Words by Omar Soub - Senior Manager, Local Content and Procurement
Contributors: Adam Forgacs - Vice President, Head of Local Content Center of Excellence, Dani Bogari - Principal, Localization Practice Lead, and Franz Winter - Manager
Launched by His Royal Highness Crown Prince Mohammed bin Salman in 2016, Saudi Arabia's Vision 2030 is a transformative blueprint aimed at reshaping the Kingdom’s economy toward a more diversified and dynamic future.
Moving beyond its historic reliance on oil revenues, Saudi Arabia looks to a time ahead powered by industries such as tourism, entertainment, technology, and manufacturing. Innovation and sustainability are also central to this strategy, with significant investments being made in technology, research, renewable energy, and efficient resource management – all of which aim to enhance the quality of life for the Kingdom’s citizens and establish the Kingdom as a leading player on the global stage.
Part 1
Local Content: A cornerstone of Vision 2030
As Saudi Arabia pursues these ambitious Vision 2030 objectives, Local Content (LC) has emerged as a key focus area, playing a vital role in reducing reliance on imports, stimulating domestic industries, and enhancing economic self-sufficiency.
This whitepaper examines Local Content’s critical role in driving Saudi Arabia’s Vision 2030 objectives, highlights some of the key achievements to date, and offers strategies for policymakers and key national players to accelerate its development into the next phase.
Part 2
Why Local Content matters now more than ever for Saudi Arabia
Pandemics, geopolitical tensions, and logistical bottlenecks have exposed critical vulnerabilities in global supply chains. These events have shown us how relying on geographically distant sources can lead to delays, higher costs, and shortages of essential goods, underscoring the urgent need for greater self-reliance.
For countries like Saudi Arabia, which have historically depended on international sources for many of its supplies, the value of building robust local supply chains has never been clearer. By prioritizing Local Content development, the Kingdom aims to improve its economic resilience, reduce its reliance on foreign suppliers, and nurture its domestic industries. This approach not only protects against global uncertainties but also strengthens local businesses and, in turn, the overall Saudi economy.
Take the city of NEOM: it requires an enormous amount of construction materials, equipment, and skilled labor. Similarly, the King Salman International Airport, envisioned to be one of the world’s largest airports, demands a vast array of building supplies and specialized technologies. Without local production capabilities, the Kingdom is more likely to be exposed to supply chain disruptions, creating an increased risk of project delays and cost overruns. By investing in local production across key elements of the value chain, Saudi Arabia can mitigate these risks and smooth out the path to meeting the substantial demands of these projects.
One of the primary environmental benefits of local manufacturing is the reduction of greenhouse gas emissions from international shipping and long-distance transportation. Producing goods within the country can allow Saudi Arabia to progress its commitment to environmental and climate action, as long as it leverages sustainable technologies and renewable to power new local manufacturing. The Kingdom’s abundant clean energy resources (a topic discussed later on in this piece) put it in a strong position to localize key industries while driving carbon-reduction impact in parallel.
Part 3
The road so far: Key achievements in Localization and Local Content development
Achieving successful localization and local content growth requires a strategic focus on building local capabilities, fostering innovation, and improving collaboration and synergies. Historically, Saudi Arabia's localization efforts have been characterized by many split-out programs managed by different key national players. These programs, each with distinct objectives and frameworks, have sometimes led to inefficiencies and overlapping efforts. However, considerable progress has been made in recent years. While it cannot be covered in full here, we will provide an overview of some of the notable initiatives that have boosted Saudi Arabia’s local industries and played a key role in fulfilling Vision 2030’s strategic goals.
Vision 2030 aims to expand the role of the private sector in the Saudi economy. A key means of achieving this is the unification of various localization efforts under the umbrella of the Local Content and Government Procurement Authority (LCGPA). This central authority coordinates localization strategies and sets unified standards across various sectors. Additionally, the Local Content Coordination Council (LCCC) serves as a critical body for enhancing collaboration, sharing best practices, and reducing duplicated efforts.
