Saudi Arabia is the fastest growing country in the manufacturing sector in the Gulf with an average expected annual growth of 7.5 per cent until 2018, said an expert.

The kingdom's manufacturing sector is poised for significant growth and has the potential to become a technology-intensive industry, not only on an advanced regional level but also on a par with global competition in most areas, remarked Martin Kuban, the lead research analyst at International Data Corporation (IDC) Manufacturing Insights, Central Europe, the Middle East, and Africa (CEMA) region.

"The diversification of the country's oil-based economy is progressing steadily, supported by a positive economic environment and favorable investment attitudes. And IT innovation spirits are rather high, as many of the new businesses are not saddled with extensive client-based solutions," he added.

The IT spending in Saudi Arabia is increasing at the fastest rate across all countries in Cema region, according to the latest insights released today by International Data Corporation (IDC).

The continuous GDP growth has resulted in ambitious development plans in the country, and there is an apparent push for improvements in the business environment to attract more foreign direct investment (FDI) to a number of different manufacturing sub-sectors, said Kuban.

Software and IT services, he stated, will be the fastest-growing segments, transforming the traditionally rather hardware-oriented IT market.

The third platform IT solutions and the Internet of Things are also expected to play a more essential role in the Saudi manufacturing sector over the coming 5–10 years. The future of manufacturing in Saudi Arabia will remain dominated by large manufacturing entities and conglomerates focusing on asset-oriented and brand-oriented manufacturing, he added.

The manufacturing sector delivers roughly 10 per cent of Saudi Arabia's GDP, and it holds significant potential both in terms of its contribution to GDP and the ongoing diversification of industries, according to IDC data.

Oil and gas processing and the related chemical industry remain the major drivers of economic growth, but a significant increase in output from these industries is unlikely due to global competition and international agreements, it stated.

"Manufacturing in technology- and engineering-oriented value chains will be driven by emerging small and medium businesses, mostly established in industrial zones surrounding big cities," remarked Kuban.

"Many of these hubs will emerge as centers of innovation and excellence, closely tied to newly developed research and development facilities, stated the expert.

According to Kuban, IT will play a crucial role in these new establishments, and this will be in visible contrast to the country's large manufacturing companies.

"While these will also undergo considerable IT transformation, it will typically be at a much slower pace and with less grace due to the lack of IT skills and poorer decision-making capabilities of their internal IT organizations," he added.-TradeArabia News Service