURING COST STRUCTURE ................................................................ 8

4. MANUFACTURING INFRASTRUCTURE ....................................................................... 9

INDUSTRIAL CITIES .............................................................................................10

MODON OASES ....................................................................................................10

5. BUSINESS ENVIRONMENT & SUPPORT PROGRAMS ................................................11

LICENSING REGULATION AND PROCESS FOR FOREIGN INVESTMENT ..........12

FINANCIAL SUPPORT ..........................................................................................13

LOCAL LOAN PROGRAMS ...................................................................................14

REGIONAL LOAN PROGRAMS .............................................................................15

FISCAL SUPPORT ................................................................................................17

EMPLOYMENT FUNDING .....................................................................................18

SIDF FUNDING .....................................................................................................20

6. OPPORTUNITIES BY SECTOR .....................................................................................23

OIL AND GAS (ARAMCO – IKTVA PROGRAM)......................................................24

PETROCHEMICAL (SABIC – NUSANED PROGRAM) ...........................................27

WATER DESALINATION (SWCC – LOCAL FABRICATION PROGRAM) ................29

ELECTRICITY (SE – LOCALIZATION PROGRAM) ................................................31

SECURITY & DEFENCE (AFED PROGRAM) .........................................................32

7. RECOMMENDATIONS ..................................................................................................33

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1. INTRODUCTION

Kingdom of Saudi Arabia is determined to change the current trading deficit in terms of the imports and

export products format being Raw, Semi-finished and Finished Products. The kingdom imports mainly

finished products and exports raw materials.

To manage this transformation, the government issued a “Local Content” initiative, part of the

transformation initiatives under the Vision 2030. The initiative is well governed by a dedicated body

called "Nama'a" which takes responsibility for the supervising the implementation program.

Beside facilitating, supporting and encouraging the private sector to switch to local manufacturing, the

government started with the major sectors and corporates they have the direct influence on its

management:

Military and Security,

Oil and Gas,

Petrochemical,

Electricity, and

Water

In each of these sectors, dedicated programs and teams were put in place to:

Change the procurement policy to make sure that local content targets are applied

Creating an auditing process to ensure compliance with the policy

Creating a detailed supporting program for the local manufacturing projects

The "Local Content" policy is part of the economic diversification plan, where local manufacturing is a

cornerstone of the program and is being catalyzed by attractive ecosystem consisting of industrial cities,

the well-developed infrastructure of more than 35 industrial and economic cities, high-quality utility

supplies, and a well-established logistics network.

Along the "local Content" initiative, Kingdom of Saudi Arabia is developing its business environment

and economic performance, by establishing clear priorities, solid alignment amongst all relevant

stakeholders, and serious commitments in leveraging private investments.

It is very important for businesses used to or looking to supply services or products to the government

and above major sectors, the seriousness and determination of the Saudi government to implement

the local content policy and achieve its targets. Accordingly, it is advisable to be one the first-movers

and benefit from the policy offerings and the various incentives.

This report investigates the “Local Content” policy, the incentives and support programs, and the various

manufacturing opportunities in the main sectors

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2. LOCAL CONTENT POLICY

In line with the objectives of Saudi national vision 2030, several programs were initiated by the main

industries and government bodies to boost the local manufacturing and services sectors in order to

increase the local content from current 36% to 50% by 2020.

The government started with the major companies and government bodies that have a major impact in

the economy and in the trading balance, and where it can enforce the policy and stimulate the private

sector serving these entities:

Increase none oil export from 16% to > 50%

Oil & Gas sector from 40% to 75%

Health 10% increase annually

Defence from 2% to 50% by the year 2028

MAIN ENTITIES IN LOCAL CONTENT PROGRAM

NO ENTITY NAME PROGRAM NAME

1 Aramco Iktva (اكتفاء)

2 Sabic Nusaned (نساند)

3 Saline Water Conversion Corporation SWCC Local Fabrication Program

4 Saudi Electricity Company Localization Electricity Industry

5 Defence & Security Sector AFED (أفد)

Above entities listed hundreds of products and services as investment opportunities for both local and

international investors with lucrative support programs including off-take agreements for ten years. More

details about each program are the section “Opportunities by Sector”.

The entities made the responsibility for local content a core part of the day-to-day processes of the

procurement teams, rather being a corporate social responsibility. They even established auditing

mechanism to ensure conformity to the policy.

Following the standards of vision 2030 implementation, Saudi Arabia established an entity “Nama’a”

http://namaa.gov.sa/en/ for monitoring and enforcing the local content policy. The entity ensures that all

the companies where government own the majority or has a major influence on, and all government

bodies are abiding by their obligations to achieve the targets of the policy.

Salaries Paid To Saudis Training & Development of Saudis

Localised Goods & Services Supplier development spending +

ITEMS COUNTED UNDER LOCAL CONTENT POLICY

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3. MANUFACTURING MARKET IN KSA

MANUFACTURING LANDSCAPE More than 7,700 factories are operating in the kingdom of Saudi Arabia. They are located all over the

13 administrative areas, with a higher density in the main three areas Riyadh, Makkah, and Eastern

Province. While Riyadh ranks first in terms of highest number of factories and the highest number of

employees, Eastern Province ranks first in size of capitals.

The top five manufacturing activities in terms of the number of establishments and manpower are:

1- Other non-metallic mineral products

2- Fabricated metal products

3- Rubber and plastic products

4- Food products

5- Chemicals and chemical products.

