Saudi Arabia’s industrial sector: A key driver of economic development

The industrial sector in Saudi Arabia is one of the most important strategic sectors that contribute to achieving economic development and promoting economic diversification away from oil, in line with the Kingdom’s Vision 2030, which aims to increase the contribution of industry to GDP and enhance the competitiveness of Saudi products in global markets.

The Kingdom began developing the industrial sector in the 1970s, initially focusing on basic industries such as petrochemicals, refining, fertilizers, and iron and steel,due to the availability of natural resources such as oil and gas. Over time, the industrial base expanded to include manufacturing, food industries, mining, pharmaceuticals, and advanced technologies,making the Kingdom one of the largest industrialized economies in the Middle East.
Factors for the growth of the industrial sector
The growth of the industrial sector in the Kingdom depends on several key factors, most notably:
Attractive investment environment: The Kingdom provides financial incentives, tax exemptions, and financing facilities to local and foreign investors through programs such as the Saudi Industrial Development Fund (SIDF) and the “Partner” program to promote partnerships with the private sector.
Abundant natural resources: The Kingdom has vast reserves of oil, gas, and minerals, which supports the petrochemical and mining industries and opens up new opportunities for energy-based industries.
Well-developed infrastructure: Integrated industrial cities such as Jubail and Yanbu, the Third Industrial City in Riyadh, and the King Abdullah Economic Zoneprovide an ideal working environment for factories.
Continuous government support: Through incentive policies such as the National Industrial Development and Logistics Program (NIDLP), which aims to make the Kingdom a global hub in the industrial, energy, mining, and logistics sectors.
Innovation and technology: The Kingdom is investing heavily in developing smart industries, digital transformation, and advanced manufacturing such as robotics, 3D printing, and artificial intelligence,boosting productivity and competitiveness.
The most important industrial sectors in the Kingdom
The industrial sector in the Kingdom is diversified to include many vital areas, most notably:
Petrochemical industries: The Kingdom is one of the largest producers of petrochemicals in the world, with SABIC holding a large share of global markets.
Mining Industries: With huge reserves of gold, phosphate, aluminum, and copper, the Kingdom is working to develop the mining sector through Ma’aden, and to boost the production of basic minerals and raw materials.
Food industry: This industry has seen significant development in recent years, as the Kingdom is one of the largest consumer markets in the region, supporting the growth of local and international companies in this field.
Pharmaceutical industries: With the trend towards the localization of pharmaceutical production, the Kingdom has become one of the most promising markets in the pharmaceutical and biotechnologysector, as it seeks to achieve self-sufficiency and reduce dependence on imports.
Military industries: The Kingdom aims to localize 50% of military spending by 2030, boosting local defense industries through the Saudi Arabian Military Industries Company (SAMI).
Green industries and renewable energy: Investments are being made in mega projects such as green hydrogen, solar, and wind energy,as the Kingdom seeks to become a global hub in clean energy production.

With continued economic reforms, sustainability and investment in research and development, the Kingdom’s industrial sector is expected to witness accelerated growth in the coming years. The shift towards smart manufacturing, the expansion of local supply chains, and the increase in local contentwill contribute to enhancing the international competitiveness of Saudi products.

The Ministry of Industry and Mineral Resources launched the Standard Incentives Program to support Saudi industry, with a budget of SAR 10 billion, as part of the programs to stimulate the industrial sector in accordance with the Kingdom’s Vision 2030. The program aims to attract industrial investments, localize industries not produced locally, and reduce dependence on imports, thereby enhancing local content and maximizing the added value of the economy.

The Ministries of Industry and Investment have announced the allocation of SAR 10 billion for the Industrial Sector Standard Incentives Program, which aims to stimulate investment growth and achieve sustainable industrial development. The program includes coverage of up to 35% of the initial investment for eligible projects, up to a maximum of 50 million riyals. The program aims to attract investments in sectors such as the chemical and automotive industries, with a focus on localizing the industry and increasing local content. The program enhances the Kingdom’s ability to achieve the goals of Vision 2030.

What is the Modular Incentive Program?

Under Saudi Arabia’s Vision 2030, which aims to achieve sustainable economic development, localizing Saudi industry and boosting local content has become one of the government’s priorities. To achieve these goals, the Kingdom has launched several initiatives and programs that support innovation and develop local sectors, most notably the Modular Incentives Program

The Benchmark Incentives Program is a government initiative in Saudi Arabia that aims to encourage and stimulate the industrial sector by providing financial and non-financial incent ives to companies and investors who achieve specific criteria and goals. The program aims to improve the competitiveness of national industries, increase the percentage of local content, promote sustainability, and raise production efficiency.

