Saudi Aramco: Public

2017KSA Advantage

Saudi Aramco: Public

Your company can benefit from “the KSA advantage”

KSA is the largest Middle East market and one of the top 20 world economies

4World-class

logistics1Funding

incentives

5Government

support

2Affordable

land & utilities

3Skilled labor

The KSA advantage

Source: Saudi Aramco analysis

Saudi Aramco: Public

There are a range of funding initiatives available to companies wishing to operate inside Saudi Arabia

1. Funding Incentives

• Saudi Aramco has a dedicated entity named Wa’ed to provide financial support and business development to SMEs in KSA

• 3 funding options:

1.Loan Financing (Non-collateralized)

2.Venture Capital Fund

3.Seed Fund (granted up to SAR 100,000)

• Wa’ed has approved funding for 75 companies with a commitment of SAR 277 MM

• Aspires to create 200 innovative companies and 450,000 jobs in non-government sector by 2020.

• Issued over 1.8bn SAR in loans to SMEs in 2015 –11% increase from 2014

• KAFALH works with 11 banks to provide loans of 50% - 75% of the investment with a maturity term of 15 to 20 years

• Evaluation to promote industrial diversification and to spread investment across the Kingdom

• Financing with rates as low as 2% from entities such as SIDF, P.I.F., KACST grants, Arab Fund for Economic Development, Arab Monetary Fund and Islamic Development Bank.

KAFALAH1 program

Additional KSA funding programs

Saudi Aramco funding

Saudi Aramco can assist potential investors with data and information to support the preparation of the business case needed to apply for direct financing

1. KAFALH is the SME Loan Guarantee Program backed by SIDF

Source: Saudi Aramco, http://www.sidf.gov.sa/en/Achievements/Pages/SmallandMediumEnterprises.aspx

Saudi Aramco: Public

Beyond direct financing, KSA offers additional incentive programs

- The gateway to local opportunities

- Pre-investment assistance (one-stop-shop)

• SAGIA – Saudi Arabia General Investment Authority

• Enable investors and help them facilitate their process, queries or concerns in coordination with all governmental entities throughout the investor journey from the exploration phase, the execution and actual operation.

• Help with document processing, approvals and building permits. Assistance in business registration, issue of commercial and industrial licenses and compliance with environmental guidelines

Exception fromimport tariffs

• MoF - Saudi Customs

• Exemption of the 5% to 12% import tariff in:

– Imported raw materials for manufacturing

– Machinery & Equipment

– Spare parts for machinery and equipment

Tax incentives for underdeveloped regions

• MoF – Department of zakat and income tax

• Tax deductions for underdeveloped regions:– 50% of cost of training of Saudis employees– 50% of annual wages paid to Saudis– Tax credit carried forward 10 years up to 15% of the capital

Incentives for Saudi workforce development

• Human Resources Development Fund – HRDF

• Training support of SAR500/month plus 75% of the salary up to SAR1,500 /month per student

• Post-training support of 50% of the student salary up to SAR2,000/month (12 months)

1. Funding Incentives

Incentive

Source: Government websites, Saudi Aramco analysis

Entity Description/eligibility

Saudi Aramco: Public

KSA has a nationwide program to develop custom economic and industrial clusters

RCJY - Royal

Commission of

Jubail and Yanbu

• Plans, develops and manages petrochemicals and energy intensive industrial cities

• 2 existing cities + 1 Ras Al-Khair“Minerals Industrial City”

•Petrochemicals•Mining•Process industries

MODON – Saudi

Industrial

Property

Authority

• Develops and supervises industrial land in KSA

• 18 existing, 4 planned, 9 promising, 6 private and 2 technology cities

•Diverse focus •Emphasis on medium and light industries

ECA - Economic

Cities Authority

• Develops and oversees economic cities encouraging foreign investment

• 4 economic cities

•Diverse focus•Emphasis in line with KSA’s diversification strategy

SPARK - King

Salman Energy

Park

• Development in two phases, with first phase to be completed in 2021

•Drilling•Exploration and production services (E&P)

