Saudi Arabia’s industrial sector sees $10bn investment in early 2024: Knight Frank

This funding milestone was achieved two months earlier than the previous year, according to Knight Frank’s annual report. File
This funding milestone was achieved two months earlier than the previous year, according to Knight Frank’s annual report. File
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Updated 02 September 2024
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Saudi Arabia’s industrial sector sees $10bn investment in early 2024: Knight Frank

Saudi Arabia’s industrial sector sees $10bn investment in early 2024: Knight Frank

RIYADH: Factories in Saudi Arabia attracted a total capital of SR38.6 billion ($10.2 billion) in the initial months of this year, reflecting a notable increase in investment compared to 2023.

This funding milestone was achieved two months earlier than the previous year, according to Knight Frank’s annual report.

The report highlights that 410 new industrial licenses were issued and 505 factories commenced production during this period. This growth is also evident in the workforce, with 11,434 new jobs created at these facilities. Of the total investment, 83.7 percent originated from local sources, 8.3 percent from international sources, and 8 percent from joint ventures.

The non-oil sector grew by 3.8 percent in 2023, contributing SR2.5 trillion to the national GDP and now accounting for 63 percent of the country’s economic output. Investment in the industrial sector surged by 63 percent last year, reaching SR15 billion. This trend has continued into 2024, with private sector investment more than doubling in the first quarter to exceed SR7 billion.

By the end of 2023, cumulative investment in the industrial sector had reached SR415 billion, supporting 891 projects across the country and demonstrating strong local and international interest. Global investments in the sector saw an 85 percent increase, according to the report.

The Saudi Authority for Industrial Cities and Technology Zones has played a crucial role in this growth. The developed industrial land now spans over 209 million sq. meters, housing 6,443 factories and 7,946 industrial, logistical, and investment establishments.

Government initiatives

The Saudi Industrial Development Fund has been instrumental in advancing the industrial sector. Over the past 50 years, SIDF has provided loans exceeding SR180 billion to more than 4,000 projects, facilitating total investments of around SR700 billion.

SIDF's National Industrial Strategy aims to elevate export values to SR557 billion by 2030, positioning Saudi Arabia as a prominent global player in the sector. The strategy also targets the creation of 2.1 million new jobs by 2030, with annual growth in the logistics sector expected to reach SR97.5 billion.

The manufacturing sector's annual contribution to GDP is projected to be SR895 billion by 2030, with exports anticipated to hit SR892 billion by 2035. To support these goals, SIDF has introduced several key initiatives. The Tanafus program offers financial support and incentives to local manufacturers, while the Sanea initiative focuses on developing small and medium-sized enterprises within the industrial sector.

Additionally, the Green Finance initiative encourages sustainable industrial practices, and the digital transformation support program helps industries adopt advanced technologies and digital solutions.

Demand for warehouse solutions soars

The COVID-19 pandemic has significantly accelerated the growth of e-commerce, driving a substantial increase in the demand for modern warehousing and logistics solutions. This surge has spurred the development of technologically advanced warehouse facilities across Saudi Arabia.

A prime example of this trend is the joint venture between Saudi Aramco and DHL Supply Chain, known as ASMO, which was established to address the rising need for sustainable and efficient supply chain services.

There has also been a notable rise in demand for storage facilities, last-mile logistics centers, and cloud kitchens, especially for smaller, centrally located warehouses.

The food delivery market in Saudi Arabia is booming, valued at $10 billion in 2023 and expected to reach $14.9 billion by 2028, outpacing competitors in the region.

Supply expansion

Over the past 12 months, several key developments have occurred in the supply of warehousing and logistics facilities. In Riyadh, the total stock of warehouse and logistics space has expanded to 28 million sq. meters, with the majority of new facilities located in the Industrial Gate City.

Jeddah has also experienced significant growth, increasing its total warehouse and logistics stock to 19.6 million square meters. Noteworthy projects in Jeddah include Maersk’s logistics park and Aramex’s facility at Jeddah Islamic Port, along with several plants developed by Logi Point in Zahid Business Park.

