Saudi defense minister inaugurates World Defense Show 2024/node/2453791/business-economy
Saudi defense minister inaugurates World Defense Show 2024
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Saudi Defense Minister Prince Khalid bin Salman on Sunday inaugurated the second World Defense Show in Riyadh on behalf of Crown Prince Mohammed bin Salman. SPA
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Saudi Defense Minister Prince Khalid bin Salman on Sunday inaugurated the second World Defense Show in Riyadh on behalf of Crown Prince Mohammed bin Salman. SPA
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The defense minister toured the exhibition, which features participation from over 773 exhibitors representing more than 75 countries. SPA
Saudi defense minister inaugurates World Defense Show 2024
Updated 04 February 2024
Arab News
RIYADH: Saudi Defense Minister Prince Khalid bin Salman on Sunday inaugurated the second World Defense Show in Riyadh on behalf of Crown Prince Mohammed bin Salman.
Held under the patronage of King Salman, the event was organized by the General Authority for Military Industries. The show, to run until Feb. 8, showcases the Kingdom’s commitment to becoming a global hub for the defense industry, said a press release issued on Sunday.
The defense minister toured the exhibition, which features participation from over 773 exhibitors representing more than 75 countries, alongside numerous government entities and leading local and international companies in the defense and security sector. He also viewed the aerial displays, static aircraft exhibitions, and ground equipment in the display area.
Speaking on the occasion, GAMI Gov. Ahmad Al-Ohali, said that the Kingdom has begun to reap the benefits of the huge support extended by the country’s leadership, with localization rates in the defense sector increasing from 4 percent to 13.6 percent at the end of 2022.
“The number of foundational permits and licenses reached 477 permits for 265 companies operating in the defense industries sector, alongside the launch of over 74 investment opportunities for supply chain localization,” the top official said.
Al-Ohali said the sector’s contribution to the gross domestic product is expected to reach approximately SR 93.75 billion ($25 billion) by 2030, with an estimated total of 40,000 direct job opportunities and 60,000 indirect job opportunities.
He also highlighted the exhibition’s significance as a global platform for defense and security industry experts, manufacturers, and decision-makers.
The Kingdom’s Interior Ministry pavilion showcased unique innovations that aim to enhance security and contribute to the development of the capabilities of security personnel.
One of their latest additions is the “Police Dog” automated vehicle, a technologically advanced solution powered by artificial intelligence. Another innovative product is the electric security vehicle, Lucid, that is equipped with sophisticated features, including a drone capable of reaching hard-to-access areas.
Col. Talal Al-Shalhoub, the ministry’s spokesman said the exhibited technologies throughout the pavilion not only enhance the work of security personnel and improve the quality of life but also provide a comprehensive solution to strengthen security in the Kingdom.
INTRA Defense Technologies unveiled its drone system called “Somum.” The company’s chairman, Salman Al-Shathri, was quoted as saying in a section of press: “We believe it will enter service within two years — at the end of 2025. The finalized version can fly at an altitude of approximately 50,000 feet, carrying a significant payload of weapons, radar systems, and optical reconnaissance systems.”
Saudi Minister of Industry and Mineral Resources Bandar Alkhorayef highlighted the integral role of a robust industrial base in supporting the military industry. He stated: “We cannot imagine a military industry without a strong industrial base. We are collaborating with industries to ensure the availability of raw materials required for military production.”
He said: “We are actively developing sectors such as iron and its derivatives, chemicals, and electronics to create alternatives for military industries.”
According to the minister, this exhibition provides a platform to showcase these opportunities to investors, serving both military and civilian sectors.
Saudi expat remittances hit 25-month peak to reach $3.44bn
Updated 20 September 2024
Dayan Abou Tine
RIYADH: Expatriate remittances from Saudi Arabia reached SR12.91 billion ($3.44 billion) in July, reflecting an annual increase of 21 percent, according to the recent data.
Figures from the Saudi Central Bank, also known as SAMA, also revealed that transfers sent abroad by the Kingdom’s nationals rose by 0.25 percent year on year, totaling SR5.81 billion.
This follows a notable peak in May, which marked the highest value recorded in the past 18 months.
As one of the world’s largest sources of remittances, Saudi Arabia’s economic policies and labor market conditions directly influence the financial well-being of numerous households across the globe.
This trend not only demonstrates the Kingdom’s economic vitality but also its interconnectedness with the global economy, especially in terms of labor migration and cross-border financial support.
According to a report by the US Department of State, Saudi Arabia’s remittance system plays a critical role in the global economy, given that nearly 75 percent of the Kingdom’s labor force consists of foreign workers.
Saudi Arabia is one of the largest remittance countries, and there are no restrictions on converting or transferring funds related to investments, including dividends, or earnings.
This facilitates a seamless flow of money across borders, with no waiting periods required for sending funds through legal channels.
According to the report, a key aspect of the Kingdom’s remittance infrastructure is the Ministry of Human Resources and Social Development’s Wage Protection System, designed to ensure that expatriate workers — who form the backbone of the remittance ecosystem — are paid according to their contracts.
Employers are mandated to transfer salaries through local Saudi bank accounts, allowing expatriates easy access to send their earnings back to their home countries.
This system not only guarantees transparency but also provides a legal and efficient pathway for expatriates to support their families abroad.
Digital transformation
The remittance landscape in Saudi Arabia and the broader Middle East and North Africa region is undergoing a transformation driven by the rise of digital platforms.
