Exclusive: Aramco VP of supply chain and procurement comments on IKTVA program

Mohammad A. Al-Shammary, vice president of supply chain and procurement at Saudi Aramco, writes that IKTVA is "on trend to achieve 70% local content and 30% energy-related goods and services exports for Saudi Arabia by 2021"

IKTVA works on a points system, with a yearly audit scoring top suppliers’ spending on local goods and services, salaries and hiring, and other measures
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IKTVA works on a points system, with a yearly audit scoring top suppliers’ spending on local goods and services, salaries and hiring, and other measures

The saying goes that a rising tide lifts all boats. When it comes to inclusive, sustainable economic growth that can in fact reinvent the business landscape, nothing proves that sentiment like local content development. We’re seeing it first-hand at Saudi Aramco – the world’s largest energy company – through our In-Kingdom Total Value Add program, designed to source a world-class oil, gas and chemicals value chain from our own backyard.

Launched in 2015 to create a pro-business ecosystem delivering cost and time efficiencies in a low oil-price environment, IKTVA is on trend to achieve 70 percent local content and 30 percent energy-related goods and services exports for Saudi Arabia by 2021 – thanks to our local and international suppliers now on board. And participation is growing.

Becoming a service-sector catalyst calls for globally competitive energy-related industries whose local investments can drive workforce development, technology transfer and R&D. Accordingly, we saw that stimulating and sustaining impactful economic development calls for a paradigm that goes beyond the transactional approach to foreign investment, for a closer, “win-win” engagement with stakeholders. 

IKTVA participation is mandatory – but a strong value proposition comes with that requirement. We devote $40 billion each year to developing mutually rewarding business relationships with key materials and services suppliers.

IKTVA participation starts with an assessment for potential value addition, augmented by an action plan. To ensure that requirements are met with consistency, fairness and sustainability, we created a monitoring system – a mechanism that sets IKTVA apart. The program works on a points system, with a yearly audit scoring top suppliers’ spending on local goods and services, salaries and hiring, and other measures.

In addition to incentives, logistical support is also provided, in part through the annual IKTVA Forum. The largest event of its kind, the Forum helps international and domestic partners navigate the Kingdom’s financial, legal and regulatory environment, and infrastructure.

The ability to expedite such areas as business registration and land allocation is central to a pro-investment climate, so cooperation with government entities is integral to supporting our targets.

The Saudi Arabian General Investment Authority is a major IKTVA partner, as its efforts to increase transparency and liberalisation in business help furnish a “one-stop shop” experience for investors.

We’re also collaborating with organisations like the U.S.-Saudi Arabian Business Council, leveraging the historic ties between America and Saudi Aramco to encourage cross-border trade and investment through the first U.S.-Saudi SME Forum in Los Angeles last month. The event gave momentum to IKTVA’s growing focus on small and medium enterprises as a powerful economic engine worldwide. And like the IKTVA Forum, the USSABC event promotes networking.

Some elements of our local-content program call for additional measures to increase the market’s capacities and capabilities. Localisation hinges on a well-developed workforce, so Saudi Aramco has set a goal of establishing 30 national training facilities to accelerate talent development in several disciplines. With 16 dedicated centers so far, we’re well on our way to preparing some 360,000 graduates by 2030 for a range of 21st-century jobs being created through our partnerships.

Capacity building has particular implications for gender inclusion in the Kingdom – a key priority, as it targets opportunities to tap the potential of Saudi women, who are highly educated but vastly under-represented in the workforce.

And that brings us to the bigger picture behind IKTVA.

Saudi Arabia seeks to diversify its income beyond oil by building a thriving private sector and global energy hub, as laid out in the Vision 2030 national transformation program. As a strategic imperative, IKTVA aligns with those aims, as we and our partners build new strengths along the spectrum of higher-value, technology-based industries.

Having identified 140 new investment opportunities spanning the upstream, chemicals, utilities, renewables, IT and more with a market gap valued above $16 billion, we’re reaching out to partners who want a stake in helping build a world-class supply chain, while expanding their local and regional footprints.

The pioneering strategy we developed in line with Saudi Arabia’s expansion beyond its 85-year economic mainstay exceeds most localisation programs in its sheer scope and momentum. But IKTVA’s lessons hold true everywhere: more efficient, reliable supply chains add value for all partners, ensuring more competitive products and services, greater productivity, and higher efficiency.

When it comes to shared success, sustainable macroeconomic growth can truly swell the tide that lifts all boats.

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Oil & Gas Middle East - December 2018

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