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 700 Participants Discussed Topics of Industrial Investment Opportunities, Challenges and Incentives at the Saudi Development Forum for Promising Regions (SDFPR), organized by SIDF in Riyadh

​The SIDF-organized SDFPR, held under the auspices of Finance Minister, H.E. Dr. Ibrahim bin Abdul-Aziz Al-Assaf, and Commerce and Industry Minister, H.E. Dr. Toufiq bin Fawzan Al- Rabiha, on 13-14 January 2015, at the Four Seasons Hotel in Riyadh,  discussed the industrial investment opportunities in the promising regions; the goals, policies, and incentives required to be in place for the development of the promising regions, and shed light on the roles to be played by the government agencies and private sector, particularly the major companies, in advancing the development of these regions.
 
More than 700 distinguished participants from the Kingdom and abroad attended SDFPR, including the 17th President of the Republic of South Korea, Honorable Myung-bak Lee, who was the guest of honor and keynote speaker, the Minister of Transportation, H.E. Eng. Abdullah bin Abdul Rahman Al Muqbel, the Minister of Communications and Information Technology, H.E. Dr. Fahaad bin Mutad Al-Hamad, and the Minister of Labor, H.E. Eng. Adel Faqih, along with a number of senior public officials, entrepreneurs  and chief executives of private sector companies.
 
The opening session was addressed by H.Es Ministers of Finance, Commerce and Industry,  Transportation, and Chairman of the Council of Saudi Chambers, Dr. Abdul Rahman Al-Zamil, and SIDF Director General, Mr. Ali bin Abdullah Al-Ayed.
 
In his address, Finance Minister pointed out that "the consecutive development plans aimed and focused on achieving balanced regional development by a set of  government agencies’ plans, policies and programs promoting development in the promising regions to maximize regional optimal utilization of the comparative geographical, demographic and economic advantages, thus allowing for an adequate distribution of the economic opportunities amongst the kingdom's regions". He added that "the Kingdom's economic policies have always been designed to cater for requirements and goals of the overall development. Indeed, financial, fiscal and structural policies have aimed at securing the financial and fiscal stability, thereby help creating an appropriate and stimulus environment for doing business. The success of these economic policies is manifested in the real GDP’s growth rate of nearly 3.6% in 2014, supported by strong performance of the private sector which grew at 5.7% and industrial sector’s growth of 6.5%, a remarkable rate making the industrial sector the second strongest performing business activity in 2014."
 
 
Referring to this year’s state expansionary budget despite the oil market fluctuation challenges, H.E. Al-Assaf stressed that "the kingdom will spare no effort to overcome these challenges. The budget reflects the state's determination not only to complete implementation of the development projects, but to allocate for more of such projects, concentrating on executing physical and social infrastructure in all regions, especially in less developed areas or promising regions, fitting them to accommodate more economic activities, qualitatively and quantitatively".
 
The Minister noted that " SDFPR coincides with the beginning of the 10th Five-Year Development Plan, which emphasizes the fundamental role of the industrial development in realizing the balanced development objectives, and that the financial policies will contribute to achievement of these objectives through Finance Ministry’s collaboration with Commerce and Industry Ministry to link the policies and objectives set forth in the 10th Five-Year Development Plan with the budget. The state is well aware, decades ago, of the importance of the economic diversification and enhanced overall development. To this end, the government has set up several specialized development Funds and launched many financing Programs, each for achieving a specific developmental goal. These  Funds and Programs  have provided loans totaling SR 587 billion since their inception, and they are expected to continue their lending role by providing about 74 billion riyals in loans to the entitled beneficiaries this year".
 