In contrast, the industrial stock in the Eastern Province has remained relatively static over the past year, with no major completions, resulting in a total stock of 7.96 million square meters. This stable supply has contributed to high occupancy rates, particularly in strategically located areas near key transport links and industrial zones.

Rising rents reflect growing demand

The increasing demand for warehouse and industrial facilities has led to a rapid rise in rental prices. In Riyadh, warehouse rents have surged by 10.5 percent to SR210 per sq. meter, while in Jeddah, rents have risen by 1.5 percent to SR208 per sq. meter.

These rental rates reflect the market average for light industrial units and Grade B warehouse and logistics facilities, with supply constraints for primary and Grade A spaces across Saudi Arabia. National occupancy levels have reached a record high of around 97 percent, highlighting the strong demand in the market.

In Riyadh, the demand for logistics and warehouse facilities is particularly intense, driven by ongoing transportation and infrastructure projects as well as landmark giga-projects such as Diriyah Gate, King Salman Park, New Murabba, and Qiddiya. These initiatives boost the need for construction and building materials and spur the development of new industrial and logistics hubs.

Challenges

Despite significant growth, Saudi Arabia is grappling with a shortage of high-quality warehouse spaces. This issue is exacerbated by the cautious investment behavior of local landowners, who are hesitant to undertake speculative development projects. This reluctance, largely due to a lack of experience in developing real estate that meets international standards, has resulted in a critical supply gap, particularly in Riyadh.

However, there is increasing interest from international developers eager to enter the Saudi market. These developers bring extensive expertise in constructing top-tier industrial and logistics infrastructure. Potential partnerships between international and local developers could help alleviate the supply shortage over time. Nevertheless, the construction and availability of new warehouse spaces are expected to take about two years, suggesting that the shortage will persist in the near term.

Outlook

Saudi Arabia’s strategic location at the crossroads of Asia, Africa, and Europe, coupled with its status as the largest market in the GCC and a key consumption center in the MENA region, makes it a vital commercial hub. Its position along the Arabian Gulf and the Red Sea, through which 13 percent of global trade flows, provides significant advantages, establishing the Kingdom as a natural gateway to international markets comprising over 6 billion people.


Nintendo shares rise on Saudi Public Investment Fund report

Nintendo shares rise on Saudi Public Investment Fund report
Updated 5 sec ago
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Nintendo shares rise on Saudi Public Investment Fund report

Nintendo shares rise on Saudi Public Investment Fund report
  • Nintendo’s shares jumped 4.44% to end at 8,087 yen
  • Kingdom has built up a stake of 8.6% in Nintendo as part of a $38-billion push

TOKYO: Nintendo shares jumped more than four percent Monday after a top official of Saudi Arabia’s sovereign wealth fund was quoted as saying it was mulling hiking its stake in the Japanese gaming giant.
Riyadh has built up a stake of 8.6 percent in Nintendo as part of a $38-billion push into gaming under Crown Prince Mohammed bin Salman’s Vision 2030 program to diversify away from oil.
It also has stakes in “Resident Evil” maker Capcom, Activision Blizzard, Electronic Arts, and Scopely, the US mobile games company behind “Monopoly Go!.”
“There are always opportunities,” Prince Faisal bin Bandar bin Sultan, vice-chair of Saudi Arabia’s Savvy Games — a subsidiary of the Public Investment Fund — told Kyodo News in an interview published Saturday.
He added, however, that the fund had no intention of raising stakes without the consent of the firms concerned.
“It’s important to keep the communication going so you get there in the right way,” he said. “We don’t want to rush into anything.”
Nintendo’s shares jumped 4.44 percent Monday to end at 8,087 yen ($54.48).
Saudi Arabia aims to create 250 gaming companies and studios on its soil, 39,000 game-related jobs, be in the top three of professional gamers per capita and to produce a blockbuster “AAA” game by 2030.
Savvy has already bought esports tournament organizer ESL Gaming and platform FaceIt. Riyadh last year hosted the eSports World Cup that saw 2,500 gamers battle for $60 million in prize money.
“There’s a lot we want to do to get it done and to reach our targets at 2030,” Prince Faisal told AFP in an interview in May.
“But we also want to make sure that we are taking the time to study things, to look at things. And make sure we’re making the right steps and not just throwing cash out there to see what hits,” he had said.


