Saudi Arabia’s Vision 2030 places a significant emphasis on strengthening the Kingdom’s economy by promoting local content, encouraging foreign investment, and fostering sustainable development. One of the flagship initiatives driving this transformation is IKTVA (In-Kingdom Total Value Add), alongside a broader focus on localization. These programs aim to reduce reliance on imports, create local jobs, and build a robust, diversified economy.
For businesses looking to thrive in Saudi Arabia, understanding IKTVA and localization programs is essential. This guide from The Saudi Gate provides an in-depth look at these initiatives and offers insights into how businesses can align with the Kingdom’s goals for mutual growth and success.
What is IKTVA?
Launched by Saudi Aramco in 2015, IKTVA is a program designed to boost the contribution of local content to the Kingdom’s economy. It focuses on three main pillars:
- Maximizing the value of goods and services sourced within Saudi Arabia.
- Creating local jobs and training programs to develop a skilled workforce.
- Encouraging the establishment of manufacturing and service facilities in the Kingdom.
IKTVA’s Core Objectives
- Increase local content across all sectors to 70% by 2025.
- Attract foreign direct investment (FDI) to support local industries.
- Foster a culture of innovation and technology transfer.
IKTVA Scorecard
Businesses operating with or supplying to Saudi Aramco are assessed through an IKTVA scorecard, which measures their contributions to local content. Factors evaluated include:
- Local workforce hiring and training.
- Investments in Saudi-based facilities.
- Procurement of local goods and services.
Companies with higher IKTVA scores gain preferential treatment in contracts and long-term partnerships with Saudi Aramco.
Localization and Local Content Development in Saudi Arabia
Localization extends beyond IKTVA and encompasses multiple initiatives to support the Kingdom’s broader economic diversification goals. Local content development focuses on increasing the use of locally manufactured goods, services, and human capital in public and private projects.
Key Localization Programs
- Local Content and Government Procurement Authority (LCGPA):
- Established to oversee and enforce local content requirements.
- Mandates local content quotas in government projects and public tenders.
- National Industrial Development and Logistics Program (NIDLP):
- Aims to transform Saudi Arabia into a global industrial and logistics hub.
- Encourages investment in manufacturing, mining, energy, and logistics.
- Saudi Vision 2030 Localization Goals:
- Develop strategic sectors such as defense, pharmaceuticals, and renewable energy.
- Promote partnerships between local businesses and global companies.
Benefits of IKTVA and Localization for Businesses
Businesses aligning with IKTVA and localization initiatives can access a host of opportunities:
1. Competitive Advantage
- Higher IKTVA scores lead to priority in contracts with Saudi Aramco and other entities.
- Compliance with local content requirements strengthens brand reputation.
2. Access to Incentives
- Tax breaks, subsidies, and financial incentives for companies investing in local production and workforce development.
- Support for research and development (R&D) initiatives.
3. Market Entry Support
- Simplified regulatory processes for companies adhering to localization guidelines.
- Collaboration opportunities with local suppliers and manufacturers.
4. Contribution to National Goals
- Enhance economic stability by reducing dependency on imports.
- Foster job creation and skill development for Saudi nationals.
Challenges and Solutions in Meeting IKTVA and Localization Goals
While IKTVA and localization initiatives present significant opportunities, businesses may face challenges such as:
1. Understanding Regulatory Frameworks
- Navigating the complex regulations associated with IKTVA compliance.
- Solution: Partner with experts like The Saudi Gate for guidance on regulatory requirements and compliance.
2. Workforce Localization
- Recruiting and training local talent to meet IKTVA targets.
- Solution: Collaborate with local universities and vocational institutions for training programs.
3. Supply Chain Adaptation
- Sourcing locally without compromising on quality or cost.
- Solution: Identify reliable local suppliers and establish long-term partnerships.
How The Saudi Gate Can Help
At The Saudi Gate, we specialize in helping businesses navigate the complexities of IKTVA and localization requirements. Our services include:
1. IKTVA Compliance Consulting
- Develop strategies to improve your IKTVA score.
- Conduct audits and provide actionable recommendations.
2. Localization Strategy Development
- Identify opportunities for local sourcing and workforce integration.
- Design training programs to enhance local skills.
3. Market Entry Support
- Assist with company registration, licensing, and regulatory approvals.
- Facilitate partnerships with local suppliers and service providers.
4. Performance Monitoring
- Implement tracking systems to monitor IKTVA and localization performance.
- Generate reports to showcase compliance and improvements.
Industries Benefiting from IKTVA and Localization
Several industries stand to benefit significantly from Saudi Arabia’s localization initiatives:
1. Energy and Petrochemicals
- Local manufacturing of equipment and components for the energy sector.
- Development of downstream industries.
2. Defense and Aerospace
- Increasing local production of defense equipment and technology transfer.
- Collaborations with international defense contractors.
3. Pharmaceuticals and Healthcare
- Expansion of local pharmaceutical manufacturing capabilities.
- Localizing the production of medical devices and consumables.
4. Renewable Energy
- Manufacturing solar panels, wind turbines, and other renewable energy components.
- Investment in green hydrogen production facilities.
Case Studies: Success Stories in IKTVA and Localization
1. Baker Hughes
- Established a manufacturing facility in Saudi Arabia to produce wellheads and pressure control equipment.
- Achieved high IKTVA scores by hiring local talent and sourcing locally.
2. General Electric (GE)
- Invested in a service and manufacturing facility in Dammam.
- Focused on training local engineers and technicians.
Future Outlook: Building a Sustainable Economy
As Saudi Arabia continues its journey toward economic diversification, IKTVA and localization programs will remain central to its strategy. Businesses that align with these initiatives will not only contribute to the Kingdom’s vision but also secure their position in a rapidly growing market.
Key Goals for 2030 and Beyond
- Increase the share of local content in non-oil sectors.
- Enhance the Kingdom’s global competitiveness by fostering innovation and technology transfer.
- Achieve sustainable development through strategic partnerships and investments.
Saudi Arabia’s IKTVA and localization programs are more than just compliance measures—they are pathways to mutual growth and prosperity. By aligning with these initiatives, businesses can unlock vast opportunities, drive innovation, and contribute to the Kingdom’s Vision 2030 goals.
At The Saudi Gate, we are dedicated to helping you navigate this dynamic landscape. From IKTVA compliance to localization strategies, we provide end-to-end solutions tailored to your needs.
Contact us today to learn more about how we can help you succeed in Saudi Arabia’s evolving economy.