Saudi Aramco signs agreements worth $7.2bn to boost local economy

The pacts, part of the company's IKTVA programme, aim to support the Kingdom’s industrial and manufacturing sectors

The IKTVA initiative refers to the local manufacturing component required by Aramco from its partners. Reuters

Saudi Aramco has signed more than 100 agreements worth about $7.2 billion to boost the kingdom’s industrial and manufacturing sectors.

The world’s largest oil-exporting company signed accords with companies including DHL, Accenture and Zoom at the In-Kingdom Total Value Add (IKTVA) Forum and Exhibition, it said in a statement on Monday.

The IKTVA initiative refers to the local manufacturing component required by Aramco from its partners.

Saudi Arabia aims to drive domestic value creation, maximise long-term economic growth and diversification and build a supply chain for the development of a globally competitive energy sector in the Kingdom through Aramco's IKTVA programme.

“The local supplier ecosystem is a top priority for Aramco as well as a major contributor to the kingdom’s economy,” said Ahmad Al Sa’adi, Aramco's executive vice president of technical services.

“Through this mega programme, we are helping to create a culture of innovation and provide high quality jobs for our growing population.”

The programme achieved 63 per cent local content in 2022, up from 35 per cent in 2015, when IKTVA was originally launched.

Gulf countries have been executing programmes to redirect more government spending domestically in a bid to shore up their local economies.

The UAE's national In-Country Value programme is expected to increase domestic demand for local products and services to Dh55 billion ($15 billion) by 2025.

Saudi Arabia, the Arab world’s largest economy, announced in 2021 that foreign firms must set up regional headquarters in the country by the end of 2023 or risk losing out on government contracts.

Companies will not be able to sign contracts with any institution or fund affiliated to the government or its agencies without a headquarter in the Kingdom, the regulation said.

However, earlier this year, Saudi Arabia announced that some companies will be exempt from the requirement.

Companies with foreign operations not exceeding 1 million riyals can operate in the kingdom without local headquarters. Firms competing for government contracts without any other bidders are also exempt from the rules.

In October 2021, 44 companies received government licences to set up headquarters in the country.

The companies that had already relocated their regional headquarters by then, included PepsiCo, Didi, Unliver, Siemens, KPMG, Novartis, Baker Hughes, Halliburton, Philips, Flour, Schlumberger, SAP, PwC, Oyo, Boston Scientific and Tim Hortons.

The IKTVA programme also encourages the establishment of regional headquarters in the Kingdom.

Since its inception, more than 150 investments have been made in the country, including products manufactured for the first time in Saudi Arabia, the statement said.

Aramco has also established 16 national training centres in 10 cities, covering more than 60 trades.