Aramco’s flagship iktva program is helping to build a diversified economy for the 21st century

Saudi Arabia’s economy has undergone a fundamental transformation over the past decade as it has diversified and developed a dynamic local commercial and industrial ecosystem more resilient to global shocks.

According to the Saudi Ministry of Economy and Planning, the non-energy sector contributed 50 percent of gross domestic product for the first time in 2023, and its importance continues to grow.

Part of this transformation has been driven by Aramco’s own In-Kingdom Total Value Add supply chain transformation program.

While iktva is widely recognized for its contribution to diversifying and strengthening the Saudi economy, its value to Aramco itself is equally significant.

Essentially, iktva is Aramco’s strategic response to one of the defining business challenges of the 21st century: building a supply chain resilient to disruption, fragmentation and uncertainty.

Supply chain resilience

Global supply chains have come under increasing strain in recent years. Geopolitical tensions, trade restrictions and shifting industrial policies have exposed vulnerabilities in global sourcing models.

Research from McKinsey shows that supply chain disruptions of a month or longer affect companies every three to four years on average, with significant financial and operational consequences.

Iktva anticipated the need to address these disruptions. Launched in December 2015, iktva aimed to increase the proportion of goods and services Aramco sourced locally to 70 percent, strengthening its control over critical supply chains and reducing risk.

Within a decade, iktva had met the 70 percent target, and Aramco has set a new target of 75 percent local content by 2030. This is designed to further increase its resilience and insulate the company from external shocks, including increased shipping costs, currency fluctuations, and global inflation.

It has helped reduce reliance on international logistics and enabled faster, more flexible responses to disruption.

A competitive industrial ecosystem

Even before the new target, iktva’s success was clear. During the COVID-19 pandemic, for example, Aramco was able to maintain reliable energy supplies despite national lockdowns and restrictions that caused disruptions elsewhere.

This resilience has continued to be tested in more recent periods of disruption and conflict. In each case, Aramco demonstrated its ability to operate reliably which reinforces the value of building strong, in-Kingdom capabilities that enable continuity even under pressure.

Iktva has played a significant role shaping a competitive industrial ecosystem across the Kingdom. The program identified more than 210 localization opportunities across 12 key sectors, representing an annual market size of $28 billion.

Backed by $9 billion in capital, these opportunities have catalyzed more than 395 inward investments from 35 countries in new manufacturing facilities across the Kingdom.

As a result, 57 products are manufactured for the first time in Kingdom, within multiple sectors including chemicals, non-metallics, and IT sectors, underpinning the diversification of the economy.

Collectively, these efforts have contributed more than $280 billion to Saudi Arabia’s gross domestic product and led to the creation of more than 210,000 direct and indirect jobs.

In addition, with its focus on small and medium sized enterprises, it is helping to drive innovation and competition across the Kingdom.

Embedded resilience

The key to iktva’s success is its integration with Aramco’s procurement processes. Any businesses wanting to work with us must become an iktva partner. To do this, they are evaluated on their in-Kingdom investments, local hiring and training plans, SMEs development, research and development, local procurement, and exports.

To ensure transparency and fairness, independent third parties audit their submissions and the suppliers receive a score. Together we then develop a five-year iktva action plan that will enhance that score and increase their contribution to the Saudi economy.

This structured approach ensures that resilience and local value creation are built directly into how business is conducted. It is not an afterthought but a core principle in our supplier selection.

Investing in people

As a strategy to strengthen Aramco, iktva does not exist in isolation. Since 2008, we and our partners have set up 16 national training centers offering courses in more than 100 trades across sectors including technology, hospitality, and finance.

To date, nearly 58,000 students have graduated from our NTCs across more than 80 different disciplines. This helps us to build a skilled workforce that can meet the needs of a modern economy.

This long-term investment reduces Aramco’s and the Kingdom’s reliance on external expertise and ensures access to talent as required.

The motivation for iktva is simple: a flourishing, resilient domestic commercial and industrial ecosystem means a more resilient country and a more productive environment for Aramco. By investing in local businesses and people, we are investing in our future.

And, by investing in developing in-Kingdom industry and services, we are making our own business more efficient, resilient, and reliable.

In an uncertain global environment, iktva demonstrates how supply chain strategy can serve as a powerful driver of both corporate resilience and national transformation. Building value locally is not an option, it is a strategic necessity.

• Sulaiman M. Al-Rubaian is Aramco senior vice president of procurement and supply chain management