Rafid initiative drives innovation in Saudi industry via academic partnerships

Led by the Ministry of Industry and Mineral Resources, this comprehensive effort aims to enhance the Kingdom’s advanced national industry by engaging local universities and technical colleges to align with the National Industrial Strategy. SPA
Led by the Ministry of Industry and Mineral Resources, this comprehensive effort aims to enhance the Kingdom’s advanced national industry by engaging local universities and technical colleges to align with the National Industrial Strategy. SPA
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Updated 17 September 2024
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Rafid initiative drives innovation in Saudi industry via academic partnerships

Rafid initiative drives innovation in Saudi industry via academic partnerships
  • Effort aims to enhance the Kingdom’s advanced national industry by engaging local universities and technical colleges
  • Rafid program focuses on advancing digital manufacturing capabilities

JEDDAH: Saudi Arabia’s industrial sector is poised for significant growth through the Rafid program, a strategic initiative that collaborates with academic institutions to spearhead innovation and research in manufacturing.

Led by the Ministry of Industry and Mineral Resources, this comprehensive effort aims to enhance the Kingdom’s advanced national industry by engaging local universities and technical colleges to align with the National Industrial Strategy.

Anchored in the principles of the Fourth Industrial Revolution, the Rafid program focuses on advancing digital manufacturing capabilities. It leverages cutting-edge technologies such as 3D printing, design and engineering analysis, and simulation to drive progress.

Saudi Arabia envisions expanding its factory count to 36,000 by 2035, with 4,000 of these being fully automated, thereby transforming the production landscape. The incorporation of advanced technologies—including artificial intelligence, 3D printing, and robotics—positions the Kingdom’s industries to emerge as global leaders in this industrial revolution.

“We have launched the Rafid program, aiming to establish strategic partnerships with leading Saudi universities and set up innovative factories on their campuses,” Saudi Minister of Industry and Mineral Resources Bandar Alkhorayef wrote in a post on his X account.

The minister highlighted that the Rafid program is dedicated to leveraging research outcomes and innovations, particularly in key sectors outlined in the country’s national industrial strategy. The program will support various initiatives and accelerated adoption of Fourth Industrial Revolution technologies. This includes the Future Factories Program, which aims to establish a robust technology ecosystem and modernize the manufacturing sector.

The launch event was attended by prominent figures from the industrial and mining sectors, university presidents, and representatives from private sector companies.

In his address at the official launch, Alkhorayef underscored the critical role of advancing the national industry in achieving Vision 2030 and fostering a diverse and sustainable economy. He stressed the need for technological progress, innovation, and the development of human resources, emphasizing that Rafid is a strategic solution to meet these challenges.

During the event, several pivotal agreements and memorandums of understanding were signed under the Rafid program. Among these was a partnership between Princess Nourah bint Abdulrahman University and Autonomous Technologies, aimed at advancing drone manufacturing capabilities. King Abdulaziz University also forged a deal with Haven Scientific to establish an advanced medical products factory. Meanwhile, Qassim University entered into a memorandum of understanding with United Defense to develop an advanced drone systems manufacturing facility. Additionally, Umm Al-Qura University, represented by Wadi Makkah Technology, signed an agreement with Abdullah Abuljadayel Company to set up a food production plant.

The agreements outlined the creation of four innovative factories at these local universities. Specifically, Princess Nourah bint Abdulrahman University will host a drone manufacturing plant, Qassim University will develop an advanced drone systems facility, King Abdulaziz University will establish a medical products factory, and Umm Al-Qura University will set up a food production plant.

The event also announced the allocation of significant industrial lands. King Faisal University was granted 1.4 million sq. meters for food and environmental industries, while Umm Al-Qura University received 1.5 million sq. meters for industries related to pilgrimage.

