SAGIA explores opportunities to attract investors

KUALA LUMPUR — Recently, Saudi Arabian General Investment Authority (SAGIA) hosted an interactive conference in Kuala Lumpur to promote Asia-Pacific opportunities in business and investment in Saudi Arabia. With the Kingdom being in the final stages of accession into World Trade Organization (WTO) increased effort is being made to attract foreign investors.

The purpose of the event was to offer the practical facts about doing business in Saudi Arabia, addressing new laws, legal requirements, taxes and tariffs, and analyzing the strategic benefits of investing in the Kingdom. Prince Abdullah ibn Faisal ibn Turki and senior-level professionals were present to disseminate information and discuss opportunities, concurrently offering case study analysis from Asian companies currently working in Saudi Arabia.

Some of the speakers included Prince Abdullah who presented both opening and closing statements, Dato’ Mohammed Mansor of Petronas, John Lonsberg from BryanCave/Kadasah Law Firm, Waleed Kayyal of Saudi British Bank, Basil Al-Ghalayini of BMG Financial Advisors and Khalid Al-Falih from Aramco, to name a few.

SAGIA offered encouragement for interested investors and a "one-stop-shop" approach to issuing investment licenses, addressing new laws, the privatization of key industries, financing options. Prince Abdullah acknowledged that, "demand should drive everything while being inspirational to the investor and the potential is now attractive as decentralization is equating to opportunities."

The conference focused on sectors on oil and gas, mining, power, water and telecommunications but SAGIA repeatedly reminded guests that their purpose was not to suggest one sector over another just to create a "better investment environment".

Dato’ Mohammed Mansor, senior vice president of Petronas, Malaysia, the first speaker of the conference, introduced the concept of a ‘New Economy’ one fraught with risks and uncertainties as the environment facing countries globally.

He elaborated on how trends of globalization and trade liberalization meant that the world is being forced to embrace cross border economic activity. With trade and investment acting as the principal measures for such economic integration many countries, including those which were formerly closed, are now breaking down barriers and introducing change and economic reforms.

Mansor drew parallels for the investment climate and opportunities between Saudi Arabia and Malaysia, offering Malaysia as a success story in the making. He attributed Malaysia’s success to astute partnering between the government and the private sector. The privatization scheme provided the opportunity for Malaysian entrepreneurs to participate in national development while at the same time develop their businesses.

"In a borderless world, competition has become more intense and to thrive in the New Economy, economies have to compete intensely for capital, investment, markets and resources."

"Like the rest of the world, Malaysia is also thrust into the new world order. Our achievement of the past 25 years can no longer guarantee our success in the future. There is a conscious need for the country to re-invent in order to survive and remain relevant to the new world."

For Saudi Arabia to meet these challenges he recommended certain criteria that have to be met. First, there must be a visionary policy for long-term economic development. Secondly, economic development can only occur if there is a healthy investment climate. In this area SAGIA is to play a crucial and primary role. "Proper legal and statutory framework to safeguard ownership rights and privileges of investors is crucial to attract investors and give them the confidence to remain." Finally, he concluded "cultural and other social barriers may make it difficult for investors to commit, but Saudi Arabia can exploit such window of opportunities by ensuring greater transparency and good governance."

As economic growth and a healthy investment climate cannot be possible without the support of project finance opportunities emerging through major infrastructure initiatives.

To discuss funding initiatives and environment for small and medium sized businesses, Basil Al-Ghalayini was on hand to elaborate on the investment environment in Saudi Arabia.

Basil Al-Ghalayini addressed the subject of financing small & medium size enterprises (SMEs) in Saudi Arabia while looking at its challenges and future opportunities in view of the Saudi economy growth potential, the foreign investment law (driven by its dynamic engine SAGIA), and the forthcoming reforms in the financial services sector, chiefly the new capital markets law.

He presented that in Saudi Arabia, SMEs account for 88 percent of the economic ventures in the country. Of the total registered enterprises in the Kingdom 81 percent are small-scale projects, while 7 percent are medium enterprises. The private sector owns 94 percent of these enterprises.

According to the seventh development plan, the service sector shows the most optimistic picture after the obvious petrochemicals. In my opinion, sectors such as financial services (including insurance), and tourism will witness high growth rates. The insurance sector, which may witness the highest growth rate in the next few years, is going through major restructuring under the newly introduced regulations after imposing medical and motor insurance coverage on expatriates, as well as locals. By 2005, it is estimated that the insurance sector may become a $5 billion market.

Other vital sectors include electricity, with the Kingdom’s 25-year electrification plan calling for increasing capacity from about 23,000 mw today to over 60,000 megawatt in 2023. Telecom, for expansion and upgrading fixed lines and the second GSM mobile network offers incredible prospects. And Basil Al-Ghalayini mentioned numerous other sectors, such as petrochemicals, desalination and mining. "Soon, under the forthcoming new Saudi capital markets law, it is expected that a new breed of investment companies and VCs will be screening such projects."

"Obviously, there are many roles for Saudi SMEs and their foreign partners to play in the implementation and execution of these projects directly, indirectly, or by related support services." The conference concluded with possible interest expressed by Malaysian company representatives.

– 21 October 2002