UAE-Jordan trade projected to reach $8bn after CEPA signing, minister says 

UAE-Jordan trade projected to reach $8bn after CEPA signing, minister says 
Updated 46 min 2 sec ago
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UAE-Jordan trade projected to reach $8bn after CEPA signing, minister says 

UAE-Jordan trade projected to reach $8bn after CEPA signing, minister says 

RIYADH: Bilateral trade between the UAE and Jordan is projected to increase to $8 billion by 2032, up from $4.2 billion in 2023, following the signing of a Comprehensive Economic Partnership Agreement, said a top official. 

UAE Minister of State for Foreign Trade Thani bin Ahmed Al-Zeyoudi emphasized that the CEPA, signed on Oct. 6, will create growth opportunities for businesses, young entrepreneurs, and startups in both nations. 

He noted that the agreement followed a series of negotiations and coordination meetings held in a short period, as reported by the state news agency WAM. 

The UAE has been actively strengthening its trade ties globally to enhance non-oil trade, in line with its economic diversification efforts, and in September the Emirates concluded talks to sign CEPAs with New Zealand and Australia, while also planning negotiations with Japan for a similar agreement. 

“The agreement will come into effect later this year after its ratification, and will mark the culmination of a long-standing, deep-rooted relationship between the two brotherly countries and their peoples,” Al-Zeyoudi told WAM after signing the CEPA with Jordan. 

Mutual investments between the UAE and Jordan are estimated at around $22.5 billion, with the the Gulf country being the largest international investor in its Middle Eastern neighbor at $4 billion, accounting for 14 percent of the Emirates’ total foreign direct investment, stated the minister. 

He added that promising areas of investments that both countries can explore include tourism, hospitality, real estate, and renewable energy, as well as transport, logistics, manufacturing, pharmaceuticals, and food security. 

Non-oil trade between the UAE and Jordan exceeded $4.2 billion in 2023, reflecting a 37.9 percent increase compared to 2021 and a 47.7 percent rise from 2019. 

The CEPA follows a $2.3 billion agreement signed last month to develop a 360-km railway network linking Jordan’s Aqaba port to its mining hubs at Al-Shidiya and Ghor Al-Safi. 

According to a press release, the project will be developed and operated by UAE’s Etihad Rail and is part of a $5.5 billion investment package agreed upon by the two countries in November 2023. 

The UAE has previously signed CEPAs with countries including India, Turkiye, Indonesia, and Cambodia, all expected to support the the country’s economy, which is projected to grow by 4 percent this year, according to a report from its the central bank last month. 


Oil Updates – prices dip after strongest weekly rise in over one year

Oil Updates – prices dip after strongest weekly rise in over one year
Updated 17 min 13 sec ago
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Oil Updates – prices dip after strongest weekly rise in over one year

Oil Updates – prices dip after strongest weekly rise in over one year
  • Brent crude futures fell 28 cents, or 0.36%, to $77.77 per barrel
  • US West Texas Intermediate crude futures slipped 19 cents, or 0.26%, to $74.19 per barrel

SINGAPORE: Oil prices fell on Monday, after posting their steepest weekly rise in more than a year last week, as oversupply concerns amid softer demand countered the worries over a wider Middle East conflict disrupting exports in the key oil-producing region.

Brent crude futures fell 28 cents, or 0.36 percent, to $77.77 per barrel by 9:45 a.m. Saudi time. US West Texas Intermediate crude futures slipped 19 cents, or 0.26 percent, to $74.19 per barrel.