The launch of the Rafid program was attended by an array of distinguished guests, including Mohammed Al Hayaza, President of Al-Faisal University; Khalid Al-Mudaifer, Deputy Minister of Industry and Mineral Resources for Mining Affairs; Abdullah bin Ali Al-Ahmari, Assistant Minister of Industry and Mineral Resources for Planning and Development; Inas Al-Issa, president of Princess Nourah bint Abdulrahman University; Bassam bin Abdullah Al-Bassam, secretary-general of the Council of University Affairs; Majed Rafed Al-Argoubi, CEO of the Saudi Authority for Industrial Cities and Technology Zones; and Muhammad bin Fahd Al-Sharikh, president of Qassim University.

Officials from the signing entities were also present, underscoring the collaborative effort driving the Rafid program forward.


Pakistan says inflation to remain between 8-9% in September-October

Pakistan says inflation to remain between 8-9% in September-October
Updated 28 September 2024
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Pakistan says inflation to remain between 8-9% in September-October

Pakistan says inflation to remain between 8-9% in September-October
  • Inflation, which peaked at 38% in May 2023, has been on a downward trend for the past few months 
  • Pakistan’s exports and imports expected to observe an increase in momentum during Sept., says economic outlook

ISLAMABAD: Pakistan’s Finance Division said this week that inflation is expected to remain in the 8-9% range from September to October, adding that the country’s economic recovery will be bolstered by a favorable external economic environment and a stable exchange rate. 

Pakistan’s annual consumer price inflation (CPI) rate eased to 9.6% in August, the first single-digit reading in almost three years. Islamabad undertook tough economic measures which included increasing taxes and electricity prices, to enter into a $7 billion loan agreement with the International Monetary Fund (IMF) which was formally approved on Wednesday. 

However, inflation has been on a downward trend in the country which peaked at 38% in May 2023. Pakistan’s August annual CPI figures were clocked at 27.4% in August 2023 and 11.1% in July 2024. The government has credited its tough reforms and economic policies for the declining trend of inflation. 

“Inflation is expected to remain within the range of 8.0% to 9.0% in September and October 2024,” the Finance Division’s monthly Economic Outlook report for September 2024 said on Friday. 

The report said that Pakistan’s exports and imports are expected to observe an increase in momentum, with exports expected to remain in the range of $ 2.5-3 billion while imports will remain in the $4.5-5 billion range in September. 

It said workers’ remittances were expected to remain in the $ 2.7-3.2 billion range this month. 

The report said that Pakistan’s external account had improved at the back of increased workers remittances and surging exports. 

“During Jul-Aug FY2025, the current account registered a deficit of $ 0.2 billion compared to $ 0.9 billion last year however, it recorded a surplus of $ 75 million in August 2024,” the report said.

The report pointed out that from July to August, goods exports increased by 7.2 percent to reach $4.9 billion while imports stood at $ 9.5 billion compared to $ 8.4 billion last year, leading to a trade deficit of $ 4.7 billion. 


Pakistan army chief thanks Saudi Arabia, UAE, China for support after IMF bailout approval

Pakistan army chief thanks Saudi Arabia, UAE, China for support after IMF bailout approval
Updated 28 September 2024
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Pakistan army chief thanks Saudi Arabia, UAE, China for support after IMF bailout approval

Pakistan army chief thanks Saudi Arabia, UAE, China for support after IMF bailout approval
  • IMF approved Pakistan’s loan program this week after Islamabad reportedly secured financing assurances from China, kingdom and UAE
  • IMF mission chief to Pakistan says Islamabad received financing assurances from three countries that go beyond deal to roll over $12 billion in loans 

ISLAMABAD: Pakistan’s Army Chief General Syed Asim Munir this week thanked Saudi Arabia, China and the United Arab Emirates (UAE) for aiding in the country’s economic recovery, days after the International Monetary Fund (IMF) approved a crucial $7 billion loan program for Islamabad. 

Pakistan reached a staff-level agreement with the IMF for the new 37-month loan program in July. However, the formal approval for the loan was delayed reportedly as the South Asian country needed to secure financing commitments from the UAE, China and Saudi Arabia. 

The IMF’s Executive Board approved the loan program on Wednesday with the lender’s Pakistan Mission Chief Nathan Porter telling Reuters that Islamabad received “significant financing assurances” from China, Saudi Arabia and UAE that go beyond a deal to roll over $12 billion in bilateral loans owed to them by Pakistan. 