The following chart shows the landscape of the 25 manufacturing activities, followed by a table listing

the size of each activity in terms of the number of establishments, capital, and manpower. The table

also includes three more related activities to the manufacturing, which are:

1- Repair and installation of machinery and equipment

2- Electricity, gas, steam and air conditioning supply

3- Water collection, treatment, and supply

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Sum of No. of Establishments Sum of No. of Employees Sum of Capital (Trillion SAR)

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2017 Growth Compared to

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Food products 794 60,596 160,648 4 837 6,367 0.51% 1.40% 4.13%

Beverages 219 25,867 49,506 -1 108 1,617 -0.45% 0.42% 3.38%

Textiles 102 6,523 18,215 1 276 259 0.99% 4.42% 1.44%

Wearing apparel 110 1,202 14,041 -2 -24 -443 -1.79% -1.97% -3.06%

Leather and related products 32 527 2,607 0 0.01 5 0.00% 0.00% 0.19%

Wood and of products of wood and cork 98 1,559 8,599 -1 75 93 -1.01% 5.04% 1.09%

Paper and paper products 264 14,066 36,880 6 651 1,133 2.33% 4.85% 3.17%

Printing and reproduction of recorded media 42 2,181 5,229 -3 -406 -345 -6.67% -15.70% -6.19%

Coke and refined petroleum products 148 94,640 18,537 -1 1,627 667 -0.67% 1.75% 3.73%

Chemicals and chemical products 751 565,598 99,794 17 3,062 989 2.32% 0.54% 1.00%

Products and preparations pharmaceutical 43 5,391 10,321 3 193 677 7.50% 3.72% 7.02%

Rubber and plastics products 1,052 27,907 98,811 12 1,199 2,922 1.15% 4.49% 3.05%

Other non-metallic mineral products 1,610 103,246 199,560 -18 1,778 1,057 -1.11% 1.75% 0.53%

Basic metals 340 75,036 68,358 8 897 -1,539 2.41% 1.21% -2.20%

Fabricated metal products 1,087 24,272 115,916 -13 72 -1,850 -1.18% 0.30% -1.57%

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Sum of No. of Establishments Sum of No. of Employees Sum of Capital (Trillion SAR)

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Computer, electronic and optical products 49 3,124 9,934 -1 204 -107 -2.00% 6.98% -1.07%

Electrical equipment 238 20,610 43,489 4 1,626 553 1.71% 8.57% 1.29%

Machinery and equipment n.e.c. 222 15,335 32,878 1 -20,831 -15 0.45% -57.60% -0.05%

Motor vehicles, trailers and semi-trailers 152 2,928 13,865 -1 -144 -197 -0.65% -4.68% -1.40%

Other transport equipment 8 1,036 4,578 -2 -17 -85 -20.0% -1.60% -1.82%

Furniture 317 3,102 26,513 -1 -7 359 -0.31% -0.23% 1.37%

Other manufacturing 71 1,912 11,791 -2 -3 37 -2.74% -0.13% 0.31%

Repair and installation of machinery and equipment

3 11 141 0 0 0 0.00% 0.00% 0.00%

Electricity, gas, steam and air conditioning supply

5 39,803 830 1 20,713 240 25.0% 108.51% 40.68%

Water collection, treatment and supply 2 3,120 645 0 0 0 0.00% 0.00% 0.00%

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MANUFACTURING COST STRUCTURE

The manufacturing sector expenses increased over the past six years. The annual growth in the

employees’ salaries of 8% and operating expenses at 7%. On the other hand, there has been a similar

annual growth in the revenues at 5% and accordingly a growth in the operating surplus at 2%.

The following tables list down the costing structure for each manufacturing activity for the year 2017. A

further breakdown of the details can be accessed by clicking on each activity name.

Manufacturing Activity Salaries Expenditures Revenues Operating

Surplus Net Asset

Food products 4,444,812 34,961,365 79,019,840 39,229,101 2,917,243

Beverages

1,097,593 6,438,333 11,055,874 3,230,055 656,197

Tobacco products

4,924 16,411 28,102 6,159 1,239

Textiles

579,005 7,484,861 11,420,947 3,272,349 660,344

Wearing apparel

1,494,355 4,978,542 10,622,359 4,056,016 634,543

Leather and related products

51,632 233,211 660,765 366,730 81,120

Wood and of products of wood and cork

627,990 4,663,348 8,099,646 2,756,333 461,664

Paper and paper products

931,723 8,118,945 18,529,839 9,272,740 494,612

Printing and reproduction of recorded media

656,191 4,982,318 8,000,561 2,245,646 468,838

Coke and refined petroleum products

5,449,078 63,445,877 142,922,078 73,319,061 4,788,218

Chemicals and chemical

products

9,520,817 86,430,010 181,626,466 82,946,904 16,786,883

Products and preparations pharmaceutical

432,780 2,051,092 3,452,053 917,858 191,463

Rubber and plastics products

858,567 9,483,923 19,579,191 9,069,194 442,272

Other non-metallic mineral

products

4,925,346 20,914,316 40,833,922 14,107,244 9,587,945

Basic metals

3,736,010 18,002,344 32,940,182 10,856,959 268,712

Fabricated metal products

2,934,199 14,059,679 32,195,728 14,558,109 580,065

Computer, electronic and

optical products

85,527 403,337 802,918 300,817 198,607

Electrical equipment

862,632 12,456,202 24,938,691 11,459,713 405,736

Machinery and equipment n.e.c.

