Industrialization in Saudi Arabia has witnessed a steady development, during which distinguished accomplishments were achieved. These are attributed to the importance of the industrial sector and the support it receives from the government owing to its role in achieving strategic and economic goals of the country. The efforts exerted by the government for the support of industrial development covered several basic spheres including implementation of required infrastructure, construction of Jubail and Yanbu industrial cities as well as other industrial cities in various regions of the Kingdom, establishment of the Saudi Industrial Development Fund (SIDF), and provision of other industrial incentives. The Kingdom has also recently launched the National Industrial Development and Logistics Program (NIDLP), one of the most important programs of Saudi Arabia's Vision 2030, which aims to help the country join the ranks of leading industrialized nations. The response and cooperation of the private sector with the governmental plans and efforts have an effective impact on the achievements of the industrial development. In the following, we review, some of the industrial progress indicators in Saudi Arabia over the past years.
1. Progress in Number of Factories, Total Finances and Number of Employees
The government has attached great importance to the industrial development by providing all kinds of encouragement and facilities to the industrial sector. As a result, the Saudi industry has made significant progress that was clearly manifested in the growth of industrial investment since the establishment of Saudi Industrial Development Fund (SIDF). The following table illustrates the progress in the number of producing factories, volume of investments and number of employees between 1974 and 2018, broken down by major sectors.
Operating Industrial Units by Number, Total Finances and Employees 1974 – 2018
|Manpower No.||Total Finance (SR’ Million)|| Factory No.||Industrial Activity|
|122||159,768||73.4||60,735||23||791||Manufacture of Food Products|
|208||43,923||59.7||22,607||17||173||Manufacture of Beverages|
| - ||17,009|| - ||5,786||1||94||Manufacture of Textiles|
|187||12,971||3.9||1,101||4||102||Manufacture of Wearing Apparels|
|9||2,370||0.6||538||1||28||Manufacture of Leather & Related Products|
|175||9,161||43.8||1,760||4||119||Manufacture of Wood and Cork, Except Furniture|
|846||36,937||153.4||13,911||12||266||Manufacture of Paper and Paper Products|
|18||8,684||56||3,340||9||64||Printing & Reproduction of Recorded Media|
|3,202||13,304||300||76,151||2||87||Manufacture of Coke & Refined Petroleum Products|
|1,578||101,098||1,804||577,251||12||725||Manufacture of Chemicals & its Products|
|-||10,346|| - ||6,138|| - ||45||Manufacture of Basic Pharmaceutical Products|
|522||99,507||107.4||30,653||9||997||Manufacture of Rubber and Plastics Products|
|1,813||200,702||1,499||104,572||24||1,650||Manufacture of Other Non-Metallic Mineral Products|
|29||77,568||3.6||79,508||2||378||Manufacture of Basic Metals|
|600||104,940||133||25,780||32||952||Manufacture of Fabricated Metal Products|
|217||4,179||27.8||968||3||34||Manufacture of Computer, Electronic and Optical Products|
|40||41,922||2.4||18,659||7||239||Manufacture of Electrical Equipment|
|5||40,376||9.1||20,093||9||227||Manufacture of Machinery and Equipment N.E.C.|
|25||15,162||6.3||2,967||7||159||Manufacture of Motor Vehicles, Trailers and Semi-Trailers|
| - ||5,023||0.1||834||1||9||Manufacture of Other Transport Equipment|
|509||24,490||39.4||2,615||22||299||Manufacture of Furniture|
|13||2,908||0.2||43,324||1||47||Repair and Installation of Machinery and Equipment|
Source: Ministry of Energy, Industry and Mineral Resources.
* Until the end of the first quarter of 2018
As indicated in the table above, the industrial base in the Kingdom has experienced a wide expansion over the past four decades. The number of operating industrial units has increased from 206 in 1974 to 7,630 at the end of the first quarter of 2018. Parallelly, invested capital has increased from nearly SR 4.3 billion in 1974 to around SR 1.1 trillion in 2018. At the same time, number of employees has increased from 10 thousand in 1974 to more than 1 million in 2018.
