MODON Signs First GCC Deal for 52 Ready-Built Factories

The Saudi Authority for Industrial Cities and Technology Zones (MODON) has signed an investment agreement with Osara Real Estate Development, an Omani investment company, to establish 52 ready-built factories in the Second Industrial City in Jeddah, marking the first project of its kind developed by the GCC private sector in Saudi industrial cities. The agreement, announced via the Saudi Press Agency on November 10, 2024, covers a total project area exceeding 45,000 square meters and represents a significant step in Saudi Arabia’s efforts to attract foreign direct investment and expand the role of the private sector in industrial development.

The deal aligns with MODON’s strategic objectives to grow foreign direct investment, foster sustainable partnerships, and support the National Strategy for Industry, all of which are central to the aspirations of Saudi Vision 2030. By enabling the construction of ready-built factories, the project is designed to empower entrepreneurs and small and medium-sized enterprises (SMEs) by providing them with immediate industrial infrastructure, reducing the time and capital required to begin operations. This initiative underscores the Kingdom’s commitment to creating a diversified, innovation-driven economy and reinforces its position as a leading destination for regional and international investment.

Context and Background

Why does this agreement matter for Saudi Arabia’s industrial landscape, and what does it signal about the Kingdom’s broader economic strategy? For years, Saudi Arabia has been working to transform its industrial sector from a primarily oil-dependent model to a diversified, knowledge-based economy. MODON, established in 2001, has been at the forefront of this transformation, developing and managing industrial cities and technology zones across the country. These zones provide essential infrastructure, services, and incentives to industrial investors, helping to localize industries, create jobs, and boost non-oil exports. The Second Industrial City in Jeddah, where the new factories will be built, is one of the oldest and most established industrial hubs in the Kingdom, hosting hundreds of factories across various sectors.

The partnership with Osara Real Estate Development, an Omani investment company, is particularly significant because it represents the first time a GCC private sector entity has taken the lead in developing ready-built factories in Saudi industrial cities. This cross-border collaboration reflects the growing economic integration among Gulf Cooperation Council states and highlights the attractiveness of Saudi Arabia’s industrial sector to regional investors. It also demonstrates the effectiveness of MODON’s efforts to create an enabling environment for foreign direct investment, in line with the National Strategy for Industry, which aims to increase the industrial sector’s contribution to GDP and enhance the Kingdom’s competitiveness.

Ready-built factories are a key enabler for SMEs and entrepreneurs, as they eliminate the need for costly and time-consuming construction. By providing turnkey industrial units, MODON and its partners can accelerate the entry of new businesses into the market, fostering innovation and job creation. This model has been successfully implemented in other countries and is now being adapted to the Saudi context, where SMEs are seen as a vital engine for economic growth and diversification.

Key Details of the Agreement

What exactly does the agreement entail, and how will it be implemented? The investment agreement between MODON and Osara Real Estate Development covers the development of 52 ready-built factories within the Second Industrial City in Jeddah, spanning a total area of more than 45,000 square meters. These factories will be designed to accommodate a range of light and medium industries, providing flexible spaces that can be tailored to the needs of different tenants. The project is expected to attract a mix of local and international companies, particularly SMEs looking to establish or expand their manufacturing operations in Saudi Arabia.

Under the terms of the agreement, Osara Real Estate Development will finance, build, and manage the factories, while MODON will provide the land and regulatory support. This public-private partnership model is central to MODON’s strategy of leveraging private sector expertise and capital to accelerate industrial development. The factories will be equipped with modern infrastructure, including utilities, roads, and telecommunications, ensuring that tenants can commence operations quickly and efficiently. The project is also expected to create job opportunities for Saudi nationals and contribute to the transfer of knowledge and technology.