1,118,197 6,954,064 12,859,701 4,565,421 404,126

Motor vehicles, trailers and

semi-trailers

239,750 1,531,803 4,588,696 2,748,415 277,353

Other transport equipment

94,545 1,206,569 2,389,938 1,074,079 321,433

Furniture

1,176,723 7,615,471 15,124,073 6,074,169 1,009,635

Other manufacturing

208,912 774,131 1,568,588 548,217 165,632

Repair and installation of machinery and equipment

1,458,292 4,105,507 8,472,391 2,706,394 1,892,828

Electricity, gas, steam and air conditioning supply

5,504,518 30,772,627 61,946,782 22,704,435 37,982,493

Water collection, treatment and

supply

442,292 2,657,741 5,008,224 1,779,599 48,434

TOTAL 48,936,410 354,742,027 738,687,555 324,171,717 81,727,635

9 | P a g e M a n u f a c t u r i n g O p p o r t u n i t i e s i n K S A

4. MANUFACTURING INFRASTRUCTURE To achieve Vision 2030, Saudi Arabia is growing and diversifying its economy: the industrial and manufacturing sectors, in particular, have the ambition to drive this diversification. The development and growth of the industrial and manufacturing industry are being catalyzed by an attractive ecosystem consisting of industrial cities, well-developed infrastructure, high-quality utility supplies, and a well-established logistics network.

Saudi Authority for Industrial Cities and Technology Zones (MODON) is the entity responsible for the infrastructure of 30 industrial cities and 5 oasis (dedicated for women projects) and X technology zone across the kingdom. Each city, oasis or zone, is strategically positioned and designed to provide operational competitive advantages such as production synergies, cluster benefits, and scale effect, supported by infrastructures such as shared services and on-site facilities to investors. The supply of industrial land, commercial real estate and utilities at a

very competitive price is considered a distinctive factor for the Kingdom, compared to other countries worldwide. Modon provides various services: Services Guide (Arabic content). With modon you can rent a ready-made facility or rent a land for the purpose of establishing:

1- An industrial project 2- A services project 3- A housing project 4- A logistic project

Visit Interactive Map

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INDUSTRIAL CITIES

Modon manages 30 Industrial Cities across the kingdom:

No Industrial city Total area (m²)

1 Riyadh 1st. 500,000

2 Riyadh 2nd. 19,000,000

3 Riyadh 3rd. 1,000,000

4 Jeddah 1st. 12,000,000

5 Jeddah 2nd. 8,000,000

6 Jeddah 3rd. 80,000,000

7 Dammam 1st. 2,500,000

8 Dammam 2nd. 25,000,000

9 Dammam 3rd. 48,000,000

10 Sudair 265,000,000

11 Qassim 1st. 1,500,000

12 Qassim 2nd. 4,000,000

13 Al-Kharj 99,000,000

14 Ha'il 2,560,000

15 Al-Ahsa 1st. 1,500,000

16 Al-Ahsa 2nd. 300,000,000

17 Al-Madina Al-Munawwara 10,000,000

18 Makkah Al-Mukarrama 730,117

19 Tabuk 4,000,000

20 Al-Baha 1st. 3,000,000

21 Al-Baha 2nd. 6,000,000

22 Assir 2,700,000

23 Najran 6,500,000

24 Jazan 39,000,000

25 Ar'ar 2,000,000

26 Hafr Al-Batin 100,000,000

27 Shaqraa 10,000,000

28 Al-Zulfi 18,000,000

29 Durma 11,500,000

30 Wa'ad Al-Shamal 290,000,000

MODON OASES

Modon Oases are industrial cities specifically set-up for women workers. Currently, there are five of them across the kingdom:

No Modon Oasis Total area (m²)

1 Al-Ahsa Oasis 500,000

2 Jeddah Oasis 5,000,000

3 Qassim Oasis 600,000

4 Al-Jouf Oasis 3,000,000

5 Yanbu Oasis 500,000

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5. BUSINESS ENVIRONMENT & SUPPORT PROGRAMS Saudi Arabia has launched the Vision 2030 aimed at enhancing its business environment and economic performance, by establishing clear priorities, solid alignment amongst all relevant stakeholders, and serious commitments in leveraging private investments. Government initiatives across different areas such as ease of doing business, social and cultural participation, and fiscal balance review show the undeniable commitment of the Kingdom in improving the whole business environment. Specific regulations and initiatives have been recently implemented by Saudi regulatory entities such as:

The settlement cycle amended from T+0 to T+2, with securities’ transactions completed after two business days following the transaction execution date,

The opening of the domestic IPO market to qualified foreign investors, and The introduction of NOMU, a parallel equity market with lighter listing requirements serving as

an alternative platform for all companies to go public. Saudi Arabia's incentives and support schemes are specifically designed to encourage investment with the potential to diversify and improve the Kingdom's competitiveness. Amongst the primary objectives of the incentives and support schemes:

Enhance the development of business, Promote the creation of clustering activities, Ensure the transfer of knowledge and Accelerate the building of skills and capabilities within the country.

The Kingdom offers a wide range of incentives and support programs to help to achieve the above objectives:

Financial support Local Loan Programs Regional Loan Programs Fiscal support Employment support

The following sections summaries the licensing regulation and process for foreign investment and the above support programs with interactive links to visit the support entity webpage for more up to date details.

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LICENSING REGULATION AND PROCESS FOR

FOREIGN INVESTMENT

Being licensed to operate in Saudi Arabia as a foreign investor is necessary to obtain any permit to start operations. Established in 2000, the Saudi Arabian General Investment Authority (SAGIA) is the Kingdom's investment promotion agency responsible to set up and govern the regulatory framework for international companies willing to enter the Saudi market, offering assistance from the initial planning stage to comprehensive aftercare services. The granting of a license to invest in Saudi Arabia is a crucial activity for obtaining all permits before starting a new business. The first step is the selection of the type of investment license for which investor wishes to apply and verify whether there are any specific requirements, such as minimum acceptable capital and any cap to foreign capital. Investors can register and apply through the SAGIA official website, with a simplified process.