Ministries and public sector organizations have taken on a central coordination and facilitation role by implementing LCGPA policies and identifying priority products for localization. This better positions demand centers to develop more effective strategies tailored to their specific focus areas and expertise, therefore more impactfully aligning with the overall localization agenda.
Below is an example of a LCGPA initiative as well as a couple of other programs designed to empower Saudi Arabia’s private sector:
The private sector’s contribution to the national GDP increased to 45% in 2023, up from 40% in 2016
Local Content contributed SAR 22.1 billion to the national GDP through government contracts in 2022
Over 1,000 products are now listed in LCGPA’s national product mandatory list
The number of SMEs exceeded 813,000 in 2023, a 108% increase from 2016
By the end of 2023, 190 companies were registered under the ‘Saudi Made’ initiative, encompassing 7,112 products
The private sector’s contribution to the national GDP increased to 45% in 2023, up from 40% in 2016
Local Content contributed SAR 22.1 billion to the national GDP through government contracts in 2022
Over 1,000 products are now listed in LCGPA’s national product mandatory list
The number of SMEs exceeded 813,000 in 2023, a 108% increase from 2016
By the end of 2023, 190 companies were registered under the ‘Saudi Made’ initiative, encompassing 7,112 products
A key goal of Vision 2030 is to unlock the full potential of Saudi Arabia’s non-oil sectors and grow their export capacity. The Kingdom’s localization efforts – which focus on expanding the local supply base, promoting innovation, and strengthening domestic industries – aim to create a more resilient, diversified, and sustainable economy and uncover new growth opportunities beyond the energy sector.
Central to these efforts are strategic partnerships and joint ventures, particularly in key sectors such as automotive, logistics, and petrochemicals. These partnerships aim to bolster the Kingdom’s industrial base and promote technology transfer and innovation. For example:
Furthermore, government-led, Vision 2030-driven transformation initiatives, including the National Industrial Development and Logistics Program (NIDLP) and the Tourism Investment Enabler Program (TIEP), are central to accelerating the Kingdom’s localization efforts in strategic sectors such as industry and tourism. National champions programs such as Aramco’s IKTVA, SABIC’s Nusaned, Ma’aden’s Tharwah, and STC’s Rawafed are also driving Localization and Local Content development efforts forward in their respective sectors.
Non-oil sectors now contribute over 50% to the national GDP
Localization in the oil and gas sector has reached an average of 63% in 2023, up from 37% in 2016
Non-oil sector localization has increased to 56.8%, up from 52% in 2016
The share of Local Content in government procurement increased to 43% in 2023, a contribution of SAR 86.91 billion
Non-oil sectors now contribute over 50% to the national GDP
Localization in the oil and gas sector has reached an average of 63% in 2023, up from 37% in 2016
Non-oil sector localization has increased to 56.8%, up from 52% in 2016
The share of Local Content in government procurement increased to 43% in 2023, a contribution of SAR 86.91 billion
Human capital development is a key component of Saudi Arabia’s localization strategy. This encompasses creating new job opportunities for Saudi nationals, strengthening local capabilities across various industries, and actively promoting Saudi participation in both the public and private sectors.
Several programs have been launched to address labor market needs and support workforce localization. For example:
Skills development is also a pillar of Saudi Arabia’s workforce development strategy:
Unemployment has decreased from 12% in 2016 to 7.7% in 2023
Women’s participation in the workforce has increased from 23% in 2016 to 34% in 2023
Over 1.1 million new jobs have been created in the private sector since 2016
More than 200 global companies have established regional headquarters in Saudi Arabia
Unemployment has decreased from 12% in 2016 to 7.7% in 2023
Women’s participation in the workforce has increased from 23% in 2016 to 34% in 2023
Over 1.1 million new jobs have been created in the private sector since 2016
More than 200 global companies have established regional headquarters in Saudi Arabia
Despite this progress, considerable work remains, and several critical areas require intensified efforts to further enhance Local Content development and achieve sustainable economic growth. To continue to build on its significant successes, the Kingdom must continue prioritizing strategic initiatives, incorporate global best practices, and better integrate localization efforts between government organizations and national entities.