The agreement was signed by senior officials from both entities, with MODON represented by its Director General, Eng. Khalid bin Mohammed Al-Salem, and Osara Real Estate Development represented by its Chairman, Sheikh Abdullah bin Salem Al-Harthy. In statements released via the Saudi Press Agency, both parties expressed their commitment to the success of the project and their confidence in the potential of the Saudi industrial market. The project is part of MODON’s broader portfolio of initiatives aimed at increasing the number of ready-built factories across the Kingdom, which currently stands at more than 1,000 units in various industrial cities.

International and Regional Impact

How does this deal resonate beyond Saudi Arabia’s borders, and what does it mean for regional economic cooperation? The agreement is a clear signal that Saudi Arabia’s industrial sector is open to foreign investment and that the Kingdom is actively seeking to deepen economic ties with its GCC neighbors. By welcoming an Omani company as a major investor in a flagship industrial project, Saudi Arabia is reinforcing the spirit of Gulf integration and demonstrating that its Vision 2030 reforms are creating tangible opportunities for regional businesses.

For Oman, the deal represents an opportunity for its private sector to expand into one of the largest and most dynamic markets in the Middle East. It also aligns with Oman’s own economic diversification goals, as outlined in Oman Vision 2040, which encourages outbound investment and industrial collaboration. The partnership could pave the way for similar cross-border projects in other sectors, such as logistics, technology, and renewable energy, further strengthening the economic corridor between the two countries.

On the international stage, the agreement enhances Saudi Arabia’s reputation as a reliable and attractive destination for foreign direct investment. It showcases the Kingdom’s ability to facilitate complex investment deals and to provide a supportive ecosystem for industrial ventures. This is particularly important as Saudi Arabia competes with other emerging markets for global investment. The successful implementation of this project could serve as a model for other GCC investors and encourage more companies from around the world to consider Saudi Arabia as a manufacturing base.

Economic and Strategic Significance

What are the economic benefits of this project, and how does it fit into Saudi Arabia’s long-term strategic goals? The development of 52 ready-built factories is expected to have a multiplier effect on the local economy. It will create construction jobs during the development phase and permanent employment opportunities once the factories are operational. The presence of new industries will also stimulate demand for local services, logistics, and raw materials, contributing to the growth of the wider Jeddah economy.

Furthermore, the project supports the objectives of the National Strategy for Industry, which aims to increase the industrial sector’s contribution to GDP from 16% to 20% by 2030. By providing ready-built factories, MODON is helping to remove barriers to entry for SMEs, which are crucial for job creation and innovation. The factories will also enable the localization of industries that currently rely on imports, thereby improving the Kingdom’s trade balance and enhancing self-sufficiency in strategic goods.

Strategically, the agreement reinforces Saudi Arabia’s position as a logistics and manufacturing hub connecting Asia, Europe, and Africa. Jeddah, with its proximity to the Red Sea and major shipping lanes, is an ideal location for export-oriented industries. The ready-built factories will allow tenants to quickly ramp up production and tap into regional and global markets, contributing to the Kingdom’s non-oil export targets.

Vision 2030 Alignment

How does this project embody the principles of Saudi Vision 2030, and what does it mean for the future of the Kingdom’s industrial sector? Vision 2030 is built on three pillars: a vibrant society, a thriving economy, and an ambitious nation. This agreement directly supports the thriving economy pillar by diversifying the economy, attracting foreign investment, and empowering the private sector. It also aligns with the ambitious nation pillar by fostering international partnerships and promoting Saudi Arabia as a global investment destination.

By enabling SMEs and entrepreneurs to establish themselves in ready-built factories, the project contributes to the creation of a dynamic and innovative business environment. It is a concrete example of how Vision 2030 is translating into real-world projects that benefit both Saudi citizens and international partners. As MODON continues to develop industrial cities and technology zones across the Kingdom, such initiatives will play a vital role in achieving the vision’s goals of economic diversification, job creation, and sustainable development.