Fiscal regime elements relevant for foreign investment Four main fiscal regime elements are particularly relevant for foreign investment

1. Corporate income tax, applicable to foreign ownership of Saudi Arabia-based company; with the statutory corporate rate set at 20%, it is the lowest among the G20

2. Zakat, applicable on local ownership of Saudi Arabia-based company; set at 2.5% of the Zakat base

3. Value-Added-Tax 4. Social Security contribution; only for Saudi personnel

International trade agreements

Saudi Arabia is a member of the World Trade Organization, working to further liberalize its trade regime and accelerate integration in the global economy.

On a regional basis, the Kingdom is a member of the Gulf Cooperation Council and of the Greater Arab Free Trade Area.

Bilaterally, Saudi Arabia signed treaties for the avoidance of double taxation of income and capital (Double Taxation Avoidance Agreements, DTAs) with 29 countries as well as agreements (23) aimed at promoting and protecting the investments of the enterprises of one contracting party in the territory of the other.

The same rules and regulations that apply to Saudi investors also apply to GCC investors

and their %100 owned companies. GCC investors enjoy the same benefits offered to Saudi

nationals directly through the Ministry of Commerce and Investment. You can find more details on

their website: www.mci.gov.sa/circular, All GCC companies with a foreign partnership of %1 or more

are treated as a foreign investment and can apply for licenses from SAGIA. For more details,

https://www.sagia.gov.sa/en/Pages/default.aspx

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FINANCIAL SUPPORT

1 - CREDIT FINANCING, GUARANTEE, AND INSURANCE

Export credit financing, guarantees and insurance by the Saudi Export Program

Coverage up to 90% of credit value

Main conditions Responsible entity

1. Exports with Saudi origin

2. Min %25 local of value added (crude oil is excluded)

3. Min transaction value funded 100k SR

4. Operational risk and creditworthiness to be accepted

5. Guarantees vary depending on risks associated

Saudi Fund for Development

2 - ENERGY AND UTILITIES

Subsidized tariffs for power, water, natural gas, ethane, diesel, and land

Power at $ 0.048 per kWh for the industrial sector

Water at $ 0.5 - $1.35 per cubic meter (based on volume)

Natural gas at $ 1.25 per MMBTU Ethane at $ 1.75 per MMBTU Diesel at $ 14/ barrel Land for lease starting from $ 0.26 per sqm

Main conditions Responsible entity

None

Saudi Electricity Company National Water Company Saudi Aramco Saudi Industrial Property

Authority

3 - FINANCIAL INCENTIVE FOR R&D PROJECTS

Investment in selected local and international R&D projects with the potential to boost the country's economic growth and self-reliance

Financed amount uncapped

Main conditions Responsible entity

Investment with following characteristics

Enable technology transfer to Saudi Arabia Diversify Saudi Arabia economy Create high skilled jobs

King Abdulaziz City for Science and Technology

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LOCAL LOAN PROGRAMS

1 - LOAN PROGRAM FOR INDUSTRIAL PROJECTS

Cover the risk of banks in financing small and medium enterprises

Interest-free Admin fee around 2.5% Repayment periods of up to 15 years 2-year grace period Additional advice on administration,

marketing, technical

Main conditions Responsible entity

1. Financeable industrial project with a valid industrial license and to realize considerable value for the economy. Characteristics:

2. Economically viable To provide training and employment opportunities for

Saudi To use locally sourced raw materials To integrate with other projects in KSA or GCC

countries To replace imports with local products To target export opportunities To bring advanced technology

Saudi Industrial Development Fund

2 - LOAN GUARANTEE PROGRAM (KAFALAH) FOR SMALL & MEDIUM ENTERPRISES

Cover the risk of banks in financing small and medium enterprises

Guarantee rate up to 75% of the loan

Main conditions Responsible entity

1. Legal entity 2. Annual sales < SAR 30 million 3. Viable in the economic, financial, technical and

administrative terms 4. Contributes positively to the Saudi economy in terms of: Hiring and training Saudi nationals Replacing imported goods with local ones and/or

producing high-quality innovative goods and services

Saudi Industrial Development Fund

Saudi banks

3 - PRODUCTIVE LOANS FOR SMALL PROJECTS AND START-UPS

Interest-free loans provided across a variety of paths to support the Saudi society

Financed amount uncapped

Main conditions Responsible entity

Saudi national Specific conditions for each path

Social Development Bank

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REGIONAL LOAN PROGRAMS

1 - LOAN PROGRAM FOR PUBLIC/ PRIVATE INVESTMENT PROJECTS

Financing for public/ private investment projects

Reduced interest rate to 2.5% for low-income Arab countries and 3% for other Arab countries

4-6 years grace period Long term extended to 22-25 years

Main conditions Responsible entity

1. Public sector: request to be accompanied by a techno-economic feasibility study (to be considered for financing)

2. Private sector: only for the legally independent entity

with:

Sound financial position

Good management practices

Operating in a purely commercial basis

The main objective of developing the economy

Not less than 51% of capital owned by citizens of member states of the Arab Fund

The Arab Fund for Economic and Social Development

2 - FINANCING FACILITIES FOR TRADE TRANSACTIONS OF GOODS OF ARAB ORIGIN

Refinancing of Arab exports to Arab & non-Arab countries through lines of credit

Pre-export credits, Post-shipment credits, buyers’ credits, and Import credits

Main conditions Responsible entity

1. Goods entirely produced or manufactured in an Arab country from primary resources and other domestic components, or

2. If the value added in an Arab country is at least 40% of the value of the goods

Arab Trade Financing Program

3 - POLITICAL & COMMERCIAL RISK INSURANCE FOR INVESTMENTS AND EXPORT CREDIT GUARANTEES

Insurance schemes and guarantees to encourage investments in Arab countries, and enhance inter-Arab trade and Arab exports worldwide

