NIDLP is one of 13 Vision Realization Programs, trying to transform Saudi Arabia into an industrial powerhouse and a global leader in logistical services by integrating growth across the four key sectors of mining, industry, logistics and energy. The overall NIDLP is trying to get by 2030 a boost of the contribution to $320 billion; stimulate investments worth more than $426 billion in the target sectors; increase the volume of non-oil exports to over $260 billion, as well as adding 1.6 million new jobs to the labor market.
As always, the presentation and launch event was already a showcase of publicity by Saudi Arabia, as it was combined by the signature of 37 agreements, slated to be worth $53 billion, while officials announced 29 other agreements, worth $960 million. The figures are somehow diffuse, as it should be taken into account that more than 25 agreements, presented during Future Investment Initiative 2018, with a total value of around $210 billion, are partly in the predictions for 2030. Around $165 billion are already taken as part of the NIDLP program. For 2019, the Kingdom has put in place 34 government agencies to work on the implementation of more than 300 initiatives under the program, of which more than 130 - with a total value of $16 billion - aim to deliver rapid growth in 2019. MBS’s core strategic groups have now urged that these initiatives focus on updating policies and regulations to quicken development and achieve tangible results within the next 90 days.
At the same time, a critical assessment of all still needs to be made. At present, the Kingdom is progressing on its path shown in Vision 2030, but still the high profile projects are still the main focus areas. The influence of US advisors is also clear, as the normal marketing statements with regards to promoting industrial development through policy and regulation development, human capacity building and research and innovation focused on the fourth industrial revolution, are making up the majority of statements by Saudi officials, such as Minister of Energy Khalid Al Falih and others.
When taking a sharp look at the SAR 204 billion ($54.4 billion) project signed as part of its recently-announced National Industrial Development and Logistics Program (NIDLP), a general trend is still clear. High profile technology or defense projects are mixed with further diversification of the oil-gas, energy and mining sectors. The list of current projects signed are:
- An agreement with French aerospace and defence company Thales and CMI of Belgium in military industry cooperation.
- The Saudi Export Development Authority and the Saudi Industrial Development Fund (SIDF) reached a financing agreement worth $840 million for the construction of the Trans-Saudi Arabia plant in Jazan for basic and transformational industries.
- Chemical companies Alrafiyah and Eastman Chemical of the United States agreed to set up a factory for hydrocarbon resins worth nearly $500 million.
- An agreement worth SAR 1.13 billion was inked to build a sodium plant, in addition to another deal to set up an industrial chemicals complex at total investments of SAR 1 billion.
- The Saudi Ministry of Energy, along with Saudi Arabian Mining Company (Maaden) and another foreign company, agreed to set up a hydrogen fluoride and polysilicone complex in Waad AlShamal worth SAR 500 million.
- The program is also offering investment in projects such as plants that manufacture rubber, catalysts and vehicles.
When looking at these projects, some skepticism is still valid. Even that Khalid Al Falih, who is one of the backbones of the Saudi Vision 2030 program and confidant of MBS, stated that the Kingdom aims to attract private sector investments worth 1.6 trillion riyals ($427 billion) over the next decade through an industrial development program aimed at diversifying the economy, reality is still little less positive. Al Falih already indicated that the current program is rather ambitious, but he indicated that there is still more than 10-years to implement them. Even that the Kingdom’s approach to integrate the mining, industry and energy sectors, clearly vital to the future of the Kingdom, two weaknesses are still visible. The first one is that the growth of the private sector will depend on attracting international investments into the Kingdom, as Saudi Vision 2030 is built on foreign investments and operations in the Kingdom, a break with the former international spending spree of Saudi Arabia to acquire products from abroad. Riyadh however is still feeling the negative repercussions of the ongoing Khashoggi murder, as investors and institutional investors have become wary of the possible negative fallout. Additionally, international companies are facing a major hurdle to invest in the Kingdom, as one of the main principles of Saudi Vision 2030 is either IKTVA (In-Kingdom Total Added Value) or Saudization. At present, for the majority of new industries or high-tech projects not enough Saudi specialists or workers are available, even not when looking at the still extreme high unemployment rates of Saudi youth.
Another criticism is that the focus of an overwhelming majority of projects is high profile or infrastructure related. As Saudi Transport Minister Nabeel Al Amudi stated NIDLP would launch 60 initiatives in the logistics sector, including five new airports and 2,000 km of railways, and aims to attract more than 135 billion riyals of investments. The latter is needed, but at present only will bring in international construction and management companies to build, own and operate, but not resulting in a vast work pool availability for Saudi young people. The knowledge and experience to run or support these major new projects is at present not at all available in Saudi Arabia. Already, existing projects are still struggling to get the official levels of Saudis inside of their own projects or operations. Privatization, as presented to be one of the cornerstones of Saudi Vision 2030, is in principle a very good approach. However, no Saudi entity is able to run most of these new projects, while regulations or education is not yet tweaked to the future needs.
As long as Saudi Arabia is not yet willing to address the main underlying facts of its future challenges, aka the position of young Saudis, men and women, and the high unemployment rates, by setting up a full-scale private Small and Medium Enterprises (SMEs) sector, the effects of most of the current Giga and high-profile investments will be only partly successful. The main basis of any successful, diversified and sustainable economy, is based and built on a strong and very agile SME sector. Looking at the success of European and North American economies, the backbone for success is not high profile companies, such as Apple, Google, Uber or General Dynamics, but smaller entities, as they are providing the majority of jobs, technology innovation and options to counter future threats. Without investing in real small companies, focusing on High Tech, Fintech, Renewables, Food and Security, the Saudi economy will be build only again on large conglomerates or sectors not providing the needed 5-6 million new jobs for Saudi’s youth.
When looking at the future of Saudi Arabia, and taking MBS’s own words, the future is for the young. The future of the Kingdom is built by and for the young Saudis, currently looking up at MBS and his supporters to provide jobs, security and welfare. The latter is not going to be provided by the current projects presented, even that the impact of a multibillion/trillion investment scheme will be positive. Without setting up a versatile and sustainable supporting sector (SME) no real future is made. At present, the role of the government is still overwhelming, still based on a part rentier-state function.