Saudi Arabia‘s industrial sector will play a pivotal role in shaping the nation‘s future economy and achieving the objectives outlined in Vision 2030. Enhancing competitiveness and nurturing the growth of emerging industries will be crucial to meeting these objectives, encouraging both localization of domestic consumption and export-driven growth.
Despite the potential of the industrial sector, the market alone will not be sufficient to spur the necessary economic shift. Government intervention through industrial policy will be critical as Saudi Arabia continues its economic transformation. These policies will provide the necessary support to encourage innovation and technology adoption, attract investment, foster sector development, and promote export expansion.
The Kingdom has iterated five-year development strategies since the 1960s. Its strategies has served as a general planning framework to achieve national objectives, incorporating pragmatic development goals. In spite of these development strategies, the Kingdom has struggled to align the proper set of policies to achieve their objectives. The right set of policies build on strategies, creating the concrete environmental factors that enable progress towards national objectives.
Designing effective industrial policies faces several challenges – as proven in other countries around the world. The success of these policies hinges on selecting the right instruments and targeting industries with the most potential for growth, which requires a data-driven approach and continuous adaptation to new challenges. A critical issue is balancing targeted support without falling into the trap of “picking winners“ and distorting market competition. Ensuring transparency and accountability in policy implementation is essential to maintain public trust and prevent misuse of resources. Moreover, there is the challenge of socializing both the risks and benefits of industrial investments, as profits often remain privatized while risks are borne by taxpayers.
