Saudi Arabia and Italy Strengthen Business and Industrial Ties Amid High-Level Visit

By strengthening ties with Italy, one of Europe’s industrial powerhouses, Saudi Arabia aims to attract investment, foster technological exchange, and boost trade in vital sectors ranging from automotive to clean energy, setting the stage for enhanced bilateral cooperation.

By Giulia Interesse

In a significant move to deepen economic and industrial relations, Saudi Arabia and Italy are set to enhance their collaborative efforts across key sectors following the visit of Saudi Minister of Industry and Mineral Resources, Bandar bin Ibrahim Alkhorayef, to Italy.

The high-level visit, which commenced on October 14, 2024, underscores the growing partnership between the two nations, particularly in areas such as manufacturing, mining, and renewable energy. As both countries seek to capitalize on emerging opportunities, this visit marks a pivotal moment in Saudi Arabia’s pursuit of diversification under its Vision 2030 strategy.

Key focus areas of the visit

Industrial cooperation

During the recent high-level discussions between Saudi Arabia and Italy, industrial cooperation emerged as one of the key focal points. Both nations explored joint opportunities in critical sectors, including:

• Automotive;
• Food production;
• Space technology; and
• Marine industries.

These industries hold significant promise for driving economic growth and innovation in Saudi Arabia, aligning with the country’s Vision 2030 initiative to diversify its economy beyond oil dependence. Italy’s advanced manufacturing expertise was a cornerstone of the talks, with both sides looking to leverage each other’s strengths to foster technological and industrial growth.

Saudi Arabia is particularly interested in utilizing Italian innovation to bolster its own manufacturing capabilities. Italy’s reputation for excellence in sectors like automotive engineering and food processing provided a solid foundation for collaboration. Saudi officials expressed a keen interest in integrating Italian technological advancements to enhance local production processes, improve industrial standards, and promote sustainable practices. Italian companies, with their focus on innovation and high-tech solutions, are well-positioned to contribute to Saudi Arabia’s goals of enhancing food security and developing cutting-edge industries.

Major Italian players such as Piech Automotive and Fincantieri were central to the discussions. Piech Automotive, known for its electric vehicle technology, aligns with Saudi Arabia’s ambitions to develop a sustainable EV industry. Meanwhile, Fincantieri, one of the largest shipbuilding companies globally, presented opportunities to modernize Saudi Arabia’s marine and shipbuilding sectors, which are crucial for the country’s growing maritime infrastructure.

Mining sector

Saudi Arabia and Italy’s bilateral discussions have also highlighted the expanding opportunities in the mining sector, with a strong focus on sustainability and clean energy solutions. Saudi Arabia’s National Industrial Strategy has prioritized the mining industry as a key driver of economic diversification, given the nation’s abundant untapped mineral resources. During the visit, both sides explored how Italy’s expertise in sustainable mining practices could help Saudi Arabia build an environmentally responsible mining industry, aligned with global trends toward cleaner and greener operations.

A central point of discussion was Saudi Arabia’s immense mineral wealth, valued at approximately US$2.5 trillion, which remains largely underexplored. With over 80 years of geological data available, Saudi Arabia offers a wealth of opportunity for investors in the exploration and processing stages of mining. Saudi Minister Alkhorayef specifically emphasized the importance of sustainable development in the sector and the potential for Italy to play a pivotal role in advancing mining exploration in the Kingdom. This includes not only resource extraction but also value-added processing activities that can be developed within Saudi Arabia to create jobs and contribute to the country’s growing industrial base.

Backdrop of Saudi Arabia-Italy economic relations

In 2023, Italy and Saudi Arabia maintained strong trade relations, characterized by significant bilateral exchange across various industries. According to the United Nations COMTRADE database, Italy’s exports to Saudi Arabia totaled US$5.27 billion, reflecting robust industrial cooperation between the two nations.

Italy, known for its advanced industrial base, exported a wide range of products to Saudi Arabia, with machinery, electrical equipment, and vehicles dominating the list.

This broad spectrum of exported goods highlights Italy’s ability to meet Saudi Arabia’s growing demand for industrial goods, technological equipment, and infrastructure-related products. Italian expertise in machinery and high-tech equipment aligns well with Saudi Arabia’s drive toward modernization and industrial diversification under Vision 2030.

Meanwhile, Italy’s imports from Saudi Arabia in 2023 were even more substantial, totaling US$6.44 billion. The primary imports from Saudi Arabia consisted of essential raw materials and petrochemical products, vital for Italy’s industrial sector.

This strong trade relationship is also supported by Italy’s technological expertise and Saudi Arabia’s natural resources, creating a complementary trade dynamic that benefits both economies. As both nations continue to explore joint opportunities in sectors like mining, clean energy, and industrial cooperation, trade volumes are expected to further increase in the coming years.

Opportunities for Italian companies in Saudi Arabia

As Saudi Arabia continues its ambitious economic transformation under Vision 2030, Italian companies are presented with growing opportunities to invest and participate in the Kingdom’s development projects. The Saudi-Italian Business Forum, held in September 2024, showcased a commitment from an Italian business association representing over 7,000 companies to expand investments in Saudi Arabia.

