economic growth model - saudi arabia
DESCRIPTION
Develop Productive Capabilities in Saudi Arabia and Economic Growth ModelTRANSCRIPT
Feb 17, 2012Final Presentation
Saudi Arabia – Beyond Oil
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What We Will Show You Today
■ The Context of Diversification in Saudi Arabia
■ The Economic Opportunities We Have Selected
■ Jumping to the Next Tree – Our Strategy and How To Make It Happen
3
KSA’s History of Diversification
1970’s – Infrastructure drive (roads, ports, power)
1980’s/1990’s – Education, health, social services
1990’s/2000’s – Privatization, Saudization, re-modernization
of infrastructure
4
Economic Diversification Realized
Source: ISI Emerging Markets Database; 2008 revenues
Telecom & ICTFood & Consumer
Goods
Financial Services
SR 14 Bn SR 5 Bn
SR 12 Bn SR 8.4 Bn
SR 11 Bn
SR 47 Bn
SR 11 Bn
Oil-based Economy
Knowledge-based Economy
Chemicals & Industries
SR 151 Bn
SR 6.5 Bn
SR 15 Bn
SR 6 Bn
Shifting Focus of KSA’s Economy
Transport & Utilities
SR 22 Bn
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Further Room for Diversification
How Saudi Arabia got to 10% Diversification
•Foreign partnerships – a dominant theme through technical support and ownership
• Infrastructure and logistics capabilities
•Knowledge and skills development (e.g. Aramco scholarships)
•Well-established supporting industries (e.g. banking and telecoms)
•Slowly pulling away from the comfort of state support (e.g. privatization)
6
What We Will Show You Today
■ The Context of Diversification in Saudi Arabia
■ The Economic Opportunities We Have Selected
■ Jumping to the Next Tree – Our Strategy and How To Make It Happen
7
KSA’s Product Space
Pharmaceuticals
Organic chemicals
Oil-related engineering
products
8
Why Organic Chemicals?
Key Questions
Additional information needed? Market size/potential, competitive landscape, supply chain
Political and government agencies’ support required? Having pool of talent for this industry – most are in petrochem
Private sector engagement required? Partnerships with big chemical companies
Evidence that country took such opportunities? Demand from nearby countries for chemical products from KSA
Length of time to realize potential? 10-15 years
Strong regional demand for exportsGrowing internal demand for
chemicals
9
Why Oil-related Engineering Products?(Mechanical Tools for Building)
Key Questions
Additional information needed? Market size/potential, competitive landscape, supply chain
Political and government agencies’ support required? Developing internal manufacturing capabilities up to scale
Private sector engagement required? Technology transfer from US, German mechanical companies
Evidence that country took such opportunities? Fair level of exports taking place
Length of time to realize potential? 5-10 years
Diverse export marketStrong demand for mechanical tools
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Why Pharmaceuticals?
High export potentialGrowing demand for
pharmaceuticals
Key Questions
Additional information needed? Market size/potential, competitive landscape, supply chain
Political and government agencies’ support required? Developing R&D capabilities
Private sector engagement required? Partnerships with big pharma
Evidence that country took such opportunities? Recent growth in exports driven by generics players
Length of time to realize potential? 10-15 years
11
What We Will Show You Today
■ The Context of Diversification in Saudi Arabia
■ The Economic Opportunities We Have Selected
■ Jumping to the Next Tree – Our Strategy and How To Make It Happen
12
“The Chicken and the Egg”
What’s preventing us from jumping further?•Our comparative advantage is on upstream oil/gas and petrochemicals – not other kinds of chemicals, downstream activities, nor pharmaceuticals
•It’s a small market and we do not have the scale so let’s just import these products from other countries
•We do not have the people, processes, systems (i.e. capabilities) to move to the new industries
•Change is slow in Saudi Arabia, so why bother?
However, the government has the resources to move into other industries in pursuit of diversification, jobs creation and knowledge-based growth
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From One Tree to the Next…
Target State
Acceptance
AbilitiesAuthority
Our Strategic Framework
Diversification Focus
From industrial chemicals to organic chemicals…
From oil-related engineering products importer to exporter…
From polyethylene to pharmaceuticals…
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Our Strategy – Defining Our Sources of Authority
Authority
•Full support of the King for all diversification efforts
•Creation of an empowered industrial zone per target industryLed by Ministry of Commerce
With authority from the King to coordinate with other agencies and get things done
One-stop shop
Industrial Zone Authority
Ministries
UniversitiesForeign Partners
Private Sector
Suppliers
Customers
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Industrial Zones
Jubail, Yanbu, Maaden, Industrial Cities (Riyadh, Jeddah, Dammam, etc.)
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Our Strategy – Developing the Required Capabilities
Abilities
•Deal-making capabilities: look for great deal-makers
•Talent development
•Foreign partnerships focused on R&D and capability building
• Implementation capabilities, monitoring and continuous improvement
Vocational Schools
Saudi Business Families
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Our Strategy – Generating Buy-in from Top to Bottom
Acceptance
•Acceptance at the top – Highlight the benefits: job creation and business opportunities and involve broad groups
•Acceptance at the implementation levels – PDIA to solve accountability, incentives and change management issues
Stakeholder alignment and “roadshows”
Change management required
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Saudi Arabia as a Successful Diversification Case Study
Pharmaceuticals
Organic chemicals
Oil-related engineering
products
19
Thank You!
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A Point on Services…
We see significant opportunities to expand existing capabilities and create new capabilities in the service sector to support economic growth
Services30%
Agriculture3%
Industries (incl. oil)67%
Saudi Arabia GDP split
Opportunities in Services
• ICT
• Transportation and Logistics, Shipping, Port Management
• Financial Services
• Real Estate
• …