So, what approaches can the Kingdom take to keep on accelerating progress and maximizing results?
Understand how to strategically assess a product value chain, break it down into its key elements, and understand its supply chain complexities both from a global and local perspective. These activities should help focus localization efforts on the high-value conversion nodes.
Leverage the Kingdom’s unique advantages – such as its location, infrastructure, and resources – to unlock more viable and strategic localization opportunities that are aligned with the Kingdom priorities and to gain a competitive edge in global markets.
Strengthen and enhance the capabilities of the local supply base to enable local players to better meet the specific demands of local production, reduce dependence on international counterparts, and foster innovation, cost effectiveness, and alignment to local regulations and market requirements.
Part 4
A strategic approach: Localizing the right components of the value chain
As localization is one of the key strategies that foster effective and sustainable economic growth, it is crucial to adopt a comprehensive and scalable methodology that addresses the entire value chain of a product or an industry, while prioritizing parts of the value chain with the highest value creation. A well-defined prioritization model focuses on identifying the most impactful opportunities that can tip the balance in favor of the local market and drive national economic growth.
Prioritizing the parts of the value chain with the highest potential for impact allows for:
While end-to-end local production may seem like the desired end-goal, it is often not the most practical or beneficial approach. Localizing associated industries across design, raw material extraction and conversion, fabrication, packaging and logistics, and recycling can yield significant localization, GDP growth, balance-of-trade, and job creation impact. Localization should recognize the complexity of global value and supply chains, and identify areas where the most value can be added, without necessarily localizing the entire value chain.
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A value chain represents the activities involved in bringing a product from its initial conception to its end-user: for example, initial raw materials extraction and processing, the manufacturing of subcomponents, and final product assembly and installation.
A value chain typically also includes the activities required to deliver the product to the final end-user, such as inbound logistics, operations, outbound logistics, marketing and sales, and the recycling and reuse of products. Each of these stages contributes to the overall value of the product, and examining them in detail helps to pinpoint the value conversion points and opportunities for localization.
It is crucial to start by determining which products should be prioritized for localization. This will mean assessing a product’s criticality and potential value to the economy and the Kingdom’s strategic vision based on how it benefits the Kingdom’s trade balance, boosts its export potential, or advances supply security and sustainability improvements=.
If a product is deemed strategically important to the country’s economic objectives, national security, or key players in the economy, it may be worth pursuing localization even in the face of challenging factors such as high monetary costs, complexity, or long timelines.
Additionally, prioritizing efforts should focus on products that enable the localization of adjacent strategic industries. For instance, localizing heat exchangers manufacturing or metal heat treatment capabilities for the industrial sector opens up opportunities for these local suppliers to cater to other industries, such as marine and automotive. This would strengthen multiple sectors’ supply chains and, if the localized products are successfully exported, would boost the Kingdom’s trade balance and strengthen its global economic standing.
In order to build robust and comprehensive localization strategies, policymakers must evaluate various value chain analysis methodologies and select the most appropriate approach for different products or sectors. These methodologies help identify areas for local value creation, understand local and global market dynamics, and build a comprehensive picture of how value is generated and costs are distributed across the value chain.
Below is a summary of key value chain analysis methodologies and their primary use cases in the context of localization, highlighting how they can help policymakers to identify the right opportunities for domestic development.
Introduced by Michael Porter in the 1980s, this methodology breaks down a company’s value creation process into five key activities: inbound logistics, operations, outbound logistics, marketing and sales, and service.
Helps in analyzing primary and support activities within a company’s value chain to identify value-adding and non-value-adding steps.
This methodology extends beyond a single-company view, examining interactions between companies and countries involved in producing a specific product or service.
Helps policymakers to evaluate the country's position with regards to a certain product or industry in global production networks and identify opportunities to shift to higher-value-added roles, such as design and manufacturing.
