Features of Industrial Policy
The Saudi Government’s economic policy is designed to lessen
dependence on the crude oil sector by diversifying the productive
base of the economy The petroleum sector will, however, continue to
occupy the primary place, at least for the near future, because its
large revenues generate the main financial resources for social and
economic development projects.
GOALS
Objectives for the manufacturing sector
1. Increase the economy’s capacity to produce a range of commodities
at costs that will enable it to compete effectively in domestic and
foreign markets.
2. Exploit the advantages of low-priced energy inputs, the abundance
of derivatives extracted from petroleum and the agricultural,
mineral and fisheries resources that are available, to diversify the
industrial base.
3. Encourage full utilization of capacities of the private sector in
the manufacturing industries.
4. Expand and deepen links with international technology utilizing
companies.
5. Promote balanced regional industrial development.
6. Raise industrial productivity by encouraging high-capacity
utilization.
7. Lessen the dependence of industry on non-Saudi labour by
intensifying education of Saudi-citizens and promoting on-the-job
training of Saudis.
8. Intensify cooperation and economic integration within existing
industries.
INDUSTRIAL POLICY AND INCENTIVE MEASURES
To achieve the maximum economic and social benefits from industrial
development for Saudi nationals, and to familiarize ministries,
government departments and the business community within and outside
the Kingdom with its policy on industrial development, the
Government announced the main principles of its industrial
development policy in 1974, as stated below:
1. The government aims to encourage and expand manufacturing
industries, including agricultural industries, which can contribute
to the increase of national income and raise standards of living and
employment. The government will adopt plans which, while increasing
the national income, will reduce the effect of outside economic
disturbances on the Kingdom and broaden opportunities to increase
the abilities and technical capabilities of the people of Saudi
Arabia.
2. Since the economy is based on competition among private
commercial and industrial enterprises, the government realizes that
the long-term objectives of industrial development can be more
effectively attained if the business community bears the
responsibility of implementing industrial projects. Accordingly,
businessmen who are prepared to take the risks of success and
failure, motivated by prospects of profits, will enjoy the full
support of the government in the preparation, establishment and
operation of industrial projects beneficial to the Kingdom. The
government is also ready to supplement the: efforts of businessmen
in the private sector by establishing, financing and participating
in the management of large industrial projects requiring wide
technical experience that the private sector cannot undertake alone.
3. The government considers competition, which addresses the
interests of local consumers, to be the best means of influencing
industry towards beneficial manufacturing and market-oriented
projects. The government also considers that competition is the most
effective means for selecting investment schemes that meet market
requirements, as it encourages low-cost production and fair prices
for both consumer and producer. However, the Government will not
permit harmful foreign competition, such as dumping.
4. To ensure that businessmen who want to participate in the
industrial development of the Kingdom have all the information they
need to identify, implement and operate feasible projects, the
government will, from time to time, familiarize them with such
industrial and feasibility studies, together with such other useful
information as may become available. The government will also
provide existing industrial establishments with available management
and technical services.
5. To encourage businessmen to invest in projects of prospective
benefit to the national economy, the Government is prepared to offer
encouragement and financial incentives to all industrial sectors.
This is to make it possible for every well-conceived and
well-managed project within this sector to realize reasonable
profits for its investors. The Government will grant the same
incentives to all projects within the sector, it being understood
that these incentives shall be given in accordance with the
regulations without delay.
The incentives may include the following:
a) provision of loans and participation in equity capital under
favorable conditions;
b) assistance to businessmen in the formation and organization of
new industrial companies;
c) provision of assistance in the selection of industrial projects,
the preparation of economic feasibility studies and evaluation;
d) operational assistance (technical, managerial and financial);
e) exemption from customs duties of imported machines, equipment and
raw materials;
f) exemption from taxes on the profit share to foreign partners of
the company as provided in the Foreign Capital Investment Act;
g) preference given to local producers in government purchases;
h) imposition of protective customs tariffs on competing imports;
i) granting plots of land for establishing factories in industrial
cities;
j) granting of subsidies for training Saudi employees;
k) assistance in exporting products.
6. To organize the assistance granted to industry and make it more
effective, whilst providing an atmosphere of security for industrial
investors and ensuring that they realize the desired benefit from
projects, the Kingdom is adopting the principle of licensing
industrial projects that exceed a specified size of invested
capital, employment or production capacity. It is understood that an
application for license shall not be refused except for practical
considerations relating to the supreme national interest or to the
national economy.
7. When the Government establishes large and important industrial
projects on its own initiative, it will encourage as much
participation as possible from the private sector. In such cases,
and in cases where the government participates in the capital of
private projects to supplement investment from the private
sector--in respect of industries other than those relating to
national security – it is the policy of the Government to sell its
share to the public in due course, if this serves the public
interest. In cases where the Government finds it necessary to assume
responsibility for the management of an enterprise owing to the
inability of businessmen to manage it successfully, it will
eventually hand these back to the displaced partner and not to a
competitor in the private sector.
8. In implementing its industrial policy the Government shall do the
utmost to avoid imposition of quantitative restriction or price
controls. The Government shall not impose restrictions except in
cases where competition cannot have an effective role, as in the
case of goods and services which, by their nature, are characterized
by monopoly.
9. The Government recognizes the right of the business community in
the industrial field to select, utilize and manage economic
resources, including industrial workers, insofar as this does not
contravene statutes in force, in order that the productivity of
industry may be raised to its maximum.
10. The Government welcomes foreign capital as well as foreign
expertise for participation in industrial development projects in
cooperation with Saudi businessmen. The Government recognizes the
benefits to the industrial development of the Kingdom by the entry
of foreign capital accompanied by administrative, technical and
international marketing capabilities. It assures investors that it
will always avoid imposing any restrictions on the entry and exit of
money to and from the Kingdom and that it shall continue its policy
based on the respect of private ownership in the Islamic Law
(Sharia).
11. The Government shall provide public utilities and make any such
basic arrangement as are necessary for the setting up of
economically feasible industries. Appreciating the dependence of
industry on the general development of the Kingdom, the Government
will promote the growth of all economic sectors to make local
resources available to producers in sufficient quantities and to
increase consumer purchasing power within an ever growing national
economy.
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