Program highlights:

Targets industries that are not manufactured locally to attract investments and expand production capacity.
Provides financial incentives of up to 35% of the initial investment, with a maximum of 50 million riyals per project.
It aims to encourage the establishment of new factories or the expansion of existing ones, especially in priority sectors.
It relies on an electronic system to apply through the “San’ai” platform, with requirements including commercial records, financial statements, and feasibility studies.
Requires adherence to operational and implementation plans and periodic reports to ensure the achievement of project objectives.

Objectives of the Standard Incentive Program
1. Localize industries that are not produced locally:
The Modular Incentives Program targets industries that are not manufactured locally, which is critical to reducing dependence on imports and enhancing the Kingdom’s ability to produce local value-added products. By attracting companies to invest in these industries, the gap in national production can be reduced and imports of products that can be manufactured locally can be minimized.
2. Enhance local content:
The program works to increase the percentage of local content in Saudi industries, especially in strategic sectors such as petrochemicals and mining, by directing investments towards intermediate products instead of exporting them abroad. Enhancing local content can help create jobs for Saudis and open up new areas for technological innovation.
3. Supporting competitiveness:
The program focuses on supporting industrial projects that contribute to increasing competitiveness by providing financial incentives for projects that produce value-added goods. These incentives encourage companies to invest in research and development, which increases the competitiveness of Saudi products in the local and global markets.
4. Attracting local and foreign investments:
Attracting industrial investments by providing financial incentives of up to 35% of the initial investment, with a ceiling of SAR 50 million for the project, is one of the main objectives of the program. These incentives are aimed at attracting foreign and local investments to establish new factories or expand existing factories, thus contributing to the development of the national industry.
Application Mechanism and Requirements
1. Apply via the “Senaei” platform:
Investors can apply for the incentives through the “Senaei” platform, which was developed to facilitate procedures and speed up the application process. Applying through the platform requires fulfilling a set of basic requirements such as submitting commercial records, financial statements, and detailed feasibility studies for projects.
2. Evaluation of projects:
Submitted projects are evaluated according to a set of rigorous criteria that include economic viability and compatibility with the Kingdom’s strategic objectives in promoting industrial investment. The evaluation includes analyzing the economic viability of the project and its compatibility with national priorities such as environmental sustainability, optimizing supply chains, and increasing employment.
3. Commitment to operational plans:
In order to benefit from the incentives, investors must adhere to the operating plans and milestones agreed upon in the feasibility study, while submitting periodic reports on the project’s progress to ensure effective follow-up and evaluation of implementation.
Importance of the program to Saudi industry
1. Reduce dependence on imports:
The Kingdom’s imports amount to about 600 billion riyals annually, and this figure represents a great opportunity for the local industrial sector to increase its production. Through this program, Saudi industries can be incentivized to expand their production and reduce dependence on imports, contributing to achieving self-sufficiency in many vital sectors.
2. Supporting national supply chains:
The importance of supply chains was clearly demonstrated during the COVID-19 pandemic, as disruptions to global supply chains significantly impacted the economy. The program works to strengthen local supply chains by supporting industries that produce intermediates and final products that previously relied on imports, reducing economic risks resulting from global crises.
3. Making the Kingdom a global center for industry:
The Kingdom seeks to be a global industrial center by exploiting its strategic location, available natural resources, and advanced infrastructure. The Modular Incentives Program supports this vision by providing unprecedented government support that includes financial and legal incentives for industrial companies, as well as innovative financing opportunities for investors.

