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National Industrial Strategy for EnhancingCompetitiveness and Diversification

2020 Vision for the

Kingdom of Saudi Arabia

Presentation By

ENGR. AHMED M. AL SADHAN

Director, National Office for Industrial Strategies & Policies

MINISTRY OF COMMERCE AND INDUSTRY

First Steering Committee Meeting Riyadh, 7 December, 2005

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We have a consensus on the way to the Future

Diversify the Economythrough industry

Rapidly build human resources

Expand public services

Encourage expansion of private sector

Streamline public sector/governance structures

We cannot continue to live off oil-revenues forever!

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Why? It is a response to the global challenges and the

dire need of sustainable welfare to our people

i. Fierce Global Competition Malaysia: prime location for ICT manufacturing

India: leader in knowledge-intensive technologies

China: the giant workshop of the world

Brazil: agricultural and industrial super-power

Finland: location for high-tech clusters

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ii. Low Relative Domestic Performance

UNIDO diagnosis shows that performance is poor

MVA share in GDP is around 9% (very low)

- In Malaysia and China it is around 35% ; even Egypt is 20%

Manufactured exports/total exports has declined

- From 24% to 20% (1990 to 2000)

We have not improved beyond 1980

- We have actually moved backward from 1990-2000

We have far to go; rising oil revenues have hidden the reality of industrial

stagnation

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Can Saudi Arabia be a dynamic economy?

We have excellent resources

We have windfall revenue from oil & gas

Very high quality infrastructure

Strong in some industries: petrochemicals, plastics,

glass, electrical equipment, chemical products

Already linked to global production networks

High income society, large domestic market

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Also WTO entry is not a constraint

KSA already faces competition in home market

-Protection levels are low ~ 5% for most

product lines

Many industrial exports are growing

WTO entry will provide further stimulus for

growth through competition

WTO entry will create a stable regulatory

climate that could attract much more FDI

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What capabilities need to be built? Technological strengthin education and industry

The key to success in India, Finland and elsewhere

An innovative-entrepreneurial business culture

Globally competitive industrial clusters

Strength in petrochemicals is fine, but not enough

High-levels of human capital in Saudi workforce

High-tech physical capital isnot a substitute for humancapital

Modernize public sector governance structures

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What benefit do we gain from the above?

We raise the technological capability of Saudi society

We raise quality of education and training

We raise the technological competence level

We build high-level skills in workforce

We raise organizational & operational efficiency

We intensify the innovation level in industry

In short: We transform ourselves into an advanced,

knowledge-deploying industrial society

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How do we move to knowledge-based technologies?

Build educational and training systems to support

industrys move to higher-technology production

By encouraging firms to produce high-tech goods

By raising the technological level of manufacturing industry

Technologies that yield higher value-added/worker

Re-organize public governance

Provide other public support for industrial renewal

R&D, standards, quality control, consulting services

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Our strategy for building human capital

Build competitiveness in manufacturing industry

Raise productivity, technological level and quality

Thereby expand exports and domestic market share

Focus on cluster development in selected areas

Clusters are the natural units of industrial dynamism

Promote technology-based SME clusters

Grow a national innovation system to support cluster development

and SME expansion

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National Innovation System & Global Linkages /

Industrial Policy Ingredients

Link-up with global value chains, through FDI

Strengthen university-industry linkages

Through the national innovation system

Encourage application-oriented research through anincentive system

Build international university linkages

Streamline public sector & regulatory structures`

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Thank You!Together For Successful Industrial

Strategy Implementation

Ministry of Commerce and Industry

First Steering Committee Meeting Riyadh, 7 December, 2005

4. Vision 20202 for KSA

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