KSA in line for multibillion-dollar infrastructure dividend

Saudi Arabia is likely to spend $1.1 trillion on infrastructure projects between 2019 and 2038. (Reuters)
Updated 17 September 2018

KSA in line for multibillion-dollar infrastructure dividend

  • Diversification via ‘localization’ will stimulate both the home market and export potential
  • "Nigeria did it, and before them Brazil did it, and there is no reason why KSA cannot do it," says industry analyst

LONDON: Saudi Arabia stands to collect an “infrastructure dividend” worth billions as it pushes ahead with its diversification drive, powered by a localization program involving partnerships between KSA enterprises and overseas firms to ensure wealth cascades down to the wider population, say experts.

Dr. Raed Kombargi, an Abu Dhabi-based partner with consultancy Strategy&, told Arab News that KSA should be able to provide goods and services for its local market as well as build globally competitive export industries. “The dividend is certainly there and I am confident they can do it,” he said.

Kombargi said the purpose of localization was, on one level, to stimulate the economy by creating a lot of jobs. But it was also about having an impact on GDP.

“If you are focused only on the local market and local demand, you will get to a certain level but you won’t get the ‘big bang’ that you are looking for,” he said. “To take full advantage of local content, home-produced goods should, in the medium term, become globally competitive, so that you are not just manufacturing, for instance, solar panels or solar components to install in KSA, but also to export regionally and beyond. That’s how you maximize local content.”

A report from Strategy& published last week estimated that Saudi Arabia was likely to spend $1.1 trillion on infrastructure projects from 2019-2038. The report looked at infrastructure spending worldwide for the next 20 years and found that Saudi Aramco was targeting 70 percent localization by 2021 as part of its In-Kingdom Total Value Add (IKTVA) program, which favors local content during the procurement process and makes localization a key condition that encompasses all its commercial arrangements.

Looking ahead, the report noted that large development schemes were being set up in a way that would allow local companies to substitute imports, and to grow non-oil exports by building an industrial base to create export potential.

Monica Malik, of Abu Dhabi Commercial Bank, said: “You have had strong population growth and you need to upgrade infrastructure, including providing services such as health, education and housing. The requirements and objectives are very broad, as is the potential.”

Turning to construction, she said that if momentum builds up, “You will need foreign construction firms to come in and work with Saudi developers, to help with the requirements on the ground. There has been a bottleneck in the past, often the ability to get contractors in has — at times of growth — not been at the pace required.”

Asked how successful he thought KSA would be in localizing content in the building of new cities such as Neom and other mega projects, Kombargi said: “I think they can. Nigeria did it, and before them Brazil did it, and there is no reason why KSA cannot do it.

“There is a new generation of highly educated Saudis, very responsible about the future of the country, and extremely savvy about what makes sense economically and what doesn’t,” he said.

But Kombargi thought KSA and others should do things slowly, building up supply chains and being aware of strengths and weaknesses with regard to the supply base.

The report said that many governments in developing economies have a sense of urgency that can lead to short-sighted and counterproductive policies. Specifically, there were biases that can interfere with robust, fact-based analysis and policy design. There were times when policy-makers overestimated the localization potential from a given product category, failing to factor in the huge disparities in sizes, designs, and costs of goods in that category. 

Ross Teversen, of London-based Jupiter Asset Management, said that KSA seemed to be taking cues from China’s fixed asset investment model “by investing in infrastructure projects to remove bottlenecks to economic growth.”

He pointed to the high-speed Haramain train service that will link Madinah and Makkah to the King Abdullah Economic City (KAEC) on the west coast and Jeddah’s King Abdulaziz International Airport, and the new Riyadh metro system as examples of key infrastructure investments that were “transforming the Kingdom.” 

Twitter co-founder Evan Williams leaving board

Updated 23 February 2019

Twitter co-founder Evan Williams leaving board

  • ‘It’s been an incredible 13 years, and I’m proud of what Twitter has accomplished during my time with the company’
  • ‘I’m going to ride off into the sunset (or...down Market Street), so I can focus on some other things’

SAN FRANCISCO: Twitter co-founder and one-time chief executive Evan Williams is stepping down from the board, leaving the one-to-many messaging service to focus on “other projects.”
Williams will depart the Twitter board at the end of this month, according to a filing with the US Securities and Exchange Commission on Friday.
“It’s been an incredible 13 years, and I’m proud of what Twitter has accomplished during my time with the company,” Williams said in the filing.
“I will continue rooting for the team as I focus my time on other projects.”
Williams throttled back his role in the San Francisco-based startup eight years ago, turning his attention to new endeavors including creating popular online publishing platform Medium.
Williams ceded his role as Twitter chief executive to Dick Costolo in 2010. Co-founder Jack Dorsey returned as Twitter chief in 2015, having held the position when the startup was nascent.
Dorsey said in a Tweet that Williams was the reason he joined startup Odeo, an endeavor that led to him, Williams and Biz Stone creating Twitter.
“I appreciate you, Ev!” Dorsey tweeted on Friday.
“We’re going to miss your voice in our board conversations.”
Twitter has become a high-profile, and sometimes controversial, global stage for communication since it was launched in March of 2006.
“Thank you, @jack and @biz for starting this crazy company with me-and continuing to make it better and better,” Williams tweeted.
“I’m going to ride off into the sunset (or...down Market Street), so I can focus on some other things.”