Renewable energy

Italian companies have a significant opportunity to engage in Saudi Arabia’s renewable energy sector, particularly in the burgeoning field of green hydrogen production. As Saudi Arabia seeks to diversify its economy away from traditional oil and gas industries under its Vision 2030 initiative, it is increasingly investing in low-carbon technologies. The country’s commitment to both blue and green hydrogen presents a fertile landscape for Italian firms known for their advanced technological capabilities and expertise in renewable energy solutions. Collaborations could focus on developing sustainable hydrogen production methods, infrastructure for transportation, and innovative carbon capture technologies.

Furthermore, with Italy recognized as a strategic partner in these initiatives, Italian businesses can play a pivotal role in exporting low- and zero-carbon hydrogen to Europe. Recent agreements between the Italian government and neighboring countries like Germany and Austria to establish hydrogen transport pipelines further enhance the prospects for Italian companies in Saudi Arabia’s renewable energy landscape.

Expanding industrial cooperation

The Lombardy region, a financial and industrial hub in Italy with a GDP exceeding US$444 billion, has emerged as a key player in increasing Italian investments in Saudi Arabia. During the forum, Attilio Fontana, president of the Lombardy Regional Government, emphasized the region’s openness to international investors and its readiness to offer incentives to Saudi partners. Lombardy is home to industries such as machinery, chemicals, and automotive products, which are crucial for Saudi Arabia’s infrastructure and industrial ambitions. Italian expertise in logistics, infrastructure development, and digital technologies positions it as a vital contributor to Saudi Arabia’s large-scale projects.

Additionally, Eng. Kamel Al-Munajjed, chairman of the Saudi-Italian Business Council, highlighted how Italian companies, particularly those in construction, could benefit significantly from participating in projects related to housing, tourism, and infrastructure, as these sectors are poised for rapid expansion.

The food sector: A growing market

Italian companies also have promising opportunities in Saudi Arabia’s food and beverage market, which is expected to grow at an estimated 4 percent annually between 2023 and 2028. With a population of nearly 36.4 million and a heavy reliance on food imports, Saudi Arabia presents an underdeveloped market for Italian agri-food exporters. Italian products, renowned for their quality, are in high demand, particularly among Saudi retail chains eager to connect with the Italian agri-food supply chain.

Market trends in Saudi Arabia indicate a significant shift towards Western food culture and an increasing demand for healthy and plant-based options, creating an ideal environment for Italian food and beverage companies to introduce their products. Furthermore, the Saudi government’s goal to localize 85 percent of food production by 2030 highlights the need for foreign investment and partnerships in the sector, allowing Italian firms to fill gaps with high-quality imports, especially in fresh agricultural products like meat, dairy, fruits, and vegetables.

Support for Italian business expansion in Saudi Arabia

The Italian government is taking proactive steps to enhance the presence of Italian businesses in Saudi Arabia, facilitated by SACE, Italy’s Export Credit Agency. SACE has launched a new financing initiative known as the Push Strategy, in partnership with the Saudi Ministry of Finance (MoF), represented by the Saudi National Debt Management Center (NDMC). This initiative involves a EUR 1 billion (US$1.08 billion) loan secured by a pool of international banks, providing 80 percent coverage to strengthen trade and investment ties between the two countries.

SACE’s financing initiative is specifically focused on creating more business opportunities for Italian exporters, particularly in significant projects aligned with Saudi Arabia’s economic diversification strategy under the Vision 2030 development framework. The MoF has shown interest in the Push Strategy operational model, which offers favorable access to the Italian supply chain through business-matching activities. This initiative aims to foster collaboration in sectors like renewable energy, logistics, infrastructure, tourism, hospitality, and manufacturing, thus boosting Italian exports.

Conclusion

In conclusion, the strengthening of economic ties between Saudi Arabia and Italy signals a promising era of collaboration that aligns with Saudi Arabia’s Vision 2030 strategy for economic diversification. As both nations explore synergies in sectors such as renewable energy, manufacturing, mining, and food production, Italian companies stand to benefit from significant opportunities in the Kingdom’s evolving landscape.

The proactive measures taken by the Italian government, particularly through initiatives like SACE’s Push Strategy, further facilitate this partnership by enhancing financial support and fostering business connections. As Saudi Arabia continues to invest in sustainable technologies and infrastructure, the contributions of Italian expertise and innovation will be pivotal in realizing the ambitious goals set forth in Vision 2030, ultimately driving mutual growth and prosperity for both economies.

Dezan Shira & Associates presence in Europe

Europe maintains substantial trade and investment connections with Asia. As various regions in Asia experience rapid development, and with the EU actively pursuing trade agreements with Asian counterparts, there is a wealth of opportunities for European investors in the region.

Incorporated in Munich in January of 2021, Dezan Shira & Associates’ European presence serves as a first point of contact for European companies wishing to do business in Asia. In both the Munich and Milan offices, our European-based team works with a variety of partners to educate businesses on the economic performance and regulatory environment of developing Asian economies.

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