Features

A worker at Pan Gulf Industrial Fabrication, one of several industrial companies located in Jubail I

A worker at Pan Gulf Industrial Fabrication, one of several industrial companies located in Jubail I



Private sector key to Saudi Vision 2030

Implementing privatisation and developing SMEs, apart from developing national industries and services, are seen crucial to transform the kingdom’s economy

May 2017

Private sector development in Saudi Arabia’s Eastern Province may finally pick up the pace as the kingdom continues its reforms push, with a thrust on privatisation and economic diversification.

Saudi Minister of Finance Muhammad Abdullah Al Jadaan told a meeting at the Eastern Province Chamber of Commerce that the government will fund the private sector with $53 billion in the next four years.

Jadaan also said that citizens and Saudi companies will not be taxed as part of the ambitious reform plan. He also confirmed that value-added tax (VAT), which will be introduced next year in line with other GCC nations, will “not be raised above 5 per cent before 2020”.

Jadaan highlighted that, to achieve the economic vision for 2030, the non-oil sector should achieve an annual growth of 8.5 per cent and a GDP increase by $400 million. The Chamber of Commerce received Jadaan and Minister of Commerce and Investment Majed Bin Abdullah Al Qasabi at an interactive session between the ministers and businessmen in the Eastern Province to ensure the importance of the role played by the private sector to achieve Saudi vision 2030.

 

AMBITIOUS TAX REFORM

Jadaan confirmed that no tax will be imposed on the profits of companies or the incomes of citizens until 2020, and that the percentage of added value tax will remain at five per cent until then.

He said the financial dues owed to contractors, suppliers and importers will be paid within a maximum period of 60 days from the date the entitlements are due.

He also explained that during the years 2015 and 2016, the kingdom laid down many financial and economic policies and implemented a number of measures that are in tandem with the policies of the biggest economies of the world.

These measure include partially reforming the prices of energy products, amending some government fees and stopping several allowances so as to review them and divert them to those who deserve them.

He pointed to the success achieved by the programme for the issuance of international bonds with the increasing global demand that exceeded $50 billion.

Meanwhile, Qasabi stressed the role of the private sector in achieving Vision 2030.

“By the year 2030, the Ministry of Commerce and Investment aims to raise commerce and investment in the kingdom to the top ten in the global competitiveness index. The kingdom should become one of the most important 15 economic systems in the world,” Qasabi stressed.

Saudi Aramco, headquartered in Dhahran, Eastern Province, is at the centre of the latest reforms push

Saudi Aramco, headquartered in Dhahran, Eastern Province, is at the centre of the latest reforms push

Qasabi said that foreign investment will be increased from 3.8 to 5.9 per cent of the GDP, and the contribution of small and medium enterprises (SMEs) in the GDP will be increased from 20 to 25 per cent.

On motivating the private sector, Qasabi said that the ministry is developing the regulations and bylaws so that they attract more global investments and are globally competitive.

“The ministry is striving to bolster competitiveness, improve business environment and develop SMEs, apart from developing national industries and services,” Qasabi said.

The aim is also to implement privatisation and raise the awareness of consumers and traders together.

The open meeting was hosted by Asharqiyah Chamber of Commerce and Industry and moderated by the deputy chairman of the Board of Directors of the Chamber Muhammad Bin Saad AlF arraj.

He drew attention to the fact that the approach of the coming stage will be to adopt stable policies as a vision for the stage. Therefore, no backdated policies will be issued. The private sector will be supported through incentive packages estimated at SR200 billion within the coming four years.

 

INDUSTRIAL CAPITAL

The Eastern Province is the most industrialised part of the kingdom with more than 86 per cent of country’s basic industries located there. The province generates 60 per cent of the Saudi Arab’s total GDP, which makes it the second-largest economy in the Middle East, and the industrial capital of the region.

According to reports, over the past two years alone the Eastern Province has brought in approximately $150 billion in industrial investments. Such an inflow of capital has been largely down to the presence of Saudi Aramco in addition to other international companies.

In fact, investment in engineering works like the King Fahd Bridge, which connects Bahrain to the Eastern Province, has facilitated commerce and trade to a great extent. The Eastern Province is also linked to the kingdom’s other provinces as well as to strategic western ports on the Red Sea, including Jeddah.

 Industrial areas in the cities of Dammam and Al Jubail represent significant achievements and unique development in the entire region. The administrative and territorial division of the Eastern Province includes 10 districts. The largest cities include Dammam, Al Hasa, Al Jubail, Ras Tanura, Dhahran, Al Khobar, and Al Qatif.

The biggest of these is located in Jubail Industrial City, which has become a global hub for the petrochemicals industry and is also home to Saudi Basic Industries Corporation (Sabic) – a diversified manufacturing company, active in chemicals and intermediates, industrial polymers, fertilisers, metals and other products.

It is estimated that around a quarter of all the kingdom’s factories are situated in Eastern Province. Aside from Jubail, there are other flourishing industrial cities, including Dammam 1st Industrial City, which comprise of around 120 factories and 14,000 employees, and the Dammam 2nd Industrial city located on the Dhahran-Ahsa Highway, which contains 340 factories and 75,000 employees. These cities are manufacturing hubs of products like paints and coatings, building materials, paper, electrical materials, furniture and medical supplies and several others.

In 2011 General Electric established its Energy Manufacturing Technology Center at the 2nd Industrial City, one of the company’s largest world-wide operations, while other major investors in the industrial sector include Boeing, Halliburton, Dow Chemical, Alcoa and many more international companies.

Howeever, heavy industry and manufacturing are not considered the only vehicles of economic diversification in the province.  Agriculture plays a significant part with the cultivation of various types of dates, fruits and vegetables forming a large segment of Eastern Province’s economy in addition to a large and diverse fishing industry.

The Province also boasts of the Dammam Metropolitan Area (DMA), which is Saudi Arabia’s fourth-biggest urban area, with a population of 1.7 million spread across the neighbouring cities of Dammam, Al Khobar and Dhahran.

With a population of 4.1 million, Eastern Province represents 27.6 per cent of the whole area of the kingdom, making it the largest region in Saudi Arabia and a prominent gateway to and from the country.

A strategic province, it extends from the borders of Kuwait and Iraq in the north to the desert of Al Rub Al Khali in the south, where the country shares borders with Yemen and Oman. It also has land and/or sea borders with Oman, the UAE, Qatar and Bahrain.

The province achieved enormous economic power and stability following the discovery of substantial oil reserves. Today, it has more than 25 per cent of the entire oil reserves in the world. This discovery brought huge investment in modern roads, ports, airports, communications and financial services, and acts as a catalyst for economic growth.

The unique feature of Eastern Province is its massive natural resources, mainly oil and gas. Saudi Arabia has over 100 oil and gas fields and the eight fields in the Eastern Province account for a 50 per cent of country’s total oil reserves.

Ghawar oil field, estimated to have 70 billion barrels of crude oil, is the largest oil field in the world. The Saffaniyah field (including Khafji and Hout, the world’s largest offshore oil field) is expected to have 25-35 billion barrels of crude oil.




More Stories



Tags