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pharmaceuticals manufactured locally. We thus see potentially strong opportunities for the private hospital operators, the health insurance providers and local pharmaceutical manufacturers.

4. An improvement in the availability of affordable housing for Saudi nationals: The Saudi housing shortage has been a persistent issue for the country; with the shortfall currently standing at an estimated 1.2mn units, in our view. Looking forward, we believe this shortfall will likely intensify given strong demand formation. The NTP is seeking to introduce greater numbers of affordable housing units and greater availability of financing. Indeed, the ministry of housing is looking to invest cUS$16bn in achieving these aims by 2020. Whilst we do not believe these measures go far enough to fully resolve the housing shortage, we nevertheless see material opportunities for Saudi real estate developers.

5. Growth in telecom/fibre infrastructure: The NTP is seeking to greatly enhance connectivity in the country, largely through increased usage of internet. Reflecting that, the government has pledged approximately US$2bn to significantly increase the availability of high speed FTTH networks in remote areas, increase mobile broadband coverage and density in urban centres (3G/4G) and allocate an increased amount of bandwidth to the mobile service providers. We thus see significant volume growth potential for the telecom service providers (particularly with regards to mobile data, where we see scope for price increases). Furthermore, we expect much of the capital expenditure required to expand the FTTH and Mobile networks to be provided by the private sector, which in our view will accelerate the case to spin off their tower portfolios (as a method of funding capex expansions).

6. Significant growth in downstream petrochemicals capacity and metals & mining: The NTP's drive to diversify revenues away from the oil sector has seen it focusing on exports of non-oil commodities. In particular, we highlight the significant investment it has earmarked for the downstream industries including petrochemicals and oil refining, as well as aggressively growing the country's metal and mining operations (likely through national champion, Maaden). Examples include the expansion of the country's base metals production (e.g. bauxite and phosphates) and the construction of an oils-to-olefins project. The further development of capital intensive industries also provides some scope for Saudi Arabia to develop service industries and increase local content provisions, in our view. These could be facilitated through joint-ventures with global service providers, who may consider manufacturing plants in Saudi Arabia.

How to gain exposure to NTP themes
In reflection of the themes articulated above (and in the sections that follow), we highlight the sectors and companies which have exposure to each of these themes in the table below. The companies highlighted in green represent the companies which are currently Buy rated by our fundamental analysts and also fit in with our theme of gaining exposure to the NTP.

Merrill Lynch
GEMs Paper #26 | 30 June 2016 41
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