Brent rose by more than 8 percent last week, the biggest weekly gain since January 2023, while the WTI contract gained 9.1 percent week-on-week, the most since March 2023, on expectations that Israel could strike Iranian oil infrastructure in response to an Iranian missile attack on Israel on Oct. 1.

However, as the Israeli response is still developing, some investors likely sold futures to lock in their gains from the recent climb.

“Technical profit-taking seems to be the most logical explanation,” Priyanka Sachdeva, senior market analyst at Phillip Nova, said on the softening in oil prices.

Still, oil markets are bound to experience tailwinds amid fears of Israel’s retaliation on Iran, as the potential mass-scale escalation of conflict in the Middle East has countered mounting demand-side pressures, Sachdeva said.

Israel bombed Hezbollah targets in Lebanon and the Gaza Strip on Sunday ahead of the one-year anniversary of Hamas’ Oct. 7 attacks on Israel that triggered the current war between Israel and the Iranian-backed militant groups. Its defense minister also said all options were open for retaliation against Iran.

Hezbollah rockets hit Israel’s third-largest city of Haifa, police said early on Monday, and Israeli media reported 10 injured in the country’s north.

ANZ Research cautioned that despite the rally in oil prices last week, the impact of the conflict on oil supply will be relatively small.

“We see a direct attack on Iran’s oil facilities as the least likely response among Israel’s options,” it said.

“Moreover, we have seen a diminished impact of geopolitical events on oil supply. This has led to a significantly smaller geopolitical risk premium being applied to oil markets in recent years, and OPEC’s 7 million barrels per day of spare capacity provides a further buffer.”

OPEC and its allies including Russia and Kazakhstan, a grouping known as OPEC+, has millions of barrels of spare capacity since it has been cutting production in recent years to support prices amid weak global demand.

The producer grouping has enough spare oil capacity to compensate for a full loss of Iranian supply if Israel knocks out that country’s facilities, but it would struggle if Iran retaliates by hitting the installations of its Gulf neighbors, according to analysts.

At its last meeting on Oct. 2, OPEC+ kept its oil output policy unchanged including a plan to start raising production from December.

Combined with the uncertain pace of economic recovery in top crude importer China, the production hike can easily shield the market from supply disruptions and continues to limit the upside in oil prices, said Phillip Nova’s Sachdeva.


Closing Bell: Saudi main index slips to close at 11,769

Closing Bell: Saudi main index slips to close at 11,769
Updated 06 October 2024
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Closing Bell: Saudi main index slips to close at 11,769

Closing Bell: Saudi main index slips to close at 11,769
  • Parallel market Nomu lost 259.40 points, or 1.04%, to close at 24,655.96
  • MSCI Tadawul Index lost 22.10 points, or 1.48%, to close at 1,474.92

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday, losing 188.50 points, or 1.58 percent, to close at 11,769.04.

The total trading turnover of the benchmark index was SR6.20 billion ($1.65 billion), as 19 of the stocks advanced and 213 retreated. 

The Kingdom’s parallel market Nomu lost 259.40 points, or 1.04 percent, to close at 24,655.96. This comes as 17 of the listed stocks advanced while 48 retreated. 

The MSCI Tadawul Index lost 22.10 points, or 1.48 percent, to close at 1,474.92. 

The best-performing stock of the day was Al-Baha Investment and Development Co., whose share price rose 7.14 percent to SR0.30. 

United Wire Factories Co. and Kingdom Holding Co. were among the other top performers.

The worst performer was Saudi Ceramic Co., whose share price dropped 7.26 percent to SR28.75. 

Other worst performers were Elm Co. and Arab Sea Information System Co.

Announcements

Almarai Co. has announced its interim condensed consolidated financial results for the period ending on Sept. 30. According to a Tadawul statement, the firm recorded a net profit of SR1.88 billion in the first nine months of the year, reflecting a 12.15 percent surge compared to the same period in 2023.

The increase in consolidated profits attributable to the company’s shareholders in the current period compared to last year is due to higher revenue growth, disciplined cost control, a favorable product mix, and stabilized commodity costs.