This methodology examines the environmental, social, and economic impacts of each step in a value chain, aiming for sustainability across the entire lifecycle of a product or service.
Supports the creation of value chains aligned with national sustainability goals, including reducing carbon footprints and promoting social benefits in production cycles.
This approach determines a product’s lifecycle cost across the value chain, beyond the initial cost, to evaluate all costs associated with sourcing, owning, maintaining, and disposing of a product.
Helps decision makers to uncover areas where local production can offer economic and strategic benefits, as well as to understand the full product costs and long-term feasibility of localization.
This methodology focuses on identifying and assessing risks and vulnerabilities in a product or an industry supply chain to reduce supply disruptions and increase security.
Allows policymakers to identify vulnerable products or sectors and develop localization strategies that aim to reduce dependency on volatile global supply chains.
Once the right methodology is selected, each stage of the product’s lifecycle can be dissected, with priority commodities and components mapped to their corresponding stages within the value chain.
Identifying the right localization opportunities requires pinpointing key value conversion nodes across a product’s entire value chain. Here, note that value does not equate to cost. Cost represents the expenses incurred at each stage of production and distribution, while value is measured through the potential for markups and profits. This distinction is particularly important for localization efforts. Policymakers should target value chain segments and products that represent high-value conversion nodes, where local production can yield the greatest economic impact and better utilize existing capabilities.
To determine high-value conversion nodes in the value chain, the following are some factors to consider:
Evaluating local capabilities at every stage of the value chain is crucial to effectively identifying localization opportunities, particularly across the high-value conversion nodes. This involves thoroughly assessing both local market capabilities and capacities, while pinpointing potential limitations and roadblocks.
When assessing the local supply base, it is important to look at key factors such as the availability of suppliers capable of providing the necessary components or materials, their production capacity, and their ability to meet quality and volume requirements. This assessment provides insights into industry dynamics and helps policymakers determine whether existing capabilities can efficiently and reliably support localization efforts. Priority should be given to products or sectors where local suppliers possess competitive advantages or specialized expertise.
Equally important is ascertaining technical limitations that could impact the feasibility and cost-effectiveness of localizing a specific product or its subcomponents. Common major barriers include complex manufacturing processes, the need for specialized patents, or a single Original Equipment Manufacturer (OEM) holding exclusive design rights. Identifying these technical limitations is essential because they can make localizing certain products particularly challenging or prohibitively expensive. For instance, advanced semiconductors used in high-performance computer chips depend on intricate manufacturing processes and exclusive patents that cannot be easily acquired or replicated in Saudi Arabia, restricting localization opportunities.
Recognizing constraints is critical when identifying localization opportunities. If certain products or components present barriers that are too difficult or costly to overcome, it may be prudent to direct efforts toward products that face lesser technological constraints and have greater localization potential. This approach ensures that resources are allocated efficiently, minimizing the risks and costs associated with battling substantial limitations.
There are different approaches to identifying localization opportunities and maximizing the potential of the value chain, such as the below:
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When examining the localization success of the automotive sectors in different countries, two distinct approaches adopted by Morocco and Hungary stand out: Hungary’s “pull” approach and Morocco’s “push” approach.
Both approaches highlight the importance of building robust value chains for a sector in line with the different strategic advantages and priorities of each country.
Background and approach
Hungary has become a major hub for automotive manufacturing in Central and Eastern Europe, housing production plants for major players like Audi, Mercedes-Benz, Suzuki, and Opel.
Hungary's automotive strategy began by attracting OEMs to set up vehicle assembly plants. This created demand for local component manufacturers, which in turn established a supply chain to support vehicle production. Key raw materials such as steel, plastic, and aluminum are imported from Germany, Italy, and Austria.
Government support and initiatives
Key success factors
Achievements
Background and approach
Morocco has positioned itself as a key player in the automotive industry, with an emphasis on becoming a manufacturing hub for European carmakers.
