Titanium Lens

In an era where economic dynamism swiftly shifts due to the winds of global trade, two countries—India and Saudi Arabia—stand out as prime investment opportunities for industrial manufacturing.

In this article, we’ll explore opportunities, strategic approaches, and strategies to overcome barriers to enter these markets.  

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India: The next global manufacturing hub

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The manufacturing sector already plays a significant role in India’s economy—13% of GDP—and through new programs and policies, the government expects that number to grow to 25% by 2025.

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Why India Appeals:

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• Economic Growth: The past five years have seen India’s GDP growth hover at 4%, almost double the United States. Forecasts for the next 5-10 years predict a growth rate of 6.3%.
• Demographics and labor costs: A young and educated population. The surge in India’s manufacturing can be attributed to its large and educated workforce, and lower labor costs relative to other manufacturing nations in Asia.  
• Government Initiatives: Becoming a global manufacturing hub is a stated policy objective of India’s government. Reforms are aimed toward enhancing infrastructure and decreasing red tape. Their capital incentives have reduced manufacturing costs, and production-linked incentives (PLI) scheme offers companies massive subsidies.  

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Launched in 2014, the Make in India Initiative targets 25 economic sectors to promote the growth of startups and producing large-scale employment. Since the launch in 2014, India has seen huge investments and growth in rail, automobiles, the defense industry, and aviation.  

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The emphasis on infrastructure is crucial to India's manufacturing rise, and not just the roads and ports. Digital infrastructure from the Digital India initiative has advanced the nation's technological infrastructure and boosted internet connectivity and digital literacy.  

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Supporting Business Operations Through Infrastructure

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Ongoing infrastructure developments are incentivizing new investments in India:

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• Transportation: The government has been expanding highways and growing new ports to facilitate faster movement of goods.
• Power and Energy: India has been enhancing its energy infrastructure to make sure they have regular and dependable power.
• Smart Cities and Industrial Clusters: These areas are evolving into hubs for manufacturing and innovation.

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Navigating Challenges

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Despite the potential, entering India's market will require a multipronged approach:

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• Understand the legal framework: The regulatory environment in India is complex. Clear information about the local legal guidelines and policies is critical for any industrial manufacturing organization looking to install operations in India.
• Compliance and clearances: Securing diverse business and environmental clearances may be time-consuming and require meticulous planning.
• Finding the right partners: Forming joint ventures or alliances is crucial and requires thorough due diligence.  

Read our Reimagining India report for a deeper dive into India’s industrial manufacturing potential.  

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Saudi Arabia: Beyond Oil

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The Saudi economy is at a crossroads. Oil still represents 40 percent of their GDP, so they’ve introduced Vision 2030, a diversification and digitalization strategy to wean the country from their dependence on oil.  

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Since 2016, when the plan was introduced, the number of factories in Saudi Arabia has increased by 50% to over 10,000 industrial facilities. Investment in large scale infrastructure and increasing investments in education, infrastructure, and tourism are also key facets of the vision.  

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In 2018, Saudi Arabia launched Invest Saudi, a unified national body and portal dedicated to communicating investment opportunities to both a global and domestic audience. Overseen by the Ministry of Investment, Invest Saudi acts to draw funding and increase private sector participation in the economy to support the economic goals.

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Diversification

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The cornerstone of Vision 2030 is diversification. The initiative specializes in expanding renewable energy, tourism, sports, and mining. Infrastructure investments will incorporate futuristic towns and large-scale tourism projects while enhancing shipping and logistics networks.

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Vision 2030 also envisages Saudi Arabia as a hub for innovation and investment through its Public Investment Fund (PIF). The fund’s five-year strategy will also see renewed focus on the growth of 13 tactical industries, including:

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• Aerospace
• Defense
• Mining
• Agriculture
• Real Estate

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PIF seeks to harness the potential of these sectors to drive job creation and investment opportunity.

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Vision 2030 has also focused on renewable energy investment. While Saudi Arabia lags India in most sector growth rates, they triple India’s rate in renewables. The Saudi Green Initiative unifies their environmental, energy and sustainability efforts under a single banner with the goal of generating half their electricity using renewable sources by 2030.

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Saudi Industry 4.0

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The adoption of AI and robotics, referred to as Industry 4.0, is boosting efficiency and productivity in a drive to diversify the region away from oil. The industrial sector is becoming more interconnected, more automated, and more data driven.

Saudi Arabia’s Advanced Manufacturing Hub strategy has identified more than 800 investment opportunities totaling $273 billion, all of which are aimed at diversifying the industrial sector.  

By 2035, Saudi Arabia aims to triple their number of factories from around 10,000 to over 30,000, including 4,000 of which are expected to be fully automated. It also aims to triple the manufacturing sector’s contribution to GDP.

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Looking Ahead: Strategies for Success in India and Saudi Arabia

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U.S. companies in the industrial sector who are considering growth opportunities in India and Saudi Arabia should consider these four steps:

1. Conduct a comprehensive market entry assessment. Understand the neighborhood marketplace dynamics, regulatory landscape, and infrastructural facilities.

2. Engage in on-the-ground immersion programs. These programs offer insights into operational nuances to help your organization find strategic locations and partnerships.

3. Choose the right local partners. Partnerships require a clear definition of roles and approaches. Establishing joint ventures is essential for market access and overcoming market entry barriers. Partners with local expertise will help you navigate the market and manage the local government.  

4. Plan for the long haul. Success in these markets calls for cautious planning, continuous engagement, and flexibility. The regulatory surroundings can be complex, and compliance requires diligent oversight.

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The transformation of India into a production powerhouse and the diversification pressures of Saudi Arabia’s Vision 2030 creates fertile investment and business development opportunities.

However, success in these markets demands an informed strategy and patience navigating local complexities.

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Read our Vision 2030 Report report for a deeper dive into Saudi Arabia’s ambitious plan for economic transformation and social reform

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For more on India as a potential investment destination, listen to our conversations with Deepak Bagla, Pavel Bruzek, and Ameya Prabhu who share their perspectives on India as a preferred investment destination, setting up business operations in India and India’s investment potential

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