Al-Etihad Cooperative Insurance Co. has announced that it is signing a contract with the Ministry of Human Resources and Social Development to ensure the financial dues of non-Saudi workers in the private sector per the agreed terms and conditions and the insurance policy approved by the Insurance Authority.

A bourse filing revealed that the one-year SR391 million contract provides insurance coverage for the financial dues of non-Saudi workers in the delinquent entities of the private sector, in cooperation with several Saudi insurance and reinsurance companies, and in accordance with the agreed terms and conditions for one year. This will commence from the date of signing the agreement with the Ministry of Human Resources and Social Development and after obtaining the final approval of the Insurance Authority.

The policy represents the cooperation between the Ministry of Human Resources and Social Development and the Insurance Authority to protect the financial rights of non-Saudi workers in delinquent entities according to the ministry’s classification.

The insurance cover includes wages, unpaid dues, and a return ticket to the worker’s home country within the agreed-upon cover limits and following an agreed set of terms and conditions.

It is expected that the financial impact of this agreement will be reflected in the company’s financial performance starting from the fourth quarter of the year.


EVIQ, Ceer partner to enhance Saudi EV infrastructure

EVIQ, Ceer partner to enhance Saudi EV infrastructure
Updated 06 October 2024
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EVIQ, Ceer partner to enhance Saudi EV infrastructure

EVIQ, Ceer partner to enhance Saudi EV infrastructure
  • Initiative will establish a comprehensive charging network to support widespread electric vehicle adoption
  • Kingdom aims to convert 30% of vehicles in Riyadh to electric by 2030

JEDDAH: Saudi Arabia’s Electric Vehicle Infrastructure Co., EVIQ, has formed a strategic partnership with the Kingdom’s first EV brand, Ceer, to expand the nation’s charging infrastructure and promote sustainability. 

EVIQ, a joint venture between the Public Investment Fund and the Saudi Electricity Co., aims to bolster the electric vehicle ecosystem by collaborating with manufacturing brands and local partners to implement installation and maintenance operations.  

This initiative will establish a comprehensive charging network to support widespread electric vehicle adoption. 

EVIQ CEO Mohammad Baker Gazzaz highlighted the agreement’s significance in supporting the electric vehicle sector in Saudi Arabia.   

“This partnership will help encourage the wider adoption of electric vehicles, making them a seamless and convenient choice for drivers in the Kingdom. We look forward to fruitful cooperation with Ceer to achieve a more environmentally friendly and sustainable future for the Kingdom.” 

Saudi Arabia aims to convert 30 percent of vehicles in Riyadh to electric by 2030, part of a larger strategy to cut emissions in the capital by 50 percent and achieve carbon neutrality by 2060.  

The Kingdom is also targeting the production of approximately 300,000 vehicles by 2030, seeking a 50 percent share of car sales in the Gulf Cooperation Council countries by 2025. 

Ceer CEO James DeLuca emphasized that the partnership extends beyond building an electric vehicle industry. “We are also committed to providing an exceptional experience for electric vehicle owners in the Kingdom. We are pleased to partner with EVIQ to ensure a comfortable and seamless driving experience for electric vehicles in the Kingdom,” he said.   

The partnership signifies a major step toward realizing the Kingdom’s vision of developing an automotive industry and promoting sustainable transportation.  

By aligning Ceer’s commitment to advanced Saudi electric vehicles with EVIQ’s goals of building an effective network, this collaboration paves the way for a smooth transition to electric mobility. 

Last year, EVIQ announced plans to install over 5,000 fast chargers across 10,000 locations throughout the Kingdom.  

This strategic initiative not only enhances Saudi Arabia's electric vehicle infrastructure but also aligns with broader economic and environmental objectives, paving the way for a sustainable future and diversified economy. 

Ceer is investing significantly in research and development to produce competitive electric vehicles, with government support through incentives and regulations designed to foster industry growth.