•Pipe manufacturing

Economic Cities (ECA)

Industrial Cities (ECA)

Jubail / Yanbu / Ras AI-Khair (RCJY)

SPARK – King Salman Energy Park

Dammam

RiyadhJeddah

3. Land & utilities

Economic and industrial clusters

Sources: Saudi Aramco analysis, RCJY, MODON, ECA

Entities behind the cities Industry focus

Saudi Aramco: Public

• Rent-free periods

• Lower rates for facilities committed to environmental and

safety requirements

• Packaged services to create a pro-business environment

(e.g., licensing, leasing, facilities management and

transportation)

• Purpose-built logistics to allow multi-modal access to

domestic and international markets

• Integration with complimentary facilities such as staff

accommodation, retail and leisure

Industrial land rates in the KSA are very competitive

0.270.270.270.270.270.270.540.540.540.810.810.811.081.081.081.081.081.081.201.351.351.35

2.30RCJY - Reserved Land

UAE

Al-Ahsa 2nd.

Hafr Al-Batin

Shaqraa

Jazan

Najran

Tabuk

Qassim 2nd.

Al-Kharj

Sudair

Makkah AlMukarama

Jeddah 2nd.

Assir

Ha’il

Al-Ahsa 1st.

Qassim 1st.

Dammam 2nd.

Riyadh 2nd.

RCJY - New Industries

Dammam 1st.

Jeddah 1st.

Riyadh 1st.

15.00USA 64.00

EU 70.00

Dammam 3rd.

2. Land & utilities

Industrial land rates pricing (USD per m2)1 Additional incentives

Source: Saudi Aramco analysis, MODON, JAFZA, C&W, Colliers, YANBU Industrial City Q3’16 Economic Review

Saudi Aramco: Public

7.2

8.0

11.2

12.0

14.0

4.8KSA

USA

UAE

India

China

EU

2. Land & utilities

Low utility rates will further support the financial attractiveness of your business case

Electricity (US ₵ per kWh)

Source: SEC, MODON, ADDC, EIA, Houston TX, EC Europa, Wessex Water, SZ Invest, Mahadis, IGU Wholesale Gas Price Survey 2016

Water (USD per m3)

0.5

1.1

1.9

2.1

2.1

0.6

USA

India

KSA

China

UAE

EU

Natural Gas (USD per mmbtu)

2.50

1.20

7.90

9.70

7.50

1.25KSA

USA

UAE

India

China

EU

Methane price

Saudi Aramco: Public

Kuwait 31,3

KSA 22,6

UAE 34,6

Russia 14,5

Singapore 30,3

China 18,8

Turkey 10,7

GCC 26,0

Japan 35,1

EU 26,3

USA 30,9 • KSA is committed to invest heavily to improve the

competitiveness of Saudi’s labor market, as part of Vision

2030

• The country will offer support to employers to create

sustainable jobs through flexible staffing regimes, subsidies

and minimization of the cost of employing women

• KSA will invest on skills development of the Saudi workforce

through vocational trainings in partnership with the

educational sector, company subsidies and career specific

trainings for the youth

• Other objectives are labor market balance between

nationals and expatriates, improvement of labor protection

and inclusion, provision of efficient mechanisms and

policies, social harmony and cohesion…

Saudi labor rates are regionally and globally competitive

3. Skilled labor

Average labor rates (USD per hour1) Additional incentives

1. Rates are a composite of average hourly compensation costs for a range of 30 different job roles relevant to energy, manufact uring and supporting industries

Source: Salary Explorer, Saudi Aramco analysis

Saudi Aramco: Public

520

1,570

2,190

2,715

Public Sector (Saudi)

Public Sector (non-Saudi)

Private Sector (Saudi)

