UNDERSTANDING THE MARKET AND OPPORTUNITIES KSA Sharif Moussa, Country Manager - March 2016
KINGDOM OF SAUDI ARABIA King Salman Bin Abdul Aziz Al Saud Custodian of the Two Holy Mosques. The Kingdom of Saudi Arabia was founded by King Abdul Aziz in 1932. The largest economy in the Middle East The largest recipient of FDI in the Arab world. Population 31 million Land area 2,149,690 sq km GDP per capita ($) 24,847 Oil Production 10.2 million bpd Budget 2016 $ 224 billion Unemployment 11.7%
THE 5 PILLARS OF THE ECONOMY Economic Diversification Development of Human Resources Expansion of public services Promoting the private sector as a key partner Streamlining and modernising the governance structures of the public sector Privatisation Diversification Local Content Desalination, Water, Power & Telecom Mining Airports Saudi Aramco Economic Cities Clusters Programme Encouraging foreign investment (SAGIA) Transfer of Technology Saudisation Netaqat Addressing barriers to entry Assessment of education and training R&D centres iktva Life Sciences
WHAT IS HAPPENING IN SAUDI ARABIA? Crude price sets the mode, today it s $ 29.19 18 Saudi women have won seats in Saudi Arabia's municipal polls, the country's first-ever elections open to female voters and candidates The National Transformation Programme Restructuring of Saudi Aramco Privatization of Saudi Aramco and listing some of the company s activities in the stock market in-kingdom Total Value Add (iktva) Cutting subsidies for fuel, electricity and water Introducing VAT on certain luxury goods and services Focus on efficiency and economic rationalisation within ministries and government bodies for projects over SAR100 million. Approval of 2.5% white land tax Establishment of the Public Authority for SME s (consolidating 7 different institutions dealing with SME s). Establishment of new Employment Council to oversee process and help private sector achieve targets.
WHY SAUDI ARABIA AND HOW CAN SDI HELP? The largest economy in the Middle East and the 19 th largest economy worldwide, the largest recipient of Foreign Direct Investment in the Arab world. 100% ownership of companies and lands by foreign investors No restrictions on capital transfer abroad Investors are sponsored by their companies No personal income taxes (taxes are imposed on companies at 20% of profits) Losses can be carried forward for an indefinite period Access to local and foreign financing institutions Market awareness events with our specialist advisers and GlobalScots One-to-one market advice and market research Specialist workshops on finance, tax and regulations Support to visit the market Field-based staff and partners in Saudi Arabia and the Gulf region Decision-makers within ministries and major organisations Contacts with leading business families Knowledge of best practice on business culture
VALUE OF PLANNED AND UNDERWAY PROJECTS IS ALMOST $1 TRILLION 2016 Budget by sector Value- Bn Sector Value- Bn Education 192 Healthcare & Social projects 105 Municipalities services 21 Military & Security 213 Economic Resources 78 Infrastructure & Transport 24 Public Administration 24 Budget Support 183 Construction 427.8 Transport 227.8 Power 168.7 Chemicals 74.3 Water 30.8 Gas 29.2 Industrial 21.2 Oil 20.1 Source: MEED Business Review February, 2016
HOW CAN YOU DO BUSINESS? Direct Sales Agent/Distributor Foreign Investment License (restriction on import & export activities) Limited Liability Company (alone or with Saudi partners) Branch Office Scientific Office Joint Stock Company (high capital projects) Temporary Commercial Registration (government contracts) The family nature of most significant business in Saudi Arabia extenuates the importance of relationship building. Take your time Undertake due diligence; History/Financial stability? Geographic coverage? Human resources/saudisation IT utilisation? Reputation? Connections in the market, especially with major organisations References? Saudis want long term partners who share the same vision and willing to invest in Saudi Arabia
AVAILABLE RESOURCES ENABLERS Saudi Arabian General Investment Authority (SAGIA) Saudi Industrial Development Fund (SIDF) Human Resources Development Fund (HRDF) Saudi Industrial Property Authority (MODON) Royal Commission For Jubail and Yanbu (RCJY) Saudi Aramco Entrepreneurship Center (Wa ed) Public Industrial Fund (PIF) Industrial Duty Exemption Saudi Standards, Metrology and Quality Organization Saudi Food & Drugs Authority King Abdulaziz City for Science and Technology Saudi Trademark Office WEBSITE www.sagia.gov.sa www.sidf.gov.sa www.hrdf.org.sa www.modon.gov.sa www.rcjy.gov.sa www.waed.net www.mof.gov.sa www.mci.gov.sa www.saso.gov.sa www.sfda.org.sa www.kacst.edu.sa www.mci.gov.sa
EAST AND WEST CAN MEET DOs Show respect to your host Understand that the decision making processes & culture are different Invest in relationship building Evaluate your business partner thoroughly Understand the corporate structure, and identify key decision makers Consult SDI, UKTI and GlobalScots Take legal advice (Sharia legislation) Visit, visit, visit! DON Ts Sign-up with the first partner you meet - beware of agency collectors Expect e-mail responses Hurry be patient. Inshallah God willing Generalise, there are many differences between East, West and Central province Think big is best for your products or service
SCOTTISH TRADE MISSION IN MAY 2016 Mon, 23 May - Orientation day Tue, 24 May Engaging with experts The Eastern Province business environment by Asharqia Chamber The legal aspects for setting up a business in Saudi Arabia Introduction to the oil & gas sector Evening reception to meet potential partners GlobalScot breakfast EPC Contractors workshop Meeting with some of the leading business families in the Eastern Province Presentations by Saudi Aramco and other appropriate organisations
QUESTIONS!