'Risk averse' Saudis look to manufacturing (page 1 of 2)

Oil and gas still drives the Saudi economy, but the country is now pumping investment into industrial cities as it strives to build a stronger manufacturing base.

Although there is a manufacturing sector in the KSA, its contribution to the country's gross domestic product is below expectations, said Khalid Sulaiman, Saudi's Deputy Minister for Industrial Affairs.

This is because industrial exports are low, as are employment levels in the sector. 'It's time to have another look as far as industry is concerned,' said Sulaiman, speaking at the Saudi Investment Forum in Dammam.

Industrial cities

The kingdom is pushing ahead with a number of industrial cities, all designed to house manufacturing businesses. The plan is to ensure they have the latest communications technologies in place too, with ubiquitous wireless and fibre optics to each building. Plus the government is trying to make it easier to set up and do business in the region.

The newest industrial cities include Sudair, a 257 million square metre city about one hour north of Riyadh. A master plan for the city is expected within six months, and contracts for a project consortium to develop it three months later.

In late November the government issued a tender for Jeddah 2, an industrial city that will host 400 companies and said that the 24 million square metre Dammam 2 should be completed within two years.
But while the government has big ambitions to improve its manufacturing base, there is a need for greater education both at school and university level and for vocational training to get the unemployed back into jobs.

Saudi Arabia suffers from high unemployment and Khaled Al-Ohali, Vice President of the National Industrial Cluster Development Program, said the country needs to create 3.6 million jobs over the coming 10 years. This means it must double the number of jobs created each year.

The program has identified five key manufacturing industries to develop and evolve. These are packaging, metals processing, consumer goods, construction materials and the automotive value chain. This would mean pushing into areas such as manufacturing car seats or tyres or value added processes for metals.

Vocational training

To support these industries, 160 vocational training centres are being set up over the same 10 year period, designed to give workers key skills in these sectors. In the technology sector, which is also seen as a growth market for the future, companies are also investing in skills - Cisco for instance recently set up a networking university in Saudi Arabia.

But a concern for Saudi Arabia is the lack of internal skills in the country and its reliance on importing them instead. In some areas, this is being tackled by setting quotas to ensure a set percentage of employees within a company are Saudi, but to an extent, this is putting the cart before the horse.

While setting minimum levels for Saudi nationals will help push up employment, if they are not educated to do the essential, higher skilled jobs, companies will hit their quotas through low-skill, low paid roles, and continue to bring in highly skilled people from other countries to fill the key positions.

Looking at the IT sector in the kingdom, Nabil Kassem, Vice President and MD of Invensys Middle East, said that while it was important to build a workforce that is Saudi, it would not happen 'without deliberate planning or investment'.