Main conditions Responsible entity

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1. Investment insurance for investments in an Arab country, the investor shall not be from the same country of the investment

2. Export credit guarantees for exports to/from Arab countries

The Arab Investment & Export Credit Guarantee Corporation

4 - EQUITY & DEBT FINANCING FOR ENTERPRISES AND PRODUCTIVE PROJECTS IN MEMBER COUNTRIES

Offers different financing schemes to support investment capital of projects, grants loans to enterprises and productive projects, and accepts deposits to mobilize financial resources in accordance with the provisions of Islamic law

Main conditions Responsible entity

Prospective member country should:

1. Be a member of the Organization of Islamic Cooperation (OIC)

2. Pay its contribution to the capital of the Bank

3. Be willing to accept such terms and conditions as may be decided upon by the bank's Board of Governors

Islamic Development Bank

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FISCAL SUPPORT

1 - CUSTOM DUTY DRAWBACK

Refund to importers/ exporters of raw material imports that are processed in Saudi Arabia and re-exported as more finished products

Main conditions Responsible entity

1. Importer to inform Customs at the point of entry on raw materials for manufacturing

2. Importer to provide the Customs 3. Import Declaration

4. Receipt for payment of duty

5. Certificate of Origin

6. Copy of the invoice to the buyer certified

Saudi Customs

2 - CUSTOM DUTY EXEMPTION

Exemption on authorized imports for industrial establishments (e.g., materials, equipment, machinery)

Main conditions Responsible entity

1. Available only if local supply does not exist, or

2. The local supply is not up to the specifications of the manufacturers

Ministry of Commerce and Investment

3 - TAX INCENTIVES

Up to 50% tax credit on Saudi national worker's payroll and training cost for 10 years

Main conditions Responsible entity

1. Available in specific regions: Hail, Northern Border, Jazan, Al-Jouf, Najran, Al-Baha 2. The number of employees > 5: Either technical or administrative jobs Contract time not less than 1 year 3. Capital > 1M SR.

Industrial Clusters

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EMPLOYMENT FUNDING

1 - PROGRAM TO SUPPORT THE GROWTH OF SAUDIZATION OF ENTERPRISES

15% of monthly salary for male citizens 20% of monthly salary for female citizens

Program duration: 1 October 2017 – 30 September 2019

Main conditions Responsible entity

1. Saudi national

2. Age between 18-60

3. Employee's monthly salary not exceeding SAR 6,000

Human Resource Development Fund (HRDF)

2 - TAMHEER PROGRAM

On-the-job training program for Saudi graduates

To provide financial support of SAR 3,000 per month during the 3 to 6 months long period of training, and

Occupational hazard insurance

Main conditions Responsible entity

1. Saudi national (or foreign national with Saudi mother) 2. With a bachelor, master or Ph.D. degree 3. Currently unemployed and not employed for the past 6

months 4. No previous participation in Tamheer program

Human Resource Development Fund (HRDF)

3 - PROFESSIONAL CERTIFICATION SUPPORT PROGRAM

The aim is to enable the Saudi workforce to obtain professional certificates accredited in several professional fields required by the labor market, e.g., CMMP, CIT, PMP,…etc.

Reimbursement for training costs, and test fees

Main conditions Responsible entity

1. Saudi national

2. Certificate to be accredited by HRDF

3. Certificate to be valid and not expired

4. Maximum reimbursement: 2 certificates for each person

Human Resource Development Fund (HRDF)

4 - DOROOB PROGRAM

The aim is to obtain certificates approved and recognized by the main companies

A comprehensive program involving electronic learning courses

Priority in the direct employment for the certificates holders

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Providing also the opportunity of benefiting from the on-the-job training program

Main conditions Responsible entity

1. Saudi national

Human Resource Development Fund (HRDF)

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SIDF FUNDING

Saudi Industrial Development Fund provides several funding programs. The summary of programs

are tabulated below:

1 - FINANCING OF PROJECTS IN THE PROMISING CITIES

Category City Maximum Loan Term

SIDF Loan (%)

1 Including Major Cities Of Riyadh, Jeddah, Dammam, Jubail, Makkak, Yunbo, And Ras Al-Khair.

15 Years 50%

2 Including The Cities Of Some Economic Advantages, Namely Qassim, Al-Ihssa, Rabigh, Taif, Kharj Industrial City, Sudair Industrial City, Madinah, (Except Yunbou)

20 Years 60%

3

Including Economically Promising Cities Such As Hail, Northern Borders, 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 Nearest Industrial City Of The SecoNd Category.

20 Years 75%

2 - SECTORS CURRENTLY NOT FINANCED BY SIDF

1. Double Glazed Glass. 2. Steel Billets. 3. Aluminum Fabrication and Cladding. 4. Automatic Bakery is making Croissant,

Pastry-Puffs, Cupcakes and Mammoul. 5. Cartons Duplex and Corrugated. 6. LLDPE Colored Powder. 7. Interlock & Curbstone Industry. 8. Crushers. 9. Aluminum doors and Windows. 10. Ice plants. 11. School notebooks manufacturing. 12. Sulphuric acid. 13. Medium and low-pressure Iron pipes. 14. Cement blocks and tiles. 15. Scrap iron shredding and recycling. 16. Pre-Printed Steel Coils 17. Terrazzo & Mosaic Tiles. 18. Traditional Prefabricated buildings. 19. Commercial Printing 20. Writing papers. 21. Dairy products from milk powder. 22. Leather tanning. 23. Meat packaging. 24. Dates packaging.

