GE To Invest $3B In Saudi Arabia To Diversify Economy

Industrial goods manufacturer General Electric Company (NYSE:GE) has recently inked a memorandum of understanding with the Saudi Arabian Industrial Investments Company to invest $3 billion in the country’s digital and industrial sectors to diversify its crude oil-based economy. The strategic move will enable General Electric to expand its presence in Saudi Arabia and play an integral part in transforming the regional dynamics.

The Saudi Arabian Industrial Investments Company is a joint venture between the Saudi finance ministry’s Public Investment Fund, state-owned oil firm Saudi Aramco, and the chemical manufacturing company Saudi Basic Industries Corporation. Its collaboration with General Electric intends to complement the Saudi Vision 2030 initiative, which aims to “promote industrial diversification, deepen manufacturing capabilities in the Kingdom, build industrial know-how and create quality jobs for Saudi nationals.”

In particular, General Electric plans to invest in projects related to water, energy, aviation, digital and other non-oil industries to help the country shed its dependency on crude oil production for economic development. The company further intends to double its workforce in the country to 4,000 by 2020.

The company also expects to develop digital innovations through its proprietary Predix cloud-based software to optimize industrial performance. During first-quarter 2016, General Electric launched a Digital Alliance Program, which is dedicated to building a digital industrial ecosystem across global systems integrators, independent software vendors, telecommunications service providers and technology providers. This industry-pioneering program will likely help General Electric to gain a competitive edge over its peers, grow its customer base and generate higher revenues by expanding its IT portfolio.

General Electric has a strong international presence. Nearly 50% of the company’s total revenue is generated from the emerging markets across the globe and it expects continued benefits from these regions given their fast economic growth. The current investments in Saudi Arabia further portray a conscious decision by the company to capitalize on the immense growth opportunities of the country that boasts the biggest economy in the Middle East Region.

General Electric currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Honeywell International Inc. (NYSE:HON) , Koninklijke KPN N.V. KKPNF and Alamo Group, Inc. (NYSE:ALG) , each carrying a Zacks Rank #2 (Buy).