The country started with establishing subcomponent manufacturers to serve large OEMs in Europe and globally. Once a robust local supply chain was in place, Morocco attracted OEMs like Renault and Peugeot to set up vehicle assembly plants.
Morocco imports primary materials like plastic and steel from Spain, France, and China, with limited but growing R&D capability.
Government support and initiatives
Key success factors
Achievements
Part 5
Leveraging the Kingdom’s competitive advantages
As Saudi Arabia seeks to continue building up its local capabilities and localization efforts, policymakers and businesses will need to identify and leverage the country’s strengths to invest in and capitalize on areas offering the greatest growth potential.
The following are some key factors to evaluate and consider:
Government ministries and Vision Realization Programs are placing a strong focus on sectors such as tourism, entertainment, manufacturing, and technology. For example, through its National Industrial Strategy (NIS), the Ministry of Industry and Mineral Resources outlines the high-priority products for localization and the initiatives to support this push. This clear direction means national stakeholders and potential investors understand which high-priority sectors and products to target, making investment opportunities more attractive.
In addition, businesses investing in localization of products or facilities aligned to these priorities can benefit from various forms of government support and financial incentives such as offtake agreements, grants, subsidies, tax breaks, and regulatory easing. For instance, the government is prioritizing investments in clean energy solutions, like in-country wind turbine manufacturing and wind farm development; government backing makes such initiatives more commercially feasible and positions them favorably for long-term success.
Localization activities should be closely aligned with natural resources available in the country. Beyond its oil and gas reserves, Saudi Arabia is also rich in mineral resources, such as copper, zinc, phosphate, gold, silver, estimated to be worth over $2.5 trillion. These abundant raw materials provide a solid foundation for various production activities and play a vital role in determining localization opportunities in sectors that benefit from the availability of these materials, reducing costs and increasing competitiveness.
Saudi Arabia’s vast energy resources, both traditional and renewable, also give it a unique edge in developing energy-intensive industries that may not be feasible in other countries.
Positioned at the crossroads of Europe, Asia, and Africa, with access to the Red Sea and Arabian Gulf, Saudi Arabia’s central location offers proximity to major shipping routes and advantages for some of its key industries. Its large ports such as Jeddah Islamic Port and King Abdulaziz Port in Dammam are crucial for the country’s global trade and provide opportunities to localize industries such as shipping and logistics. For example, there is potential to establish regional transport and freight management centers to handle the growing volume of trade and support various local industries. This streamlines logistics, cuts costs, and improves connectivity between shipping lines, ports, and inland transport.
This prime location presents unique opportunities for establishing repair and refurbishment facilities for fleet maintenance, as well as logistic hubs for commercial vessels passing through. Furthermore, investments in local shipyards for constructing commercial vessels and offshore platforms support the growth of the local maritime industry, reduce reliance on foreign services, and create skilled jobs in the sector.
It is not just shipping: the Kingdom’s advantageous location also offers opportunities for the aviation sector. With the expansion of national carriers like Saudia and Riyadh Air, Saudi Arabia is well-positioned to act as a major hub connecting Asia, Europe, and North America. The increased demand for aircraft can be leveraged by establishing partnerships with leading aircraft manufacturers like Boeing and Airbus to create local opportunities for aircraft repairs and spare parts manufacturing. By investing in maintenance, repair, and overhaul (MRO) centers and related facilities near major airports like the King Abdulaziz International Airport, Saudi Arabia can strengthen its role in global air travel and support its growing aviation sector.
Saudi Arabia stands out as the Middle East's largest economy, supported by its strong buying power from its growing population, which drives substantial demand across a wide range of industries and products. As a result, understanding local demand, market dynamics, and evolving consumer preferences can provide insights into whether local production can adequately meet the market’s needs, which is key to identifying the strongest localization opportunities. Demand sources include:
By understanding these demand drivers, strategies can be developed to enhance collaboration and leverage synergies between major national demand centers. Aggregating demand and pooling resources will enable these entities to achieve economies of scale that provide greater leverage for attracting investment, a critical element for effective localization. For instance, while SABIC and Aramco operate in distinct sectors (petrochemicals versus oil and gas), they both rely on many similar equipment and materials. By identifying shared product requirements and standardizing specifications where possible, these organizations can consolidate their demand and create compelling opportunities for localization.