Incentives offered to investors in the Modular Incentives Program
The Modular Incentives Program is one of the main tools used by the Saudi government to attract investments and promote local industries. The program offers a range of incentives for investors in industrial sectors that contribute significantly to achieving the goals of Saudi Vision 2030. These incentives include financial, administrative, and technical benefits, and are designed to encourage companies to localize their industries and increase reliance on local resources. Some of the most prominent incentives offered by the program include:
1. Tax exemptions
Tax exemptions are one of the most prominent incentives offered to investors under the Modular Incentives Program. The government aims to reduce the tax burden on companies that adhere to the criteria of localization of industry and use of local materials and services. These exemptions can include partial or full exemptions from income tax for a specific period, helping companies cut costs and achieve greater profitability in the early years of their operations.
2. Direct financial support
The Modular Incentives Program offers direct financial support to investors who adopt industry localization initiatives. This support can include financing new industrial projects or expanding existing ones, including soft loans or grants to support investments in infrastructure and new technologies. Financial support also helps companies improve their production and innovation capabilities.
3. Facilitated access to industrial land
The government provides significant facilities to investors in terms of obtaining the industrial land needed to implement their projects. These facilities include granting land at competitive prices or waiving fees related to land acquisition, making it easier for investors to set up industrial projects without having to face financial or bureaucratic complications.
4. Supporting exports to global markets
The program seeks to enhance the ability of local products to compete in global markets. Through this support, companies are given incentives to expand the export of their products abroad. These incentives may include logistical support programs, assistance in opening new markets, and facilities in promoting Saudi products at international exhibitions. This initiative aims to improve Saudi Arabia’s trade balance and increase revenues generated by exports of local industries.
5. Training and manpower development
To enhance the skills of the local workforce, the program offers a range of incentives related to training and professional development. The government contributes to funding specialized training programs to raise the efficiency of workers in industrial sectors, leading to improved production quality and increased competitiveness. Companies are also encouraged to develop vocational training programs for Saudi employees, which contributes to achieving high employment rates by providing advanced skills in line with industry needs.
6. Administrative Facilities and Licenses
As part of the standard incentives, the government provides administrative facilities to investors by simplifying procedures related to the issuance of licenses and operating permits. This contributes to reducing the time and costs associated with establishing industrial projects. By reducing bureaucracy, the start-up process is accelerated and it is easier for investors to implement their projects quickly and efficiently.
7. Collaboration with research and technology institutions
The program promotes collaboration between companies and local and international research and technology centers, supporting innovation in national industries. The government provides support to investors who wish to adopt modern technology in their production processes, including allocating budgets for research and development, as well as funding technical innovations that enhance product quality and reduce costs.
8. Exemption from customs duties on imported equipment
The program grants several customs incentives, including exemptions or reductions in customs duties for imported industrial equipment. This exemption contributes to reducing the costs incurred by companies in the process of modernizing their equipment or adding new production plans, which enhances their ability to expand and grow in the local and international market.
9. Prioritization in government tenders
One of the important incentives that the program offers to investors is to prioritize government tenders for projects that are committed to enhancing local content. This initiative encourages companies to adhere to the program’s standards by giving them a competitive advantage when bidding for government projects, opening up more opportunities for them to obtain important government contracts.

The impact of the Modular Incentives Program on the Saudi economy
The Modular Incentives Program is not just a tool to support local companies, but is part of a larger strategy aimed at boosting the Saudi economy in general. The impact of the program goes beyond the industrial fields to include all economic sectors, contributing to the Kingdom’s Vision 2030 goals of economic diversification and sustainable development. The following are the main impacts of the program on the Saudi economy:
1. Increasing local production and reducing reliance on imports
One of the most obvious impacts of the Modular Incentives Program is to increase local production and reduce reliance on imports. By encouraging companies to use local raw materials and promoting industrial localization, the program contributes to raising the level of self-sufficiency in many sectors. This contributes to reducing the gap between local consumption and national production, alleviating the economic burden of importing goods and services from abroad.
2. Creating new job opportunities
The modular incentive program is one of the main factors in creating job opportunities in the Kingdom. With the localization of industries and the expansion of the local production base, the need for skilled and unskilled labor increases. This contributes to reducing unemployment rates, especially among young Saudis, and enhances their employment opportunities in the various industrial sectors. These opportunities also contribute to improving the level of national income and increasing local consumption.
3. Stimulating growth in non-oil sectors
One of the strategic goals of Saudi Vision 2030 is to reduce dependence on oil as a major source of income. The Modular Incentives Program plays an important role in stimulating growth in non-oil sectors by attracting investments into manufacturing and technology industries, such as raw materials, electronics, and renewable energy industries. This diversification of sectors contributes to minimizing economic volatility caused by changes in global oil prices.
4. Promote foreign direct investment
By providing a stimulating environment for foreign investors, the Modular Incentives Program contributes to attracting foreign direct investments to the Kingdom. Foreign investments help in transferring modern technology to Saudi Arabia, which contributes to the development and modernization of local industries. It also contributes to raising the level of competition in the local market and improving the quality of products and services. In addition, foreign investments enhance the Kingdom’s position as a regional commercial and industrial center in the region.
5. Supporting innovation and technological development
The Modular Incentives Program promotes innovation and technological development in local industries. By encouraging companies to adopt modern technologies and use best industrial practices, the program contributes to raising production efficiency and reducing costs. Supporting research and development in local companies opens the door to the development of new products and technological innovations that contribute to improving the competitiveness of Saudi products in international markets.
6. Increase exports and boost the trade balance
By supporting local companies in exporting their products to international markets, the program contributes to improving the Kingdom’s trade balance. Increasing exports means foreign currencies enter the Saudi economy, which helps strengthen the local currency (the Saudi Riyal) and promotes economic stability. Moreover, expanding into new markets helps Saudi companies diversify their markets and minimize the risks associated with relying on traditional markets.
7. Improving the structure of the national economy
Thanks to private sector investments in local industries, the Modular Incentives Program enhances the overall structure of the national economy. It contributes to the development of industrial infrastructure, including factories, warehouses, transportation, and logistics. It also enhances the Kingdom’s ability to meet its needs for goods and services locally, which strengthens the stability of the national economy in the face of global economic crises.
8. Expanding the SME base
The program is one of the main catalysts for the small and medium enterprises (SMEs) sector in Saudi Arabia. Technical and financial support is provided to these companies to expand their operations and enhance their competitiveness. Supporting SMEs promotes economic diversification, as they are a key driver of economic growth and contribute to increasing diversity in the Saudi labor market.
9. Stimulate environmental sustainability
With a focus on the use of local raw materials and sustainable technology, the program also contributes to incentivizing companies to adopt sustainable environmental practices. Companies are encouraged to use environmentally friendly technologies, reducing the environmental impact of various industries and enhancing the Kingdom’s position in the field of environmental sustainability at the international level.