Munir visited the Karachi Corps on Friday where he interacted with the country’s business community and inspected the military’s operational preparedness, the Inter-Services Public Relations (ISPR), the military’s media wing, said. 

“COAS [chief of army staff] appreciated the praiseworthy role performed by brotherly and friendly countries especially China, Kingdom of Saudi Arabia and UAE in the economic recovery of Pakistan by helping us in multiple domains,” the ISPR said on Friday. 

Munir also appreciated the business community and entrepreneurs’ contributions toward the country’s economic growth, the ISPR said. He appreciated efforts by the federal and provincial governments toward supporting the country’s key economic reforms. 

Pakistan’s powerful military has exercised a sizable influence in the country’s economic decision-making for years. In June 2023, the government set up the Special Investment Facilitation Council (SIFC), a key hybrid civil-military body, to attract international investments in Pakistan’s vital sectors, particularly from Gulf countries. 

The SIFC seeks to rescue Pakistan from a prolonged economic crisis that saw its reserves plummet to historic lows and its currency weaken significantly over the past two years amid staggering inflation. 

The military has a significant role in the body, with the army chief being a member of its apex committee and the army itself serving as the national coordinator for both the SIFC’s apex and executive committees.

The military’s involvement in key economic decisions can be traced back to June 2019 when then prime minister Imran Khan set up a high-powered National Development Council (NDC) of which then army chief, General Qamar Javed Bajwa, was a member. It was the first time the army had been given a formal seat at the economic table.


Only 17 percent of chief economists expect strong growth in Middle East and North Africa in 2024-25: Report

Only 17 percent of chief economists expect strong growth in Middle East and North Africa in 2024-25: Report
Updated 27 September 2024
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Only 17 percent of chief economists expect strong growth in Middle East and North Africa in 2024-25: Report

Only 17 percent of chief economists expect strong growth in Middle East and North Africa in 2024-25: Report
  • Growth perspectives are positive, but uncertain, for the MENA region, survey reveals

DUBAI: Almost half (48 percent) of chief economists globally expect moderate growth in 2024 and 2025 in the Middle East and North Africa region, according to the latest Chief Economists Outlook by the World Economic Forum.

Growth in the MENA region is expected to rise from 2.2 percent in 2024 to 4 percent in 2025, according to the International Monetary Fund’s projections.

Only 17 percent expect strong growth for the region this year and next, while 31 percent expect weak growth in 2024, and 34 percent expect weak growth in 2025.

South Asia has the most growth potential, as seven out of 10 chief economists expect strong or very strong growth in 2024 and 2025. The US also has a positive outlook, with nearly 90 percent expecting strong or moderate growth this year.

Europe, on the other hand, lags, with almost 69 percent of respondents expecting weak growth this year.

The report, released this week, is based on a survey of leading chief economists. It found that “easing inflation and strong global commerce” are the key drivers of “cautious optimism” for global recovery. 

However, elevated debt levels are a growing concern for both advanced (53 percent) and developing (64 percent) countries.

Geopolitical tensions are another potential source of macroeconomic shocks, with 91 percent of respondents saying they would undermine global collaboration efforts.

The various conflicts in the world, from Europe to the Middle East, have taken a humanitarian and financial toll on national economies. Although countries have managed to adapt to numerous geopolitical disruptions, it is not a cost-free process, the report said.

For example, shipping costs between East Asia and North Europe more than doubled between April and July 2024 following an increase in attacks on ships in the Red Sea.

And the latest World Investment Report cites worsening geopolitical tensions as one of the key drivers of a 10 percent slump in global foreign direct investment last year.

Global inflation continues to drop, with IMF projections showing full-year global inflation falling from 6.8 percent in 2023 to 5.9 percent in 2024.

Although the projections vary vastly between advanced economies (2.7 percent) and developing economies (8.2 percent), they remain above pre-pandemic levels.

