When the World Becomes Less Cooperative: Self-Sufficiency as a Sovereign Strategy Introduction: The End of Globalization Globalization has been seen as the key to shared prosperity.

Introduction: The End of Smooth Globalization

Globalization has long been promoted as the golden path to shared prosperity, where each nation specializes in what it does best and exchanges benefits in an open global market. However, current geopolitical reality tells a vastly different story: disrupted supply chains, escalating trade wars, and economic sanctions wielded as political weapons. Market efficiency is no longer the sole criterion; rather, economic sovereignty and strategic security have become top priorities for decision-makers.

In this transforming context, Saudi Arabia's self-sufficiency and local manufacturing strategy emerges not as a traditional economic choice, but as an existential necessity in a world heading toward fragmentation and polarization.

Potential Scenarios: Reading the Future of the Global Economic Order (2035-2045)

Scenario One: Deep Economic Decoupling

Key Features:

Decoupling will not merely be a tariff war, but a fundamental reshaping of global economic architecture. International trade will split into competing blocs, each building its own system of technical standards, financial exchange protocols, and even internet and communications networks. Sensitive technologies such as semiconductors, artificial intelligence, and quantum computing will become new dividing lines between camps.

Current Indicators:

• The U.S. CHIPS Act and restrictions on advanced technology exports to China

• China's Belt and Road Initiative as an alternative to Western institutions

• Increasing use of financial and technological sanctions as political tools

• Supply chain repositioning under "Friend-shoring"

Probability: 30-40%

Implications for Developing Nations:

• Import costs rising 15-25%

• Structural inflation in strategic goods

• Pressure to align with one camp while losing maneuverability

• Need to build self-reliance capabilities to avoid absolute dependency

What International Institutions Say: The International Monetary Fund warns that global economic fragmentation could cost the world losses in GDP reaching 7% over the long term, with greater impact on medium and small nations that heavily depend on international trade.

Scenario Two: Cascading Crises

Key Features:

Not one major crisis, but a series of overlapping and interacting shocks: financial crises resulting from excessive debt, climate disruptions hitting food production, regional conflicts disrupting trade corridors, and new pandemics exposing the fragility of global supply chains. Each crisis amplifies the others, creating chronic instability.

Recent Historical Examples:

• The COVID-19 crisis that exposed excessive dependence on single production sources

• The 2022 European energy crisis following the Russia-Ukraine war

• Semiconductor supply chain crises and their impact on the automotive industry

Probability: 15-25%

Implications:

• Sharp and unpredictable fluctuations in energy, food, and raw material prices

• Accelerating inflation difficult to control with traditional tools

• Eroding confidence in global financial markets

• Expanded government intervention to protect vital sectors

• Top priority for food and energy security over economic efficiency

Shift in Priorities: World Economic Forum reports confirm this scenario forces a fundamental shift in economic decision-making philosophy: from "Efficiency First" to "Resilience First." The question is no longer "What's cheaper?" but "What's safer and more sustainable?"

The Saudi Response: From Diversification to Industrial Sovereignty

A New Development Philosophy

Saudi Arabia's self-sufficiency strategy is not an attempt at isolation or return to historically failed closed economy models. Rather, it's a smart hybrid model combining:

• Selective Openness: Participating in global trade but from a position of strength, not weakness

• Sovereignty in Critical Sectors: Owning essential capabilities in strategic fields

• Geographic Diversification: Not depending on a single source or market

Strategic Pillars: From Vision to Implementation

Pillar One: Redesigning National Value Chains

Beyond "Made in Saudi Arabia":

The Saudi strategy doesn't settle for attracting final assembly plants but targets owning the entire value chain:

1. Raw Material Control: Leveraging competitive advantage in energy, petrochemicals, and minerals

2. Intermediate Component Manufacturing: Developing a local industrial base to produce parts and components

3. Advanced Final Manufacturing: Attracting and developing high-value-added industries

4. Certification and Quality: Building national systems for standards, testing, and quality

5. Guaranteed Local Consumption: Using government procurement as a primary demand driver

6. Strategic Export: Reaching regional and international markets from a distinctive position

Applied Example: Petrochemicals Sector:

• Phase One: Exporting crude oil and gas

• Phase Two: Producing basic petrochemicals (ethylene, propylene)

• Phase Three: Producing plastics and polymers

• Phase Four: Conversion industries (packaging, pipes, components)

• Phase Five: Specialized finished products

Pillar Two: Practical Implementation Tools

1. Mandatory Local Content in Public Procurement

Evolution from Incentive to Mandate:

Local content percentages are no longer just additional advantages in tenders but have become mandatory requirements that escalate gradually. The Saudi model relies on:

• Graduated percentages: Starting with reasonable percentages then raising them gradually as local capabilities grow

• Precise measurement: Clear definition of local content that goes beyond superficial assembly

• Tangible incentives: Price preference for bids with higher local content

• Deterrent penalties: Sanctions on manipulation or false claims

• Transitional flexibility: Limited exceptions for technologies unavailable locally with a timeline for localization

2. Supply Chain Localization for Major Corporations

National Companies as Demand Engines:

Aramco, SABIC, Ma'aden, and other major companies are considered not just revenue sources but platforms for developing local industry. Their localization programs create:

• Sustainable, long-term demand for local suppliers

• High standards that push local industry to evolve

• Technical partnerships with global suppliers conditional on knowledge transfer

• Opportunities for small and medium enterprises to grow and expand

Example: Aramco's In-Kingdom Total Value Add (IKTVA) Program: The program aims to raise local content in the oil and gas sector to 70% by 2025, focusing on:

• Technology and knowledge transfer, not just assembly

• Creating quality, sustainable jobs

• Developing an industrial base capable of regional competition

3. Targeted Incentives and Financing

Beyond Traditional Support:

