Major Challenges Facing the Saudi Industry
At this juncture with the Kingdom marching into the rank of developed countries, industrialization remains the best strategic choice to accelerate the achievement of economic development objectives. However, with the formation of an economic climate characterized by openness; high competitiveness; proliferation of new economic trends; information and technology innovations as well as other features of globalization, numerous challenges are faced by economies and business activities worldwide. Accordingly, the future of the Kingdom's industrial sector and, in turn, the role of the SIDF as a financing institution to this sector, are facing major challenges. Hence, several key elements have emerged as important challenges to the future of Saudi industry. The following is an overview of some of the most daunting challenges:
Upgrading the international competitiveness of Saudi industrial products is necessary, not only to capture a share of international export markets but also to maintain and enlarge the market share of the domestic market. Meeting this challenge successfully will necessitate raising the productivity levels within the industrial sector in the Kingdom to global standards. One of the most important challenges in achieving this goal is the changes in the cost structures of the industrial sector. To adapt to these changes, industrial firms need to adopt new production techniques that raise their economic efficiency and rationalize the use of energy.
Nowadays, developments and innovations in international markets and technology are rapidly advancing, posing major challenges to business sectors worldwide, especially in industrial sectors. To face such challenges, it is important to create flexible mechanisms for management, design, production, marketing and all other aspects of the industrial business in the Kingdom.
Technology plays a critical role in increasing productivity. Thus, it directly affects the competitiveness of industrial products. Accordingly, the establishment of a solid base for technology is of paramount importance in planning the future of industry in the Kingdom. One of the most important challenges in this area is the adoption of emerging technologies and Industry 4.0 (the fourth industrial revolution). In this regard, there is still a big room for Saudi manufacturing and industrial companies to gain a competitive advantage and increase performance and productivity through Industrial Automation. So, the Kingdom needs to improve the technical capabilities of its national industries notwithstanding achievements already evident in the field of technology transfer. More importantly, however, is the urgent need for positive concerted efforts on the part of those directly concerned with industrialization to adapt and develop technology already available e.g., by means of research carried out by collaboration of industrial corporations with universities and techno-scientific institutions, or by attracting high-tech foreign investments.
As the Kingdom of Saudi Arabia is a full member in the World Trade Organization, an additional need has arisen for the country to adapt and comply with the rules of the Organization, which are binding on all member countries. Government policy continues to be the adoption of strategies that will maximize the benefits of membership of the organization and the nullification or mitigation of any adverse effects. Moreover, it will be necessary for such strategies to take into account new future challenges within the framework of the Organization's regulations, and the emergence of new issues such as environment, labor and others.
It is certain that the current concern on environmental issues will gain growing momentum in the future. Therefore, maintaining the industrial environment while increasing efforts and developing the requisite technology to contain the adverse effects of industrialization, pose a formidable challenge to the industrial sectors and units in the Kingdom.
The skills and quality of the industrial workforce are regarded as vital factors within the framework of industrial development and the competitiveness of Saudi industry in the future. In order to develop Saudi manpower capabilities, it is necessary to revise and intensify the fields and quality of technical education and vocational training, so that their output would match the requirements of industrial corporations in all specializations.
It hardly needs reiterating that improvement of the performance and productivity of industrial enterprises depends on the efficiency and quality of the management of such enterprises, a factor of crucial importance in the face of growing to international competition and rapid developments in marketing and technology. Moreover, there is also an urgent need to give special attention to this factor in the case of small and medium industrial enterprises, which constitute the majority of the operating Saudi industrial plants.
As known and observed from modern industrial management experiences, vertical integration undertaken by specific industries (in the same factory) may not achieve their presumed benefits. Concentration on the basic activity of the specialized product might be affected due to lowered efficiency and higher operational costs. In some cases, such factories lose their share of the market. Therefore, large factories in particular should ensure the viability of vertical expansion and compare it with integration with other factories, especially local ones, in terms of securing their input needs, so that they do not lose focus on the development of their basic products and ability to compete in the local and export markets.
Despite the notable achievements of the industrial sector in the Kingdom, its overall contribution to the GDP is still less than aspirations. To ensure a more effective role for the industry in the country's economy, there is a need for intensifying channeling of resources and investments, particularly in the manufacturing industries sector. To achieve this objective, admittedly a challenging one, national and foreign private entrepreneurs must work in collaboration with government efforts to improve the Kingdom's business and investment environment for raising investment levels in this sector.