The majority of chief economists (63 percent) expect moderate inflation this year in the MENA region, with this number growing to 68 percent next year. Roughly 20 percent expect low inflation in both years with only 11 and 15 percent expecting high inflation in the region in 2024 and 2025, respectively.

On the other hand, the proportion of respondents expecting high inflation in the US dropped from 21 percent in 2024 to just 6 percent in 2025.

Similarly, in Europe, expectations of high inflation dropped from 21 percent this year to 3 percent next year.

The survey points to a loosening of monetary policy over the next year, particularly in the US (91 percent), Europe (91 percent), and China (84 percent).

In the MENA region, 62 percent expect a loosening of monetary policy, while 35 percent expect it to remain unchanged.


Saudi banks positioned for 2025 profit growth amid interest rate cuts: Report

Saudi banks positioned for 2025 profit growth amid interest rate cuts: Report
Updated 27 September 2024
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Saudi banks positioned for 2025 profit growth amid interest rate cuts: Report

Saudi banks positioned for 2025 profit growth amid interest rate cuts: Report

RIYADH: Saudi banks are poised for a significant increase in profit margins in early 2025, driven by anticipated interest rate cuts that are expected to position them favorably against their Gulf counterparts.

A recent report from Bloomberg Intelligence highlighted the strengths of the Kingdom’s financial institutions, pointing out that they enjoy higher valuations primarily due to their reduced exposure to volatile markets.

Their conservative leverage not only positions them favorably but also allows for a strategic increase in profitability as interest rates decline.

Moreover, their adept management of the tax landscape enhances their competitive edge compared to other Gulf nations.

In addition to these factors, Saudi Arabia’s substantial role in a $2 trillion construction pipeline in the Middle East and North Africa region, which accounts for 34 percent of the total, indicates that the country’s banks will increasingly need to secure funding to support a variety of ongoing projects.

Following the US Federal Reserve’s decision on Sep. 18, the central banks of Saudi Arabia, the UAE, and Bahrain reduced their interest rates by 50 basis points, with Qatar cutting its deposit, lending, and repo rates by 55 basis points.  

This change signaled a shift in US monetary policy after two years of rate hikes aimed at controlling inflation.

Central banks within the Gulf Cooperation Council, including Saudi Arabia, typically align their policies with the Fed due to the peg of their currencies to the US dollar.

The analysts in the report predict that the Federal Reserve will implement a series of interest rate cuts, starting with a 50 basis point reduction in September, followed by 25 basis point cuts in the subsequent two meetings. This would total a reduction of 100 basis points for the year.

The reduction in interest rates is expected to support Saudi Arabia’s Vision 2030 projects and further accelerate non-oil activities. Businesses in capital-intensive sectors such as real estate, construction, and infrastructure are likely to benefit from cheaper credit, facilitating more aggressive expansion and investment opportunities.

Impact of oil price and government spending

The valuation of Gulf banks is influenced by several key factors, particularly oil prices and regional spending, according to the report. An average price of $80 per barrel is essential for maintaining liquidity in the Gulf banking sector, as it supports the economic stability and cash flow necessary for banking operations.

For Saudi Arabia, achieving budget balance requires an oil price of $108 per barrel, largely due to a substantial increase in public expenditure, which rose by $111 billion from 2016 to 2023. Including investments by the sovereign wealth fund in domestic projects, total spending has increased by $148 billion.

This spending surge is associated with various government initiatives aimed at promoting social and economic development. MEED’s July data reveals that Saudi Arabia leads with a project value of $680 billion within a $2 trillion construction pipeline set for the next five years, excluding energy-related projects.

The Public Investment Fund of Saudi Arabia, valued at $925 billion, reported a 29 percent increase in assets, reaching SR2.87 trillion ($765.2 billion) in 2023.

This growth is largely attributed to a strong emphasis on local investments. Allocations for domestic infrastructure and real estate development rose by 15 percent year-over-year to SR233 billion, while foreign investments increased by 14 percent to SR586 billion.

Simultaneously, the Saudi government has introduced new laws and reforms to stimulate and mandate domestic investment, aligning with its Vision 2030 initiative to diversify the oil-dependent economy.