25. Electric wires. 26. Raw asphalt and bitumen. 27. Egg trays. 28. Fiberglass tanks. 29. Monolayer films and LLDPE films. 30. Traditional plastic products. 31. Precast concrete. 32. Wet Glue Labels. 33. Steel Lattice Towers 34. Gypsum powder and Gypsum boards. 35. Soft drink cans. 36. Pre-engineered buildings. 37. Thermoblocks 38. Decorative Stones Cutting 39. Ready mix. 40. Bottled drinking water. 41. Pozzolan Blocks. 42. Steel Drums (Barrels). 43. Pre-insulated Pipes. 44. Steel Pipes Coating. 45. AAC Blocks & Panels. 46. Artificial Stone. 47. Marble & Granite. 48. Building Chemicals (Concrete Admixture,

Tile Adhesive, Waterproofing Powder, Epoxy Floor Coating).

3 - FINANCING OF LOGISTICS AND INDUSTRIAL SUPPORT SERVICES PROJECTS

Maximum Financing Limit for a Single Project

Financing Ratio (%)

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SR 100,000,000 (50%) of the financeable costs in all regions of

the Kingdom.

Financeable Activities Scope of Scheme

1. Logistic and Warehousing Projects.

2. Model Factories projects.

3. Vocational Training Centres.

4. Laboratory Facility Centres.

Industrial cities located in: The Economic Cities Authority. Royal Commission for Jubail and Yanbu. General Authority of Civil Aviation. Saudi Ports Authority. Saudi Railways Organization. Saudi Industrial Property Authority

(MODON). Ras Al-khair and Jazan industrial cities.

Main conditions

1. The requirement for an industrial license to be replaced by a permit from the concerned

authorities.

2. The project should be owned wholly or partially by the private sector.

3. The project should be financially viable and supported by a feasibility study.

4. The sponsors should be financially strong and ready to provide adequate guarantees.

5. The Fund should be able to mortgage all fixed assets of the project.

6. The land lease agreement should be in line with SIDF requirements.

7. Disbursements to be based on actual cost incurred and paid for.

8. The projects under the scheme should contribute to the service of the industrial sector.

9. SIDF loans for this scheme will follow the same requirements as SIDF's loans to industrial

projects with regard to financing cost, repayment period, guarantees needed, disbursements,

conditions, and covenants whenever are applicable.

4 - ENERGY EFFICIENCY PROGRAM

Financing program aimed at increasing energy efficiency in industrial enterprises.

Main Features

The program helps factories reduce their increasing energy costs.

It is available for all industrial sectors.

Extended repayment period and faster evaluation and financing procedures are among the

program features. Enterprises can get special offers on evaluation services rendered by several consulting offices

certified by the Saudi Energy Efficiency Center.

5 - INDUSTRIAL DIGITAL TRANSFORMATION PROGRAM

The program helps industrial enterprises develop their business mechanisms and productivity using modern technology.

Main Features

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The program is available for all industrial sectors.

The program offers special features such as extended repayment period and short evaluation

period when conditions are fulfilled. The program offers a number of advisory organizations which help in evaluating and designing

the projects of Industry 4.0

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6. OPPORTUNITIES BY SECTOR The drive to increase local content in procurement in Kingdom Saudi Arabia presents a unique set of opportunities for companies bidding for business contracts or those with supply chain operations in the region. Any organization bidding for contracts or awarding projects to suppliers in the kingdom should be aware of the drive to promote local content, an initiative to increase local participation, employment and foreign direct investment in manufacturing and services. The Saudi government estimates that SAR 270 billion of opportunities for local businesses can be generated. In return this will help to create 450,000 jobs in the non-government sector by 2020, reducing the Kingdom’s reliance on sourcing labor from overseas, and increasing the use of local employees. This section will explain in detail the opportunities offered by five main sectors:

1- Oil & Gas – Aramco Iktva Program 2- Petrochemical - Sabic Nusend Program 3- Water Desalination – SWCC Local Fabrication Program 4- Electricity – Localisation Program 5- Defence & Security – AFED Program

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OIL AND GAS (ARAMCO – IKTVA PROGRAM) Saudi Aramco started its local content program since 1st December 2015, under the name of “In Kingdom Total Value Add (IKTVA)". Through which Aramco is targeting to achieve 70% of the local content out of overall operating expenditure by 2021. Through the program, Aramco works jointly with its registered suppliers to help them develop their abilities to produce the right quality of products and services at the right cost and according to a schedule. Following table list down the offered opportunities by Aramco:

1 – OILFIELD EQUIPMENT

Download the details of the opportunities

Opportunities

Precision Machining for down-hole tools, Coiled Tubing manufacturing, Drill Pipe manufacturing, Perforating Guns manufacturing, Drill Collar manufacturing,

Packers manufacturing, Liner Hangers manufacturing, DV Tools manufacturing and Whip stock manufacturing.

2 – ELASTOMERS AND CHEMICAL DERIVATIVES

Download the details of the opportunities

Opportunities

Elastomers for tires, Non-tire rubber products, Polyurethanes, Polyurethanes,

Organic synthesis and elastomer conversion equipment,

Coating treatments.

3 – STATIC AND ROTATING COMPONENTS

Download the details of the opportunities

Opportunities

Valve manufacturing (butterfly, Choke and plug) heat exchanger tubes

manufacturing, Pipe fitting manufacturing,

Industrial fans manufacturing, gears manufacturing,

Bearings manufacturing, Mechanical seals design and

manufacturing.

