Tap into a land of ongoing growth

 

A vast kingdom the size of Western Europe and with a population of 32 million, Saudi Arabia is the dominant nation in the Gulf region. It is home to a vast abundance of natural resources, a flourishing ex-pat community of six million workers, and one of the fastest growing per capita incomes anywhere on earth. Ranking among the world’s top 25 economies, Saudi Arabia is a land of great opportunity and challenge.

Identified as a high-growth market by the Department for International Trade (DIT), Saudi is the UK’s largest Middle Eastern trading partner and the UK is its second biggest foreign investor (after the US).  

With 16 per cent of the world’s oil resources, Saudi Arabia is OPEC’s biggest hitter and the world’s largest petroleum exporter. Oil accounts for 87 per cent of budget revenues, 42 per cent of GDP and 90 per cent of export earnings. In fact, this one nation is responsible for a quarter of all Arab GDP. Such enormous wealth offers huge potential for UK exporters.

Oil is still king, but this fast-growing market is taking bold steps to diversify its economy away from oil and gas dependency. Saudi Arabia's bold ‘Vision 2030’ project aims not only to cut oil dependency by 2030, but to also liberalise its economy, create a larger private sector and undertake crucial economic reforms. As a result, the kingdom is encouraging greater foreign investment with the aim of increasing competitiveness. In 2016 the World Economic Forum rated Saudi Arabia 29th in its Global Competitiveness Index.

Education is a national priority, focused in particular on the country’s young people, who often lack the education and technical skills required by private business. 2009 saw the opening of Saudi Arabia's first co-educational higher educational institute, the King Abdullah University of Science and Technology (KAUST) in Riyadh (catering for 50,000 students), and a new women-only facility at Princess Noura University. In the Nature magazine's 2016 Rising Stars Index, KAUST was ranked 19th in the world for high quality research output.

British providers can capitalise on the fact that in some recent years roughly a quarter of the country’s budget has been earmarked for education and training.

Another key issue in Saudi Arabia is its shifting demographic profile in the wake of its recent population boom - around 60 per cent of the Saudi population are under 20 years old. As a result, the country has followed a ‘Saudisation’ programme since 2011, which has aimed to provide more jobs by favouring its domestic labour force. One means of achieving this has been through limiting the number of foreign workers.

On the positive side for international trade, the government has invested heavily in national infrastructure to cope with these population changes. Consequently new investment opportunities are being created, especially in the water, oil, gas, power transport, petrochemicals, communications, construction and mining sectors – all adding up to an estimated 1 trillion US dollars over the next two decades. Despite labour restrictions such as ‘Saudisation’ and constraints on investment in some sectors of the economy, the World Bank’s 2017 “Ease of Doing Business” report ranked Saudi amongst the top 100 in the world.

Although Britain has long-standing ties with the country, doing business in Saudi can be eye-wateringly difficult not least because of cultural and religious complexities[M1] .

Named after the ruling Al Saud family, the country was formed in 1932 and remains an absolute monarchy ruled by the founder’s sons and a wider circle of royalty and advisors. A Council of Ministers wields executive power. Political parties and public demonstrations are banned. At a local level the country is governed by a series of councils. Calls for political reform led to the first elections to these councils in 2005.

Saudi Arabia boasts an annual budget of $150 billion, spending  huge amounts on education, training, health, infrastructure and social development.  Following Middle Eastern unrest during the 'Arab Spring' in 2011, King Abdullah announced increased social benefits worth $91 billion, a new minimum wage for state employees and bonuses for workers in the public sector.  However, after the drop in oil prices in 2014, King Abdullah’s death in 2015, and the ascension of King Salman, spending has been reigned back to its lowest point in a decade. This indicates government intentions that the private sector will play a significantly bigger role in providing services.

Defence spending has increased dramatically since 2015  and remains a crucial sector for both UK and Saudi business. The UK has long-standing ties supplying the Saudi military, with over 194 export licences for arms worth more than £3.3 billion having been approved since 2015.

Other opportunities for UK businesses include financial services, environmental technology, consumer goods, and ICT.

Saudi Arabia is also the UK's largest market for healthcare products and medical equipment in the Middle East, and continues to be a thriving sector with vast potential for British firms.

MODON, the Saudi Industrial Property Authority, is building six new Industrial Cities as part of its vision to encourage private sector involvement. The Saudis have said specifically that they are interested in working with UK consultants for master-planning, design maintenance and operation of these facilities.

In addition, the country is also investing heavily in four major Economic Cities in Hail, Al Madinah, Jazan and near Riyadh. Envisioned as public-private partnerships, they are designed to create over a million new jobs, promote economic diversification and provide homes for up to five million people.

Saudi’s key business regions are Riyadh, the Eastern Province (which includes Dammam, Al Khobar, Dhahran, Jubail, Hofuf and Abgaig), and Jeddah. 

 

Telephone David Attia on 0845 034 7200 or email for advice.

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