In conclusion, the MODON-Osara agreement is more than just a real estate deal; it is a testament to Saudi Arabia’s commitment to building a prosperous future through collaboration and innovation. It signals to the world that the Kingdom is open for business and that its industrial sector is ready to welcome partners from the GCC and beyond. As the first GCC private sector investment in ready-built factories, it sets a precedent that could inspire similar ventures, further integrating the Gulf economies and advancing the region’s collective prosperity.

20 Questions

Q1. What is the main purpose of the agreement between MODON and Osara Real Estate Development?

A1. The agreement aims to establish 52 ready-built factories in the Second Industrial City in Jeddah, marking the first GCC private sector investment of its kind in Saudi industrial cities.

Q2. Which entities signed the investment agreement?

A2. The Saudi Authority for Industrial Cities and Technology Zones (MODON) and Osara Real Estate Development, an Omani investment company, signed the agreement.

Q3. Where will the 52 factories be located?

A3. They will be located in the Second Industrial City in Jeddah, Saudi Arabia, covering a total area exceeding 45,000 square meters.

Q4. What makes this project unique in the GCC context?

A4. It is the first project of its kind to be developed by the GCC private sector in the construction and development of ready-built factories in Saudi industrial cities.

Q5. How does the project align with MODON’s objectives?

A5. It aligns with MODON’s goals to develop and grow foreign direct investment, foster sustainable strategic partnerships, and support the National Strategy for Industry and Vision 2030.

Q6. What are ready-built factories?

A6. Ready-built factories are pre-constructed industrial units that are equipped with basic infrastructure, allowing businesses to start operations quickly without the need for costly construction.

Q7. Who will benefit most from these factories?

A7. Entrepreneurs and small and medium-sized enterprises (SMEs) are expected to benefit most, as they will have access to affordable and ready-to-use industrial spaces.

Q8. What is the total area of the project?

A8. The total area of the project exceeds 45,000 square meters, providing ample space for the 52 factories and associated facilities.

Q9. How does this agreement support Saudi Vision 2030?

A9. It supports Vision 2030 by diversifying the economy, attracting foreign investment, empowering SMEs, and enhancing the private sector’s role in industrial development.

Q10. What role will Osara Real Estate Development play in the project?

A10. Osara will finance, build, and manage the factories, while MODON will provide the land and regulatory support, reflecting a public-private partnership model.

Q11. What is the expected impact on the local economy?

A11. The project is expected to create jobs, stimulate demand for local services, and contribute to the growth of Jeddah’s economy through increased industrial activity.

Q12. How does this project fit into the National Strategy for Industry?

A12. It supports the strategy’s goal of increasing the industrial sector’s contribution to GDP and localizing industries to enhance self-sufficiency and exports.

Q13. What is MODON’s role in Saudi Arabia’s industrial development?

A13. MODON develops and manages industrial cities and technology zones, providing infrastructure and incentives to attract industrial investment and promote economic diversification.

Q14. Why is Jeddah an attractive location for this project?

A14. Jeddah’s strategic location near the Red Sea and major shipping lanes makes it ideal for export-oriented industries and logistics.

Q15. How many ready-built factories does MODON currently have?

A15. MODON currently has more than 1,000 ready-built factories across various industrial cities in the Kingdom.

Q16. What are the benefits of ready-built factories for SMEs?

A16. They reduce startup costs and time, allowing SMEs to focus on production and growth rather than construction and infrastructure development.

Q17. How does this agreement strengthen GCC economic ties?

A17. It represents a cross-border partnership that promotes economic integration and demonstrates Saudi Arabia’s openness to regional investment.

Q18. What sectors are likely to occupy these factories?

A18. The factories are designed for light and medium industries, including manufacturing, processing, and assembly, catering to a diverse range of businesses.

Q19. What is the significance of this being the first GCC private sector deal?

A19. It sets a precedent for future regional investments in Saudi industrial cities, showcasing the Kingdom’s attractive investment climate and Vision 2030 reforms.

Q20. What are the next steps for the project?

A20. Following the agreement, Osara will begin construction, and MODON will facilitate approvals, with the factories expected to be operational in the coming years to serve tenants.

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