4 – OILFIELD CHEMICALS

Download the details of the opportunities

Opportunities

25 | P a g e M a n u f a c t u r i n g O p p o r t u n i t i e s i n K S A

Drilling fluids, Proppants, Well stimulation agents, Production chemicals,

Work over and completion chemicals, Additives, Lubricants and Stabilizers.

5 – ELECTRICAL EQUIPMENT OPPORTUNITIES

Download the details of the opportunities

Opportunities

Current and Voltage transformers (CT – VT) manufacturing

Electrical fuses manufacturing Circuit breakers manufacturing Relays manufacturing for industrial

applications UPS manufacturing for industrial

applications

Batteries manufacturing for industrial equipment

Electrical inverters manufacturing Low voltage motors manufacturing Conduit and fittings manufacturing Smart Meters

6 – METALS

Download the details of the opportunities

Opportunities

Open-die forgings Closed-die forgings

Investment Casting Sand Casting

7 – WATER OPPORTUNITIES

Download the details of the opportunities

Opportunities

PAM, Coagulants, Membranes,

Filters, Sludge thickeners

8 – Industry 4.0

Download the details of the opportunities

Opportunities

Cyber Security, 3-D printing, Cloud Computing, HPC,

Big Data & Advanced Analytics, Mobility, Additive Manufacturing, Robotics.

9 – NON-METALLIC OPPORTUNITIES

Download the details of the opportunities

Opportunities

Reinforced plastics injection moulding Recycling

10 – SAUDI MARITIME JV AND OTHER OPPORTUNITY

26 | P a g e M a n u f a c t u r i n g O p p o r t u n i t i e s i n K S A

Download the details of the opportunities

Opportunities

Diesel generators, Personal Protective Equipment PPE,

Welding machinery Welding consumables, Welding support products & services

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PETROCHEMICAL (SABIC – NUSANED PROGRAM)

In order to achieve SABIC’s localization agenda and local industry development, SABIC is initiating “Nusaned” – its first integrated Localization Engine, aimed at addressing some of the issues investors face from idea generation to execution of the idea. Nusaned is open to Entrepreneurs/SMEs, Local firms looking to expand or International companies looking to set-up or expand operations in KSA.

It aims to support investors in areas related: SABIC opportunities available to drive investment and create local demand through

- procurement spends - product conversion to develop downstream industry - commercialization of SABIC patents / technologies /applications

SABIC support packages to help in commercializing opportunities, including providing raw materials, technical support, etc.

Advise and support on financing

Local workforce development and training support through sponsorship or advice

Strong alignment of Nusaned’s program with different local authorities to ease project development Nusaned program addresses these challenges and implements the solutions through its four main pillars:

1. Entema Program: (View the details of the opportunities)

Through Entema, SABIC aims to provide investors with a portal to explore investment opportunities

and test their viability and attractiveness to receive SABIC support through Da'aem.

The attractiveness of each opportunity will be gauged based on

The socio-economic impact it has on KSA which includes GDP contribution to KSA, number

of jobs created, trade balance improvement

Long-term competitiveness and sustainability of the opportunity which includes local and

global market size and profitability, management team profile.

2. Daem Program (Support to Entma): (View the details of the opportunities)

DAEM, is the 2nd pillar of the Nusaned Localization engine, is to execute the proposed SABIC

support packages to investors during Entema

Only those investors who are qualified through the Entema process are eligible for DAEM support

packages.

The support package will differ in scale and scope on a case-by-case basis depending on the level of

socio-economic impact they have on KSA and the long-term attractiveness of the opportunity. These

scale and scope of the support packages are solely at the discretion of SABIC

Supplying materials and services to SABIC

Product offtake from SABIC

Technical Support and Products Application/Technology commercialization

Capability Development

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World-class practices at SABIC

Shared services and global supply chain

3. Access to Finance (Support to Entma): (View the details of the opportunities)

Access to Finance is the third pillar of the Nusaned initiative. It aims to provide financing for attractive investment opportunities through the right authorities for the Nusaned supported opportunities, to ensure the required financial support for the feasible opportunities

4. Muahal Program: (View the details of the opportunities)

Muahal aims to develop the technical and leadership capabilities of the local workforce for the Nusaned supported opportunities or for companies endorsed by SABIC LCBDU. This is to ensure that investors have the right workforce to execute the opportunity in a competitive and sustainable way:

providing local workforce development and training for investor opportunities

Executive MBA programs will be offered for leadership and management development.

Technical training will be provided through degrees and apprenticeship programs in

maintenance, operations, logistics, etc

Following table list down the offered opportunities by SABIC:

SABIC

View the details of the opportunities

Opportunities

Chemicals and Raw Materials Spare Parts Services Polymer Conversion Rubber Conversion Catalysts Oilfield Chemicals

Coatings Surfactants Plastic Additives Tubes Vegetable Oil Valves Seals

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WATER DESALINATION (SWCC – LOCAL FABRICATION PROGRAM)

The desalination of the sea water sector offers a wide range of opportunities to locally manufacture their consumables spare parts and supplies. A dedicated division is established to support investors interested in locally manufacture the required parts and supplies.

