“Doing Business in Saudi Arabia” EMITA seminar: UAE & Saudi Arabia – a wealth of opportunities...
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Transcript of “Doing Business in Saudi Arabia” EMITA seminar: UAE & Saudi Arabia – a wealth of opportunities...
“Doing Business in Saudi Arabia”
EMITA seminar: UAE & Saudi Arabia – a wealth of
opportunitiesDavid Lloyd OBEConsultantThe Middle East Association
6 March 2007
Saudi Arabia has the largest economy in the Middle East. The manpower requirement to meet the Kingdom’s current level of project development across the board is for 1.2 m engineers, skilled and unskilled
workers.
Introduction
•Safety and Security: Saudi Arabia does a have a problem, but it must be seen in context. Security is good and the country is no less safe than the UK. Some would say safer.
•Ease of Access: Poor
•Availability of Market/Country Information: FCO & UKTI websites are always a good starting point for travel, business and other advice and may allay some misconceptions.
General
• King Abdullah is and has been the driving force behind economical and social reform in the Kingdom. He has also assumed international stature. Women more in evidence. Media less constrained.
• WTO accession in November 2005– very important to the Saudis. It is the gateway to encouraging FDI and is expected to encourage non-oil export growth.
Economy :• Nominal GDP growth for 2006: 12.4%. Total revenue: $174.7bn.
Government expenditure: $104bn. Fiscal surplus: $70.7 bn. Oil export revenues 18% above 2005: $191bn. Non-oil exports: $12bn.
• Estimated Saudi oil production levels in 2007: 9m bpd at an average price of $43 per barrel.
• Inflation: 1.8%
• Capital Markets and Insurance Laws are now firmly in place. IPOs oversubscribed. Foreign bank ownership of 60% now allowed and 10 licences awarded
• The Tadawul All Share Index crash in March was a shock to many small Saudi investors and necessary lessons about rapid unchecked growth have been learnt.
• 3.0% pa birth rate driving infrastructure development. Current population including expatriates thought to be about 23m and growing younger every year. High unemployment (could be as much as 30%), generally low level of skills
• Job creation vital. But Saudi-isation of jobs probably more of a hindrance than a help. Priority requirement is training and education
Doing business :• A lengthy process, requiring much patience and perseverance.
But first know your market. In Saudi you are looking at 3 centres: Jeddah, Riyadh and Eastern Province. The best vehicle for initial familiarisation is the Trade Mission.
• Allow 2 years to decide on the right sort of partner and to establish a good working relationship. Imperative to visit and re-visit the market to achieve this.
• Joint ventures and local manufacture are very welcome and foreign principals can now hold a controlling interest.
• Women can also conduct successful business in the Kingdom, although it is not always easy. Don’t be daunted!
• Competition. Most ME markets are price sensitive. Saudi Arabia is cash-rich and the Golden Goose may lay an egg at Fortnum and Mason prices, if the product is special; but Sainsbury/Tesco prices are the rule of thumb.
• Priority Sectors: Training and Education; Oil & Gas; Water and Water management; Power; Health; Construction.
Some projects :• Oil production to increase to 12 mbd. $1.8bn investment in
the Shaybah field to increase Arabian extra light by 250,000bd. Major increase in refining capacity too of which the $8.5bn Rabigh project is the leader.
• Rail landbridge – 3000 km: Jeddah to Riyadh. Jalamid-Al Zabira-Riyadh to Ras Al Zour, the Mining Industrial City.
• Mining – bauxite and phosphates
• IWPP power and desalination
• King Abdullah Economic City at Rabigh on the West coast: £26bn. port, marina, business park, financial centre, residential and golf course) costing USD 26bn of predominantly private sector finance. To which add Hail, Madinah and Jizan.
UK exports last year: £1.6 bn in visibles. Double that with invisibles.
KSA is our largest, end-destination ME market.
“Doing Business in Saudi Arabia”
EMITA seminar: UAE & Saudi Arabia – a wealth of
opportunitiesDavid Lloyd OBEConsultantThe Middle East Association
6 March 2007