Private Sector (Non-Saudi)

Saudi is investing in building a skilled and flexible workforce

3. Skilled labor

National labor rates (USD per month1) Education

Source: Ministry of Labor and Social Development, Labor Market Report, July 2016

• Targeting to increase the proportion of white collar jobs from current level (18%)

• Focus on Saudi nationals who have completed secondary school but not reached tertiary education – approximately 20% of the workforce (1.4 million people)

• Selected investment in tertiary institutions:

− King Fahd University of Petroleum and Minerals is the top science and engineering university in KSA

− King Faisal University, with an enrollment of ~26,000, is the top University in the Eastern Province

− King Faisal University Community College,a new college that will receive an investment of USD 8.2mn

− King Abdullah University of Science and Technology, one of the fastest growing research institutions in the world

Saudi Aramco: Public

A world-class logistics network links international supply markets with regions and industrial hubs

• 221,372 km of existing road network

• USD 2.4bn investment in Makkah ring road

• 6 international, 8 regional and 13 domestic airports

• USD 7.2bn investment allocated to the King Abdulaziz International

airport redevelopment

• Saudi Arabia’s 9 seaports compose the key port network in the Middle

East

• Establishment of Ras Al Khair port under the 9th Development Plan

• Railway network of 1,380 km with 2 main lines

• Land Bridge Project, a 950 km rail link between Jeddah-Dammam

Damman

Jubail

RiyadhMadinah

Jeddah

Ras Al Khair

Jizan

Yanbu

Dhiba

Key

Seaport

Airport

Major Road

Planned GCC road

4. Logistics

Saudi Arabia’s strategic location – Intersecting Europe / Africa and Asia – uniquely positions it as a logistics hub with access to two billion consumers

Source: Saudi Aramco analysis, Rail Journal, Arabian Business, Thomson-Reuters, The Big 5 Hub, SAGIA, Ports Finance International, MCL, The National, NY Times, Zawya

Saudi Aramco: Public

This logistics network benefits from preferential duties and customs, and low domestic freight costs

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201720162013 20152014

AsiaEuropeUSAKSA

• Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world

• Saudi Arabia is part of the GCC1 and applies GCC common external tariff of 5%

• The Saudi government also applies a 12% tariff on 207 products, in some cases to support local industries

• Customs duty exemption is available on all authorized imports for industrial establishments, equipment, machinery, tools, spare parts, raw materials or packaging materials if

− Local supply does not exist or

− The local supply is not up to the specifications of the manufacturers

• Import duties on the majority of other products is 12%

4. Logistics

Import duties and customs

Source: Saudi Aramco analysis, Rail Journal, Arabian Business, Thomson-Reuters, The Big 5 Hub, SAGIA, Ports Finance International, MCL, The National, NY Times, Zawya, CMA-CGA, energy.gov, Trading Economics, iContainers, Marketline reports

Road freight costs(USD, per 1000 miles, per ton)

Saudi Aramco: Public

Saudi Arabian General Investment Authority –oversight of investment affairs in the KSA

Saudi Industrial Property Authority –development of industrial cities

Royal Commission of Jubail and Yanbu –development of Jubail and Yanbu industrial cities

National Industrial Clusters Development Program – investors to industrial clusters connection

Ministry of Finance – monitoring of loan policies for the KSA Government

Public Investment Fund – SME investment on behalf of KSA

Small and Medium Enterprises Authority –improvement of regulations and promote SMEs

MERAS – Unified electronic platform to facilitate business start-ups

Human Resources Development Fund –implementation of HR practices

Saudi Export Development Authority –enablement of export opportunities for SMEs

Certificate of Conformity – provision of confirmation certificates for KSA imports

Saudi Industrial Development Fund – provision of finance and advisory services

Saudi Aramco

Localization is supported by a comprehensive ecosystem of government stakeholders

5. Government support

Source: Saudi Aramco analysis