Following table list down the offered opportunities by SWCC:

1 – COMMODITY CHEMICAL

Opportunities

2075 - Ferric Chloride,

2084 - Monoethanolamine, NH2C2H4OH,

2085 - SODIUM META BISULPHITE,

Na2S2O5,

2086 - SODIUM SULPHITE,

ANHYDROUS, Na2SO3,

2087 - SODIUM BISULPHITE, NaHSO3,

2088 - CALCIUM HYPO-CHLORITE,

2089 - SODIUM HYPOCHLORITE, NaOCl

2090 - Ammonium Hydroxide, NH4OH,

2091 - CITRIC ACID, ANHYDROUS,

C6H8O7,

2092 - HYDROCHLORIC ACID, HCl

2093 - Sodium Hydroxide (Caustic Soda),

NaOH, pellets,

2094 - SODIUM HYDROXIDE (Caustic

Soda), NaOH, Liquid

2099 - Tri-Sodium Phosphate,

Na3PO4.12H2O,

2100 - Sulphuric Acid, H2SO4,

2101 - CARBON DI-OXIDE GAS, LIQUIFIED,

CO2

2102 - Chlorine gas, liquefied, Cl2,

2103 - CHLORINE GAS, LIQUIFIED, Cl2,

2104 - LIME STONE (CALCIUM

CARBONATE) 98%,

2105 - HYDRATED LIME (CALCIUM

CARBONATE) 90%,

2106 - LIME STONE (CALCIUM

CARBONATE) 93%.

2 – SPECIALTY CHEMICAL

Opportunities

2107 - Anti-scale albrivap,

2108 - Anti-scale belgard,

2109 - Anti-scale sokalan Pm 10i,

2110 - Acid Corrosion Inhibitor

2111 - Anti-foam,

2112 - Ion Exchange Resin, Anion,

2113 - Ion Exchange Resin, Cation,

2114 - Hydrazine Hydrate,

2115 - Oxygen Scavenger,

2116 - Genesol 704,

2117 - Genesol 701,

2118 - Genesol 30.

3 – SPARE PARTS & MACHINERY

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Opportunities

2044 - Reverse Osmosis Membrane 1st

Pass,

2045 - Evaporator (Shell & Tube),

2046 - Intake screens,

2047 - Intake, Booster, and Brine

Discharge Pumps,

2048 - Dissolved Air Flotation (DAF),

2049 - HP Pumps,

2050 - Reverse Osmosis Membrane 2nd

pass,

2051 - Heat Recovery, Heat Rejection

Pumps,

2052 - Brine Heater,

2053 - Common, Post-Treatment &

Backwash Pump,

2054 - Energy Recovery Device,

2055 - Filtration Equipment,

2056 - RO Membrane Pressure Vessels,

2057 - Electrical Drives (Motors),

2058 - Electro-Chlorination system,

2059 - HP Piping & Valves,

2060 - Flocculators,

2061 - Piping Structure & Erection Material,

2062 - Membrane Racks/Piping,

2063 - Steam supply system,

2064 - Vacuum pumps,

2065 - Pre & Post-Treatment Chemical

Dosing Pumps,

2066 - Intake Piping,

2067 - LP Piping & valves,

2068 - Deaerator (incl. Ejectors),

2069 - Post-Treatment & Brine Discharge

Piping & Valves,

2070 - Electric Mixers,

2071 - Cleaning system (sponge ball),

2072 - Pre-treatment and Post treatment

tanks,

2073 - Air Blowers.

4 – SERVICES

Opportunities

2074 - Lime Contactors,

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ELECTRICITY (SE – LOCALIZATION PROGRAM) The tremendous growth in the residential, commercial and manufacturing sectors dictate a reciprocal growth in the generation and distribution of the power. Accordingly, the Saudi Electricity Company needs for parts and services have been growing over the years to maintain a reliable supply of the power to the various stakeholders. The company prepared a detailed list of opportunities in the manufacturing of the various spare parts required for the new projects as well as the maintenance. Summary of the various parts are listed in the following table and classified based on the business line and detailed in the following informative booklet: https://www.se.com.sa/ar-sa/Business_Document/localization/12_2_18_SE_Industrial_Investment_Opportunities_Booklet_2018_Web_Spreads.pdf

1 – DISTRIBUTION

Opportunities

Insulators of different types, Arresters, Cut-out fuses, Rods, Clamps, Accessories, Smart meters, Breakers,

Regulators, Boxes, Re-closers, Panels, Switches, Switchgears and Other spare parts.

2 – GENERATION

Opportunities

Vanes, Blades,

Fuel Additives and Other items

3 – TRANSMISSION

Opportunities

Insulators, Cables & conductors,

Transformers and Switchgears

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SECURITY & DEFENCE (AFED PROGRAM) The security and defence sector offers a wide range of opportunities to locally manufacture their consumables spare parts and supplies. A dedicated division is established to support investors interested in locally manufacture the required parts and supplies. Based on achieving the required quality and competitive prices, long-term contracts can secured with the various units in this sector:

1- Directorate Of Civil Defence – DCD

2- Medical Services Department – MSD

3- Royal Saudi Land Forces – RSLF

4- Border Guard – BG

5- Military Industries Corporation – MIC

6- Facilities Security Forces – FSF

7- General Security Aviation Command – GSAC

8- Royal Guard Regiment – RGR

9- Royal Saudi Air Defence Forces – RSADF

10- Royal Saudi Air Forces – RSAF

11- Royal Saudi Navy Forces – RSNF

12- Saudi Emergency Forces – SEF

13- Special Security Forces – SSF

14- Ministry Of National Guard – SANG

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7. RECOMMENDATIONS

The local content initiative offers a great opportunity for the manufacturing sector in Bahrain to expand in the Saudi market and benefit from the various incentives and support programs in the five categories covered in this report. The opportunity is valuable to the existing manufacturing industry to expand or extend their manufacturing facilities to further manufacturing stages in the Saudi market. The same opportunity is available for entrepreneurs and investors interested in the manufacturing industry. It is recommended to build a communication channel between the manufacturing community in Bahrain represented by the Chamber of Commerce and Industry with their counterpart in Kingdom of Saudi Arabia and Nama'a entity as well as the five major entities supporting the local content program.