He pointed out that "the industrial sector, in specific, has been given a special attention by the Government of Custodian of the Holy two Mosques, as it is an essential option  for diversifying the economy, and its pivotal role in boosting the development of the promising regions. In context of the government support drive for industrial development, SIDF is considered to be one of the most important institutions in support of the development of the promising regions, which has become even more crucial following the Council of Ministers’ decision of 1432 H, granting investment incentives to the industrial projects located in the promising regions. Lending incentives were integrated  with the completion of the infrastructure projects in these regions. This in addition to other incentive policies, the most prominent of which include tax cuts by Zakat and Income Tax Department up to 15% of the foreign capital invested in industrial projects located in the promising regions. This tax cuts aim to increase foreign investments in these regions, with special focusing on the employment of the local citizens in any foreign project located in the promising regions, by providing encouraging tax cut by 50% of the annual training and employment costs for Saudi employees, besides the Saudi Credit and Savings Bank’s priority to financing small and medium projects in the promising regions. These incentives and efforts exerted collectively by the different government bodies have proven successful in attracting local and foreign investments to these regions. Over the period from the effective date of the Council of Minsters’ decision to the end of the last fiscal year, the number of loans granted to the promising regions reached 213 loans at a value of SR 9.5 billion. Although this figure is below expectations, yet it is a leap forward compared to the previous situation".
 
Al-Assaf concluded his address by inviting the investors to explore the lucrative opportunities for investment in the Kingdom’s promising regions, " as a result of the government's policies supporting balanced regional development, investors in various Saudi regions are now able to benefit from the same basic structures, services, and access to funding sources that are available to investors in the main cities".
 
In his speech, the Minister of Commerce and Industry highlighted the main procedures taken by the Ministry to boost setting up of industrial projects. He explained that "the issuing of provisional industrial licenses is automated, and done in one day, not to follow up with any other governmental body. Thanks to the provisional license, the investor is able to get a piece of land, and import equipment before getting the final licenses. Also, the time required by industrial investors to receive customs exemptions went down from 8 months to less than two weeks". He stated that the Ministry of Commerce and Industry is "currently offering online service of knowing the number of factories, activities, roles, products and their locations. The manpower related procedures have also streamlined. The Ministry is currently working with the competent authorities in order to facilitate the procedures of clearing the chemical materials required for chemical factories".
 
According to the Ministry's statistics, there are 6800 factories in the Kingdom with an investment portfolio of more than one trillion riyals, employing more than 935,000 workers, factories grew by 6% in 2014, and job opportunities increased by 10.8%. As for factories in the promising regions, he explained that Hail came first in terms of number of factories and loans, by attracting major factories and companies to the region, and that employment by factories located in the promising regions increased by  25% .
 
Al-Rabiha further stated that "industrial cities are being established in several promising regions. This step is accompanied by related investment incentives, such as ready-made factories, and subsidizing power and energy sources". He hailed the Ministry of Finance's support to the Saudi Industrial Property Authority (MODON) in recent years, aimed at development of the industrial cities in the promising regions. He also commended the SIDF efforts in attracting investments, and the enhanced support provided to industrial projects.
 
In his speech, the Minister of Transportation highlighted the vital role played by the transportation and communications sector in boosting the national economy and the economic development. He also exhibited several of the projects undertaken by the government, in order to achieve an inclusive development in all areas. In regards to the support given to the promising regions in specific, Al Muqbel pointed out that "among the various government initiatives was the establishment of economic and industrial cities in several regions, aimed at diversifying income sources, and promoting medium and manufacturing industries".
 
He added that "the Ministry included in its plans and programs the opening of many roads and intersections to facilitate the access to the economic and industrial cities. An example is the high way connecting Jeddah to Rabegh and Medinah, and the Haramain high speed rail serving King Abdullah's economic city".
 
He went on explaining that "so far, the Ministry executed 64,000 km of roads, and is currently working on an additional 22,000 km, which will help expedite the connection of the Kingdom's regions, as well as promote development efforts in remote areas". The Minister stressed also the importance of the rail road projects currently undertaken by the Ministry, and unveiled one of the Ministries' ambitious plans aimed at connecting all of the Kingdom's regions, and the Kingdom itself with neighboring states.
 