The Saudi model ties incentives to real impact, focusing on:

• Qualitative Localization: Supporting projects that transfer advanced technology or create high added value

• National Employment: Linking incentives to Saudi hiring and training percentages

• Financial Sustainability: Evaluating projects on their ability to continue after support ends

• Chain Effect: Preferring projects that create opportunities for other projects around them

• Export Potential: Prioritizing industries capable of international competition

Pillar Three: Priority Sovereign Sectors

1. Defense and Military Industries

From Import to Local Manufacturing:

With a defense budget exceeding $75 billion annually, Saudi Arabia possesses enormous leverage to build a local defense industry. The strategy goes beyond "traditional localization" to:

Phases:

• Near-term (2025-2030): Maintenance and logistical support, ammunition and simple equipment production

• Medium-term (2030-2035): Joint manufacturing of armored vehicles, drones, electronic systems

• Long-term (2035+): Developing integrated defense systems with local technology

Strategic Importance:

• Reducing dependence on a single source for critical equipment

• Ability for maintenance and continuous operation without external constraints

• Creating an advanced technical base that reflects on other sectors

• Creating thousands of quality jobs

2. Pharmaceuticals and Biotechnology

Health Security as a National Priority:

The COVID-19 pandemic exposed the danger of near-complete dependence on imports in the health sector. The Saudi strategy relies on:

Development Phases:

1. Local Packaging: The least complex starting point

2. Generic Drug Production: Manufacturing off-patent medicines

3. Active Pharmaceutical Ingredients (APIs): Producing active components, not just packaging

4. Biologic Drugs: Investing in advanced technologies

5. Research & Development: Developing new drugs and local solutions for prevalent diseases

Special Opportunities:

• Geographic location connecting European, Asian, and African markets

• Large and growing local demand with aging population

• Ability to expand to GCC and Arab markets (400 million people)

3. Smart Food Security

Realistic Not Complete Self-Sufficiency:

Saudi Arabia learned from the 1980s wheat farming experience that complete self-sufficiency can be costly and inefficient. The new strategy is smarter:

Hybrid Strategy:

• Intensive Local Production: For products suited to the local environment (dates, greenhouse vegetables, limited livestock production)

• Hydroponic and Vertical Farming: Modern technologies reducing water consumption by 90%

• Import Source Diversification: Securing long-term relationships with multiple producers

• Foreign Investments: Purchasing land and agricultural companies in friendly countries

• Strategic Reserves: Stocks sufficient for 6-12 months of essential commodities

4. Critical Minerals and Future Industries

Minerals as a Gateway to the Next Industrial Revolution:

The Kingdom possesses huge reserves of rare and critical minerals forming the backbone of future industries:

Strategic Minerals:

• Lithium and Copper: For battery and electric vehicle manufacturing

• Rare Earth Elements: For permanent magnets and advanced electronics

• Phosphate: For fertilizers and chemicals

• Bauxite and Aluminum: For light industries and aviation

Local Value Addition: Saudi Arabia doesn't settle for exporting raw materials but targets:

• Establishing local refineries for minerals

• Developing conversion industries (batteries, electronic components)

• Attracting electric vehicle and technology manufacturers

• Building an integrated ecosystem from mine to finished product

Why This Strategy Succeeds in 2035-2045 Scenarios

In the Economic Decoupling Scenario:

Advantages of Independence:

• Ability to maneuver between camps without existential pressures

• Avoiding being a bargaining chip in others' conflicts

• Maintaining diverse trade relations without forced complete alignment

• Possessing goods and services everyone needs (energy, minerals, pharmaceuticals)

In the Cascading Crises Scenario:

Flexibility and Resilience:

• Ability to absorb external shocks without internal collapse

• Stabilizing prices of basic goods locally

• Avoiding social unrest from acute shortages

• Ability to help allies and neighbors in crisis times

In Both Scenarios:

• Reducing Risk Premium: Lowering financing and investment costs

• Inflation Control: Local production means better price stability

• Social Stability: Jobs and economic security maintain internal cohesion

• Geopolitical Influence: Ability to use resources and capabilities as diplomatic tools

Challenges and Risks: A Realistic View

Technical and Human Challenges:

1. Skills Gap: Shortage of local technical competencies requires massive investment in education and training

2. Learning Costs: Early stages may be costly and inefficient

3. Global Competition: Facing established producers with decades of experience

4. Intellectual Property Protection: Need to build strong legal systems to attract technology

Economic Risks:

1. Opportunity Cost: Money invested in localization could be used in other areas

2. Excessive Protectionism Risk: May lead to lower quality and higher prices for consumers

3. Dependence on Government Spending: Risk of unsustainability if industries don't become competitive

4. Trading Partner Reactions: Possibility of policies being considered protectionist and counter-measures imposed

Risk Mitigation:

• Realism in Objectives: Focusing on sectors with potential competitive advantage

• Calculated Openness: Not complete isolation and continuing global participation

• International Standards: Adhering to global quality and efficiency standards

• Periodic Review: Continuous policy evaluation and adjustment based on results

Conclusion: A Strategic Bet on a Less Stable Future

Saudi Arabia is not betting on the end of globalization but preparing for its transformation from a unipolar model to a more complex, less predictable multipolar model. Self-sufficiency and local manufacturing are not a retreat from openness but a redefinition of it from a position of strength, not weakness.

The Central Lesson: In a world characterized by uncertainty, the ability to stand firm is more important than running fast. Nations that build their self-reliance capabilities today are buying themselves strategic options that may not be available to others tomorrow.

The Real Measure of Success in 2035-2045: Will not be measured by foreign trade volume or degree of openness, but by the ability to survive and thrive even when the world around you closes.

"In an age of disruption, economic sovereignty is not a luxury, but a condition for survival."