Saudi Arabia’s modern and rapidly expanding infrastructure is a key element supporting the localization of various industries. The Kingdom has made significant investments in infrastructure, including highways, rail networks, and cutting-edge technology such as high-speed internet and 5G coverage.
An extensive road and highway network makes it possible to efficiently transport goods and raw materials across the Kingdom and into neighboring countries, reducing logistical costs and improving supply chain management for industries like retail and consumer goods. Expanding rail lines, such as the Saudi Landbridge and North-South Railway, further enhances cargo transport capabilities and connects key economic zones, making localizing heavy industries such as steel production feasible.
Saudi Arabia has also extensively invested in digital infrastructure, successfully attracting major investments in technologies such as data centers, e-government platforms, and digital payment systems. Global tech giants, including Microsoft, Oracle, and Huawei, have collectively invested 16.5 billion riyals to establish cloud computing infrastructure in the Kingdom. These efforts have positioned Saudi Arabia at the forefront of digitalization, with widespread high-speed internet and 5G coverage across the Kingdom. The country has also digitized 97% of government services and is ranked second among G20 countries in digital competitiveness.
These advancements, combined with a digitally proficient workforce, help determine which sectors and products to localize. They enable the growth of tech-driven sectors and digital services such as electronics, software development, and e-commerce applications. Additionally, advanced connectivity and the availability of local expertise can benefit other industries that require robust digital infrastructure and real-time data processing, such as smart manufacturing, aerospace, and retail.
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Saudi Arabia’s mining sector, rich with diverse resources like gold, phosphate, aluminum, and copper, was identified as a key area for growth and localization. The Saudi Arabian Mining Company, commonly known as Ma'aden, was founded in 1997 to harness these vast mineral reserves and leverage the Kingdom’s strategic geographic location. In 2008, the company evolved from a state-owned enterprise into one of the world’s largest mining companies, earneing a listing on the Saudi Stock Exchange (Tadawul).
Since its early days, Ma'aden has invested heavily in infrastructure, including large-scale mining facilities, transportation networks, and port facilities, to support local mining activities. Establishing Ma'aden Industrial City in Ras Al Khair, for instance, was a significant milestone, integrating mining operations, processing plants, and shipping facilities.
To advance its localization strategy and integrate itself into global supply chains, Ma’aden positioned itself as a supplier of raw materials to global players. An example of this strategy is the full acquisition of the Meridian Group, a prominent South African conglomerate with a sophisticated supply chain spanning agricultural commodities, importation, manufacturing, distribution, retail, and agriscience. This 2024 acquisition allowed Ma’aden to harness Meridian's well-established distribution network to expand its phosphate supply operations and export capabilities.
Ma’aden has also formed strategic partnerships with leading international mining companies to facilitate technology and knowledge transfers and operational efficiency. Notable partnerships include:
Ma'aden has focused on developing local supply chains and incorporating local businesses into the mining sector’s ecosystem by sourcing materials, services, and technology from local suppliers, with benefits for both the company and the domestic economy. For example, Ma'aden switched from using imported steel screens to locally manufactured polyurethane screens for its gold mine crushing circuit. With the screens lasting four to five times longer, Ma’aden experienced reduced maintenance costs, shortened supply chain lead times, and strengthened supply chain security.
Other efforts include Ma'aden’s localization program, Tharwah, established to enhance the Kingdom’s industrial capacity by providing investors with demand information, technical support, funding, and access to procurement opportunities. As part of Tharwah, Ma'aden introduced its Supplier Development Program (SDP), intended to foster long-term supplier partnerships as well as increased collaboration with national partners to support suppliers through industrial consultation, land facilitation, regulatory guidance, and workforce development.