The Chairman of the Council of Saudi Chambers, Dr. Abdul Rahman Al-Zamil applauded this special initiative for hosting such an important industrial developmental forum. He noted that "although the infrastructure is available and advanced, and services are available in all of the promising regions, there are yet to be found any acceptable job opportunities for the Saudi youth in these regions". According to Al-Zamil, "the solution is to copy the SIDF's experience, by increasing the financial incentives for the projects taking place in the promising regions, such as extending the loan term from 15 years to 20 years, and boost the financing rate from 50% to 75% of the project's cost. In fact, results have shown that 50% of the number of loans approved by the fund, since the Cabinet's decision on increasing incentives in promising regions entered into effect till the end of 2013, were related to projects in less developed cities, knowing that this rate did not exceed 14% of the total loans granted by the fund prior to the implementation of the said decision. It is worth signaling that the number of job opportunities created by those loans in 2013 mounted to about 11 thousand direct jobs, and 33 thousand indirect jobs".
 
Al-Zamil added that "remote regions will become more appealing if we provide other incentives to the industrial and services sectors. With this said, the creation of acceptable job opportunities for Saudis in the fields of technical and administrative services, abundantly available in the operational and maintenance sector in the government's projects, such as hospitals, universities, schools, roads, civil and military institutions in these regions, depends on the saudization rate of this sector, by specifying the jobs reserved for Saudis, in each contract, as well as the salary, medical insurance, transportation fees and housing allowance, similar to what the private sector pays". He wished for this system to be applied in all of the Kingdom, thus creating more than 150 thousand real jobs in government contracts". Against this backdrop, Al-Zamil stressed on the importance for "both the government and private sector to collaborate in the execution of major or medium projects in the remote regions, in order to encourage the private sector to invest in these regions. One success story in this regards is the Saudi Basic Industries Corporation (SABIC) established in the seventies by the government due to the absence of a private sector in those times". He also called for "the creation of additional incentives for the promising regions, pertaining mainly to trainings leading to employment. In addition to spreading the currently successful implemented system, we should encourage the establishment of small projects, through the "Kafala" (sponsorship) program aimed at financing small and medium enterprises, as well as the Credit Bank's programs in the promising regions".
 
Al-Zamil concluded his speech by saying that : "Despite all the efforts exerted for the development process, we still need these efforts to continue, in order to spread the inclusive development, including the industrial development, all over the Kingdom. At to do so, we have two crucial paths to take: The first is to solve all technical or organizational problems, and overcome the challenges hindering the development process in the promising regions. The second is to earmark additional financial support and any other type of facilities, in order to encourage the private sector to maintain its efforts to boost the economy in these regions".
 
In his inaugural speech, SIDF Director General, Mr. Ali Al-Ayed, pointed out that "this Saudi Industrial Development Forum is a manifestation of the Government’s attention to undertake all that would promote prosperity and development in the Kingdom, and create decent job opportunities for its citizens Kingdom-wide. This drive is in line with the Kingdom's plans to diversify the national income, boosting the national economy by advancing the industrial sector to new heights that rank the Kingdom among the industrialized advanced countries".
 
He added: "Our gathering today is a new initiative by SIDF which has been playing for more than four decades the role of help implementing the government's policies aiming at the development of the industrial sector, and boosting its contribution to the national economy, in addition to providing medium- and long-term loans to industrial projects, along with providing financial, technical and marketing consultations. Since its inception, SIDF financed more than 2700 industrial projects Kingdom-wide with approved loans totaling SR 118 billion. SIDF's success in its task and the wide and increased demand for its services have resulted in repeated increment of its capital to SR 40 billion".
 