With plans to invest approximately $680 billion in construction projects over the next five years, banks may need around $400 billion to finance 60 percent of this pipeline, relying on a mix of deposits and additional debt issuance.

Funding the growth

As reported by Bloomberg Intelligence, Saudi banks have issued $13 billion in debt by August, with $6 billion of that coming from sources excluding the Saudi National Bank’s certificates of deposits issued in Singapore. This amount surpasses the $11 billion in debt issued by UAE banks during the same timeframe.

Total debt issuance from Saudi banks is projected to reach at least $15 billion annually, supported by a diversified funding strategy that includes up to 15 percent from wholesale funding.

The last instance of Saudi banks outperforming UAE banks in debt issuance was in 2022, when tight liquidity and increased capital demand, particularly from the mortgage sector, were prevalent.

Bloomberg Intelligence noted that Saudi banks’ debt offerings are 3.7 times oversubscribed, compared to three times for their UAE counterparts. This indicates strong investor confidence and ample market liquidity, enabling Saudi banks to secure the necessary capital for expansion as the nation advances its Vision 2030 initiatives.

However, the report also pointed out a challenge: Saudi banks are dealing with a $4 billion currency mismatch, meaning they may have borrowed in one currency while managing assets or revenues in another, exposing them to financial risks from fluctuating exchange rates.

Moreover, heightened competition among Saudi banks has led to narrower spreads on corporate loans, making it challenging to impose higher rates. Although declining interest rates may improve these spreads, the high costs of liabilities compel banks to seek additional strategies to enhance the profitability of their corporate lending.

Shift to sustainable funding

Saudi banks primarily rely on wholesale funding from other banks and financial institutions; however, this source is deemed unreliable for long-term obligations, particularly those in foreign currencies.

Consequently, the report emphasizes the urgent need for Saudi banks to secure more stable, long-term funding options to support their operations and growth.

According to Bloomberg Intelligence, the share of wholesale funding in Saudi banks’ balance sheets has decreased from 15 percent in the fourth quarter of 2023 to 14 percent in June, signaling a shift in how banks are managing liquidity needs and reducing reliance on short-term interbank borrowing.

Additionally, UAE banks have extended liquidity support to Saudi banks through interest-bearing deposits, showcasing cross-border financial collaboration.

While unsecured debt constitutes only 3 percent of the banks’ assets, this figure has risen due to record debt issuance this year. This suggests that although Saudi banks are working to expand their debt profiles, a significant portion of their funding remains secured.

Furthermore, Tier 1 capital represents 2 percent of the balance sheet, indicating a stable capital position relative to total assets. Notably, Al Rajhi Bank and Alinma Bank have received considerable amounts in time deposits from other banks, which suggests variability in the amounts they can secure over time despite their engagement with wholesale funding.

Asset quality and profitability

Saudi banks are sustaining stable asset quality, with Stage 1 or good loans increasing to 93.4 percent in the first half of the year, up from 92.8 percent in 2023. This improvement is attributed to strong new loan origination.

The report indicated that write-offs and recoveries surged, peaking at SR6 billion in the fourth quarter, resulting in a decline of Stage 3 or bad loans to just 1.6 percent.

To mitigate potential risks, banks are bolstering their provision buffers, with coverage for Stage 1 loans rising to 45 basis points. The cost of risk improved to 34 basis points in the second quarter, exceeding expectations; however, it may increase in the latter half of the year if recovery trends falter.

In contrast, UAE banks, which experienced a significant boost in profitability last year, are likely to face a rise in their cost of risk as they adapt to a new corporate tax structure while striving to maintain their performance levels.

The introduction of a 9 percent tax, projected to increase to 15 percent in 2025, along with the potential for higher provisioning requirements in the future, presents challenges for these banks.

Saudi banks, on the other hand, are already subject to a 10 percent zakat tax but operate with lower leverage compared to their UAE counterparts. This reduced leverage positions Saudi banks favorably to enhance their return on equity if interest rates decrease.