Part 6
Expanding local capabilities
As countries increasingly focus on localization to strengthen their domestic industries and enhance their global competitiveness, developing a strong value proposition for local suppliers becomes critical.
Localization efforts must aim to harness the unique strengths of domestic producers – such as specialized skills, innovative technologies, and high-quality production – to attract international investors and appeal to global buyers. By showcasing success stories of local suppliers, particularly in key sectors like industrial machinery and components, governments can effectively demonstrate the reliability and excellence of their local businesses, setting the stage for successful international partnerships. So, how can governments and businesses achieve this?
A key challenge currently facing Saudi Arabia is the lack of platforms for local suppliers to increase their visibility by showcasing their capabilities and capacities. This absence makes it difficult for major demand centers and investors to identify suitable partners, hindering potential localization opportunities. Government entities and key national stakeholders can implement a range of initiatives to make their domestic suppliers more visible, including:
Creating a unified supplier intelligence platform: One effective approach to address this is the creation of a unified local supplier intelligence platform and database, where local manufacturers and service providers can register their capabilities, products, and services. This platform should be accessible to international investors or buyers, making it easier to find and evaluate potential local suppliers. By providing detailed supplier profiles and using smart algorithms, the platform can help international companies quickly find verified local suppliers, driving investment and local business growth.
Organizing targeted trade missions and delegations: Government entities and key national players can also host supplier matchmaking events and trade missions, inviting foreign investors and buyers to visit local industries and engage in B2B matchmaking sessions. This direct interaction allows small businesses to pitch their products to international companies looking to localize their supply chains. By providing a structured space for networking and introductions, these events can break down barriers and create opportunities for local suppliers to expand their reach.
Subsidize participation in global trade shows: To increase global visibility, the government could provide financial support or subsidies for local manufacturers to participate in relevant international trade shows and industry conferences. These platforms allow businesses to display their products on a global stage, connect with international buyers, and stay updated on industry trends. By reducing the financial barriers for small suppliers, the government can help them tap into larger, global markets and attract investment that promotes localization.
Forming partnerships between Saudi companies and international firms allows both parties to leverage each other’s strengths, whether through access to new technologies, localized expertise, or shared resources.
These partnerships also play a crucial role in capacity building by providing the Saudi workforce with valuable hands-on training on new systems and exposure to global best practices. This is essential for developing a highly skilled workforce capable of operating, maintaining, and improving sophisticated technologies. Over time, this leads to a more knowledgeable and capable workforce that is better equipped to drive innovation and contribute to the growth of new sectors.
Below are some examples of these partnerships:
Establishing joint ventures enables global companies and local suppliers to combine their strengths for expanded market reach. Global companies bring financial resources, international experience, and established brand recognition, while local suppliers contribute deep knowledge of regional markets, regulatory compliance, and operational flexibility. Together, they can share risks and rewards, accelerate market entry, and create tailored products or services that meet the specific demands of the local market, strengthening both parties' competitive positions.
Joint R&D and co-development agreements allow global companies and local suppliers to collaborate on creating innovative products and solutions. By pooling resources, knowledge, and expertise, both partners can develop products, create new designs and generate new proprietary assets. This collaboration helps reduce the time-to-market, share the risks associated with innovation, and bring to market products that are more suited to local tastes, regulations, and consumer demands.
Global companies typically have extensive intellectual property (IP) portfolios, which local suppliers can tap into to enhance product development. Through technology licensing, global companies provide local suppliers with cutting-edge technologies and design patents, which enables local suppliers to enhance their production capabilities, improve product offerings, and adapt advanced technologies to meet local market needs. For instance, a Saudi company specializing in construction materials might partner with an international firm to adopt innovative 3D-printing technology, leading to creative and efficient solutions.