Looking into the sectoral composition of the operating industrial units in the Kingdom at the end of 2018, we note that the Other Non-Metallic Minerals Sector headed all other sectors in terms of operating industrial units, with 1,650 factories, representing 22% of total operating ones. Manufacture of Chemicals & its Products Sector occupied the leading position among the other industrial sectors in terms of total finances at about SR 577 billion, representing 52% of total finances of operating factories, followed by the Manufacture of Other Non-Metallic Minerals Sector with SR 105 billion, representing nearly 9% of total investment of operating factories. As for number of employees, the Manufacture of Other Non-Metallic Minerals Sector headed all other sectors with 200 thousand workers, representing 19% of total employment in operating factories.
2. Progress in Industrial Production:
The Kingdom has made significant progress in terms of production of manufacturing industries over the past years. As shown by the figure below, the gross domestic product (at constant prices) achieved by the manufacturing industries increased from SR 32 billion in 1974 to around SR 319.5 billion in 2018. Also, the growth rate of the manufacturing industries continued to rise throughout this period at an average of 5.2% per annum, which is considered one of the highest and most sustainable growth rates among other economic sectors. Owing to the substantial growth achieved by the manufacturing industries during this period, the contribution of the sector to the country's GDP increased from 3% in 1974 to 12% at the end of 2018. Parallelly, the contribution of the manufacturing industries sector to the non-oil GDP reached 7.5% in 2018. These ratios refer to the development of the industrial sector in the Kingdom and the diversity of the local industrial base, which contribute to the strength and solidity of the Saudi economy, in addition to the leading role played by the institutions concerned with industrial development, mainly the Saudi Industrial Development Fund.
Source: General Authority for Statistics
An important aspect in the development of the industrial sector in the Kingdom is indicated by the change that occurred in its sectoral composition over the past years, as the share of manufacturing industries (other than oil refining) in manufacturing GDP increased from 32% in 1974 (at constant prices) to 70% at the end of 2018. This trend reflects the dynamism of the Saudi manufacturing industries sector (other than oil refining). In this regard, we refer in particular to the substantial progress and expansion experienced by the petrochemical industries in the Kingdom over the last two decades under the auspices of SABIC.
The Statistics and analysis made by SIDF show that GDP composition of the manufacturing industries sector, (other than oil refining), has been a subject of a substantial growth throughout the past two decades. Since the early nineties, the Chemical Products Sector has been occupying the leading position of manufacturing industries' GDP composition, (other than oil refining). Other sectors that have been showing a notable growth include: Machinery and Equipment, Building Materials, and Food Products. At present, these four sectors contribute to the major part of the Saudi manufacturing industries' GDP.
3. Progress in Industrial Exports:
The Kingdom has devoted a great attention to the development of industrial exports in accordance with the government's comprehensive economic development strategies aiming at expansion of production base and diversification of income sources. Despite the relative recentness of the experience of private sector in the field of exports, Saudi industrial exports have made significant strides in this area. The Chemical exports have taken the lead in penetrating international markets and given a positive image of Saudi products in terms of quality and price. The table below shows the progress made in values and contributions of Saudi industrial exports during the period from 1995 to 2017:
Progress in Non-oil Exports: 1995 – 2017.
Source: General Authority for Statistics
The previous table shows that Saudi industrial exports have achieved rapid growth over the past years, with an annual growth rate of 9.3% during 1995-2017, rising from SR 22,558 million in 1995 to SR 159,057 million in 2017. The significant increase in the industrial exports in 2003 and 2005 could be attributed to the implementation of the GCC Customs Union and the Kingdom's accession to the World Trade Organization (WTO), respectively. As for industrial exports ratio to non-oil GDP, it increased from 6.6% in 1995 to 8.7% in 2017, indicating the importance of exports as a factor of industrial development. The following figure shows the composition of the Kingdom's non-oil industrial exports for the period 1995-2017.
Source: General Authority for Statistics
The above figure shows that the chemical and plastic exports represent more than two thirds of the total Saudi non-oil industrial exports. These exports have grown steadily as their value rose from SR 15,621 million in 1995 to around SR 16,698 million in 1997. However, their value declined to SR 12,718 million in 1999, due to a drop in oil prices in 1998 and 1999. Then, it surged substantially after that as a result of increasing production capacities and diversification of products, in addition to the improvement of oil markets, to record SR 116,609 million in 2017. The other manufactured exports (non-chemical and plastic) have also grown remarkably during 1995-2017, rising from about SR 6,937 million in 1995 to SR 42,448 million in 2017.