Valeo Feasibility Studies and Business Solutions’ role in supporting the Modular Incentive Program
Valeo Feasibility Studies and Business Solutions is a strategic partner in the implementation of modular incentive programs, providing comprehensive feasibility studies and strategic recommendations to local and foreign investors. Through its specialized services, Valeo helps companies assess the economic viability of industrial and commercial projects, enabling them to make informed and effective investment decisions.
1. Assessing the economic feasibility of industrial projects:
Valeo prepares accurate feasibility studies that help companies analyze the potential costs and returns of industrial projects that benefit from standard incentives. This includes estimating the initial cost of the project, operating costs, and analyzing the future returns that will result from the expanded use of local raw materials and localization of industries.
2. Providing strategic advice for financing and government support:
When implementing a modular incentive program, Valeo provides financial advice to companies to help them obtain the government support and funding needed to take advantage of the incentives offered. This includes guidance on how to apply for incentives and the requirements required by government agencies.
3. Analyze economic impacts at the local and global level:
Valeo provides comprehensive insights into the impact of industrial projects on the local economy by analyzing the relationship between local production, exports, and local consumption. These analyses contribute to enhancing the utilization of regulatory incentives by providing marketing and production management strategies that contribute to improving the competitiveness of local products.
4. Supporting innovation and technological development:
As part of the implementation of modular incentives, Valeo helps companies adopt innovative technological solutions and advises on the use of sustainable production technologies that are in line with the Kingdom’s environmental and investment guidelines. This supports companies in achieving industrial localization goals more effectively.
5. Guide investors to feasible investment opportunities:
Through specialized feasibility studies, Valeo helps investors identify the most feasible investment opportunities in sectors that benefit from modular incentives, such as raw materials, manufacturing, and technology. This makes it easier for companies to take advantage of the government incentives offered by the Kingdom to support these sectors.

References:
Saudi Ministry of Industry and Mineral Resources – Standard Incentive Program
Saudi General Authority for Statistics – Economic and Industrial Statistics
Saudi Industrial Development Fund – Supporting Industrial Sectors and Development

Ministry of Industry and Mineral Resources: The ministry provides details on the modular incentives for the industrial sector and its objectives in enhancing the Kingdom’s competitiveness.(https://mim.gov.sa)
Al Arabiya: Report on the allocation of SAR 10 billion to activate modular incentives for the industrial sector, highlighting the program’s objectives in attracting investments and boosting local content.(https://www.alarabiya.net/aswaq/economy/2025/01/11)
Saudi Press Agency (SPA): An article explaining the allocation of 10 billion riyals to activate normative incentives, with a focus on achieving the targets of Saudi Vision 2030 in the industrial sector.(https://spa.gov.sa/N2240819)
Arqaam: An article explaining the details of the normative incentives for the industrial sector, including financial support for industrial projects.(https://www.argaam.com/ar/article/articledetail/id/1781727)