Policymakers can support the above-mentioned collaborations through reforms and initiatives which aim at encouraging market entry and reducing risks for international firms. Below are some examples:
Effective localization requires local suppliers to adhere to rigorous quality standards to meet internal and external market demand and specifications, while maintaining cost competitiveness for overall marketability. This can be achieved through supplier development and capacity-building initiatives that focus on improving specific areas such as procurement practices, inventory management, and customer relationship management. Support mechanisms by the government and key national players include:
Policymakers and regulators can mandate international firms entering the Saudi market to include local companies and manufacturers as tier-2 suppliers. Embedding such requirements into the regulations and procurement policies of public sector entities and organizations where the government holds majority shareholding can help build up local suppliers and integrate them into global supply chain networks, particularly for key contracts and projects.
Furthermore, the government can provide guidance to help local businesses align with international compliance requirements, including information on relevant regulations, best practices, legal documentation, and strategies for ongoing compliance.
Governments can offer direct financial assistance to local suppliers in key industries such as technology, manufacturing, and renewable energy. This can include:
In addition to providing or subsidizing access to industry tools, governments can organize workshops or offer online tutorials on best practices and how to use common software applications. These sessions could cover everything from quality management to logistics and inventory management systems, ensuring that local suppliers can use them effectively.
Creating centers of excellence (CoE) can provide SMEs with a range of operational support and industry-specific improvements. This may look like guiding local companies on how to meet international standards, through workshops, training sessions, and consultancy services that help local suppliers understand and implement global certification requirements.
Governments can also provide local suppliers with valuable demand data, global industry trends, and regulatory updates that help them stay informed about the latest international standards and market demands. This could be in the form of reports, webinars, or data repositories that allow suppliers to benchmark their practices and products against global competitors.
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The discovery of substantial oil reserves in the North Sea during the 1960s marked a major turning point for Norway’s economy. Recognizing the potential these oil reserves presented, the Norwegian government acted to manage extraction effectively and establish local capabilities in relevant technologies. This strategic focus, supported by long-term government initiatives and the proactive efforts of Norwegian oil and gas companies, has been crucial to the country’s success.
Norway’s commitment to building local technologies in offshore drilling dates back several decades.
In addition to the government’s direct support, Norway has implemented several policies to ensure local control over oil and gas resources and facilitate technology transfer. The 1996 Norwegian Petroleum Act creates a framework to prioritize local ownership and control of hydrocarbon resources. It mandates that the government retains ownership of subsoil resources, granting exploration and production rights through licensing rounds. These licenses are often awarded to consortiums that include Norwegian companies, ensuring a significant degree of local involvement. Furthermore, the government has introduced policies which contractually require international oil and gas companies in Norway to provide technology transfer and workforce training to help build domestic capabilities within Norway.
Below are a couple of examples of the many innovations that have improved drilling accuracy and showcased Norway’s ability to capitalize on local capabilities and optimize existing technologies:
Part 7
The road ahead: Unlocking the full power of Local Content towards Vision 2030
Saudi Arabia stands at a pivotal moment in its pursuit of Vision 2030, with Local Content playing a central role in this transformative journey. Substantial progress has been made in advancing Local Content in the Kingdom as a top priority on the agendas of all national stakeholders.
Nevertheless, challenges also persist, particularly in localizing more complex sectors and products. To overcome this challenge, the Kingdom must focus on localizing critical elements of the value chain by leveraging its competitive advantages and strengthening local capabilities. This paper has outlined a strategic pathway for advancing Local Content in the Kingdom for policymakers and key national players, highlighting essential approaches and considerations for identifying opportunities and crafting effective strategies.
Driving Localization and growing Local Content is a complex, multi-faceted challenge that demands coordinated efforts from all stakeholders, including policymakers, government entities, key national players, and suppliers and investors. To maximize the impact of these efforts and ensure the sustained success of Saudi Arabia’s economic transformation, it is crucial to embrace global best practices, address emerging challenges, and prioritize strategic products that will deliver the greatest impact. By pursuing these strategies, the Kingdom will be well-positioned to achieve its localization objectives and its broader economic aspirations and secure long-term success in its Vision 2030 agenda.
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