While UAE banks managed to soften the impact of the corporate tax in their second-quarter financial results, their margins are under pressure, raising concerns about their loan recovery capabilities, which could affect bad-loan ratios.

According to Bloomberg Intelligence, Qatari banks are expected to maintain relatively stable margins, but their exposure to the real estate sector presents a risk to asset quality. A recovery in this sector could serve as a significant catalyst for enhancing overall stability and performance.

Fitch Ratings reported in August that the operating environment for Saudi banks is favorable, assigning them a score of bbb+, the highest among the banking sectors in the GCC.

This score is one notch above the ratings of its closest peers— UAE, Qatar, and Kuwait— and represents the highest score awarded by Fitch globally to emerging market banking sectors.

Fitch anticipated that Saudi banks will continue to grow at roughly double the average rate of the GCC, with projected financing growth of about 12 percent for 2024, compared to 11 percent in 2023.


At UN, Saudi Arabia calls for global collaboration at COP16 Riyadh to tackle land degradation

At UN, Saudi Arabia calls for global collaboration at COP16 Riyadh to tackle land degradation
Updated 27 September 2024
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At UN, Saudi Arabia calls for global collaboration at COP16 Riyadh to tackle land degradation

At UN, Saudi Arabia calls for global collaboration at COP16 Riyadh to tackle land degradation

RIYADH: Saudi Arabia has called on the world’s policymakers to urgently address land destruction and drought ahead of the 16th UN Convention to Combat Desertification COP16 in Riyadh in December. 

At the Kingdom’s “Road to Riyadh” event on the sidelines of the UN General Assembly, opened by Minister of Foreign Affairs Prince Faisal bin Farhan, Saudi Arabia urged delegates to prepare to take decisive action at the upcoming meeting, outlining a roadmap for international action and engagement and unveiling the thematic program for the COP.

According to a press release flagging up the gathering, every second an equivalent of four football fields of healthy land becomes degraded, totaling 100 million hectares every year.

Incoming COP16 President and Saudi Arabia Minister of Environment, Water, and Agriculture Abdulrahman Abdulmohsen Al-Fadley, said: “This is a pivotal moment for our planet. Land restoration is vital to securing a prosperous future for generations to come.”

He added: “It is crucial the international community unites to deliver ambitious and lasting solutions that curb land degradation, combat drought, and promote the sustainable use of natural resources.

“We must strengthen international cooperation to address the pressing environmental challenges facing our planet.”

The minister emphasized that Saudi Arabia's hosting of COP16, from December 2 to 13, reflects its commitment to environmental preservation and restoration, both domestically and internationally, citing initiatives such as the Saudi Green Initiative, the Middle East Green Initiative, and the G20 Global Land Initiative.

While land degradation trends vary across regions, UNCCD data warns that, if current patterns continue, the world will need to restore 1.5 billion hectares of degraded land by 2030 to meet the Land Degradation Neutrality targets outlined in the Sustainable Development Goals. 

In Riyadh, under Saudi Arabia’s Presidency of COP16, there will be a strong push for more concrete commitments to accelerate restoration efforts and meet this critical goal.

At the Road to Riyadh event, senior stakeholders from international organizations, government and civil society also addressed the growing need to increase ambition and address the global challenges caused by land degradation, including drought, food insecurity and forced migration, alongside the urgent need for multilateral action to tackle them.

UNCCD Executive Secretary Ibrahim Thiaw said: “Land degradation and drought affect nearly half the world's population, especially indigenous communities, smallholder farmers, women, and youth. 

“COP16 in Riyadh will be a pivotal moment to accelerate large-scale land restoration and boost drought resilience, with multiple benefits for people, nature and climate. 

“Our success depends on the ambition of all parties and our commitment to resetting our relationship with the land for future generations.”

According to the UNCCD, up to 40 percent of the world’s land is already degraded, directly affecting an estimated 3.2 billion people. At the same time, droughts are occurring more frequently and with greater intensity – up 29 percent since 2000. An estimated 75 percent of people globally will be affected by drought by 2050.