Al-Ayed added that "The Fund's initiative in hosting this Forum is consistent with our wise leadership's goals of giving a special attention to the industrial development in the promising regions. Indeed, the Forum is part of a series of initiatives taken by the Fund to help advance the industrial sector in the Kingdom, the last of which was the incentives of increasing  the values of loans to the industrial projects located in the promising regions, extending the maturity schedules of loans provided to these regional projects, as well as SIDF Board of Directors’ approval to raise the maximum lending limit for a single loan to the industrial projects located in these regions to SR 1.2 billion in contrast with SR 900 million to industrial projects located major cities. This set of incentives has led to increased share of the promising regions of the Fund loans to 48% of the total number of loans granted by the Fund, and about 40% of the total value of these loans, over the period from 2011 to the end of the fiscal year 2014, compared to less than 14% of the total granted loans, and 15% of their values".
 
Al-Ayed added that "in addition to the Fund's encouraging lending policies in these regions, it is contributing to the financing of the development of the industrial cities' infrastructure, support and logistics services projects inside these cities, such as housing projects, hotels, model factory buildings, sewage and drinking water treatment, gas distribution, transport and storage services, in order to enhance the capacities of these regions to attract new investments, and create an environment suitable to investors, employees and workers".
 
He pointed out that "We, at the SIDF, consider ourselves a part of comprehensive task force including all Ministries, public and private bodies and institutions which are striving to achieve the Kingdom's overall economic objectives. We believe in the ability of the Kingdom's experts to competently diagnose the situation on the ground in many economic fields. We are aware of "where we wish to get to". However, it all depends on our ability to soundly implement our programs, and achieve our goals, through concerted and joint efforts by all concerned parties; continuous coordination among them, the unceasing follow-up, and non-dependence. We hope that the Saudi private sector would play its role in exploiting the many opportunities that are readily available. Saudi companies and industrial groups have acquired a vast experience from setting up and operating of factories, as well as marketing their products. And thanks to their size, expertise and reputation, they are perfectly able to develop partnerships with international companies, with the purpose of establishing technologically advanced industries allowing them to boost their competitiveness in international markets, and increase the Saudi industry's exportation capacities. We, therefore, look forward to see these expertise utilized in the industrial development of the promising regions".
 
The Korean example
At the end of the opening session, the Forum's guest of honor, the seventeenth President of the Republic of South Korea, highlighted in his keynote speech the close relations between the Kingdom and the Republic of South Korea since the fifties.
 
He shed light on the Korean experience in the development field, which started with the development of the infrastructure, mainly roads and rail roads, and helped speed up and spread the development process to various regions. He, then, presented several main examples of the development process in some Korean regions, which might prove to be useful for the Kingdom’s promising regions. The Korean president stressed the importance of the industrial sector, and the impact it has on advancing the development process by contributing to sustainable economic growth, and enhancing the income sources. He added that, thanks to its successful implementation of outstanding and transparent developmental policies, South Korea has accomplished remarkable progress, and South Korea is now one of the most advanced country in the world, an overturn from the state of being a poorest country in the past, with a per capita income jumping from USD 82 in 1961 to USD 28,000 today.
 
The former head of the state praised the major change that the Kingdom witnessed in enhancing the income sources, mainly realized by the industrial sector. He highlighted the importance of individual initiatives for young businessmen, and the role of information technology in the development of the promising regions. He called for providing additional support to these initiatives, which are capable to gear with the local and international economic changes, such as those we see today following the oil prices fall.
 
 
Honoring the sponsor companies
At the end of the opening session, their excellencies Dr. Al-Assaf and Dr. Al-Rabiha honored the companies and institutions sponsored the event. They are Saudi Aramco, Saudi Basic Industries Corporation (SABIC), Ma'aden Company, Saudi Telecom Company, National Commercial Bank, the Savola Group, The Ben Laden Group, National Industrialization Company, Dallah Al-Baraka Holding Company, Mahmood Saeed Collective Company, Solb Steel, Saudi Industrial Property Authority (MODON), SEBCOM, Al Jazeera Bank, Middle East Electric Meter Factory (MEMF), Najran Cement Company, Arab National Bank, and Al Fanar Company. Media partners, namely Al-Arabiya TV, Al-Eqtisadiah TV, Al-Riyadh newspaper, Al-Jazeera, Al-Eqtisadiah and Okaz were also honored.
 
 

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