Tap into a land of ongoing growth
The size of Western Europe but with a population of 27 million, Saudi Arabia is by far the dominant presence in the Arabian Gulf. It has vast resources and ranks among the world’s top 25 economies. It has one of the fastest growing per capita incomes anywhere on earth. It remains very much a land of opportunity – and challenges – and is home to around six million ex-pat workers.
Oil remains king. With 25 per cent of the world’s oil resources, it remains OPEC’s biggest hitter and the world’s biggest petroleum exporter. Oil accounts for four-fifths of budget revenues, 45 per cent of GDP and 90 per cent of export earnings. In fact Saudi Arabia accounts for a quarter of all Arab GDP. This enormous wealth offers huge potential for UK exporters.
Dubbed a high-growth market by UK Trade & Investment, Saudi is the UK’s largest Middle East trading partner. After the US, the UK is the second biggest foreign investor in this vast kingdom. It is a fast-growing market taking active steps to not only diversify away from oil and gas but to liberalise its economy, create a larger private sector and undertake key economic reforms. The kingdom is encouraging greater foreign investment. The aim is to increase the country's competitiveness.
Education has been flagged up as a priority, focused in particular on the country’s young people who often lack the education and technical skills required by private business. The country has opened its first co-educational higher educational institute, the King Abdullah University of Science and Technology in Riyadh catering for 50,000 students and a new women-only facility at Princess Noura University. British providers can capitalise on the fact that a quarter of the country’s budget is earmarked for education and training.
The country’s Saudisation programme aims to provide more jobs for those under 25. One means of achieving this is by limiting the number of foreign workers.
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.
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 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.
The World Bank’s 2011 “Ease of Doing Business” report ranked Saudi as eleventh in the world – ahead of all other Middle Eastern and Arab countries. It is rated as the world’s fourth best nation for “fiscal freedom” and seventh for both the most rewarding tax system and freest labour market by the World Economic Forum.
With an annual budget of $150 billion plus the Saudi government spends huge amounts on education, training, health, infrastructure and social development, although it has reigned in increases in spending in recent years to its lowest point in a decade. This indicates government intentions that the private sector will play a significantly bigger role in providing services.
Following Middle Eastern unrest in 2011King Abdullah announced increased social benefits worth $91 billion, a new minimum wage for state employees and bonuses for workers in the public sector. A drive is on to build half a million new homes and $4 billion has been earmarked for new medical facilities.
Saudi Arabia has one of the world’s fastest growing populations with 60 per cent of people under 20 years old. To cope with the upsurge new investment opportunities are being created especially in water, oil and gas, power transport, petrochemicals, communications, construction, mining and other infrastructure projects – all adding up to a trillion dollars over the next two decades.
Other opportunities for UK businesses include financial services, environmental technology, consumer goods, and ITC. Defence is also a crucial sector for UK business with long-standing ties supplying the Saudi military. An order for 72 Typhoon fighters from Britain ensures that the relationship is set to continue for many years to come.
Saudi Arabia is the 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.