Historically, these transactions were dominated by physical channels like banks and exchange houses, but technological advancements have paved the way for new solutions.
These digital platforms offer a more convenient, cost-effective, and efficient means for individuals to transfer money across borders.
The widespread use of smartphones and the internet has allowed users to send money anytime and anywhere, making digital remittances increasingly popular.
They also come with great advantages like competitive exchange rates, lower transaction fees, and faster processing times.
What once took days and involved paperwork can now be completed instantly, allowing recipients to receive funds almost immediately, which is crucial for many who rely on timely support.
Digital platforms have not only made remittances more accessible but have also contributed to financial inclusion, especially for underserved populations, such as migrant workers and individuals in remote areas.
These groups now have easier access to financial services, which helps bridge gaps in financial systems and promotes economic participation across different regions.
The growth has also been supported by financial institutions and fintech companies, which have embraced technology to develop their own digital platforms or partner with existing firms.
This collaboration has led to the creation of innovative solutions like mobile apps, online portals, and digital wallets, enhancing the customer experience and broadening the range of remittance options available.
Regulatory bodies in Saudi Arabia and the MENA region have also played a pivotal role in facilitating this transformation.
By implementing supportive policies that ensure consumer protection, promote competition, and foster an enabling environment for digital financial services, regulators have helped shape a secure and robust ecosystem.
These measures have encouraged the adoption of new technologies, allowing fintechs to operate within a well-defined regulatory framework.
As the industry continues to evolve, the integration of emerging technologies like block chain and artificial intelligence is expected to further revolutionize remittance services, making them even more efficient, secure, and accessible.
US interest rate cut could see funding taps turn on for GCC startups
Updated 20 September 2024
Nour El-Shaeri
RIYADH: After almost two years of rate hikes, the US Federal Reserve has slashed interest rates by half a percentage point to a range of 4.75-5 percent, but what does this mean for the startup and venture capital ecosystem?
The relationship between the US Federal Reserve and the global startup ecosystem is somewhat complicated.
Washington’s decisions on interest rates significantly influence the availability and cost of capital, which are crucial factors for startups and venture capital firms.
Lower interest rates generally make borrowing cheaper, potentially encouraging more investment into riskier asset classes, including startups.
Gulf Cooperation Council central banks followed suit in rate cuts, as their currencies are pegged to the US dollar.
Venture data analyst and founder of MAGNiTT, Philip Bahoshy, shares a nuanced perspective on the potential impact of rate cuts on the global and regional startup ecosystem.
In an interview with Arab News, Bahoshy said that the cut itself may not be the most significant, but rather, the potential trend expected to take place.
“To answer what impact will the cut have on VC investment, you need to understand why the Fed has taken this decision,” Bahoshy said.
“Ultimately, Jerome Powell (chair of the US Federal Reserve) says that the aim is to bring down or keep inflation steady while keeping moderate to low unemployment in the US,” he added.
“The signs are that we are trying to avoid a recession and/or an economic downturn in the US and that things are healthy, and therefore bringing down interest rates can help stimulate disposable income and people’s consumption,” the analyst said.
This, in turn, brings down the cost of capital, also known as the borrowing cost, which in turn makes VC a less attractive investment.
On the flip side, when interest rates are high, the implication of putting money in the bank or investing in less riskier options like real estate becomes the go-to for investors.
If an investor is earning 6 percent on a savings account, knowing that their money is secure, there’s little incentive to take on the uncertainty of investing in a startup, not knowing when or if they’ll get their money.
On the lending side, lower interest rates also make borrowing cheaper for startups.
Entrepreneurs, who are often very focused on maximizing every dollar, will appreciate the ability to borrow at lower costs which enables them to allocate more resources toward growing their businesses, rather than paying high interest costs.
Bahoshy has mentioned in previous reports that the decline in venture capital funding in the Middle East and North Africa region in the last couple of years has been, though not solely, due to high interest rates.
Venture data analyst and founder of MAGNiTT, Philip Bahoshy. Supplied
The MENA region saw a 34 percent year-on-year drop in funding in the first half of the year, compared to the same period last year.
In 2023, VC investments declined by 23 percent on an annual basis.
Interest rates and venture stakes
Bahoshy explained that the Fed’s last cut will not immediately impact VC investments, but the implication of continued rate reductions will.
“We anticipate that this will create a lower cost of capital for late-stage investors, more willingness for people to invest in other asset classes because fixed deposits become less attractive and, therefore, more investments going into venture in general,” Bahoshy said.
“My view is that the immediate impact will be somewhat limited. However, heading into 2025, if we continue to see rate cuts in the US, it will likely stimulate venture capital investments globally and in turn likely to return investor appetite for venture capital in the region. However, that’s likely not to impact Q4, more likely to impact 2025 positively,” he added.
Echoing Bahoshy’s prediction, Tushar Singhvi, deputy CEO and head of investments at venture capital firm Crescent Enterprises, feels somewhat positive that more cuts are underway.
Speaking to Arab News, Singhvi said: “The Fed rate cut sets the trend for a series of rate cuts expected over the next few quarters – this will result in higher liquidity in general, and the venture asset class will also benefit from higher liquidity.”
Short-term projections
Bahoshy pointed out that there have already been signs of growth in the VC landscape in the US in the first half of the year, which will probably be reflected in the MENA region.
“We noted back in the H1 report that in the US, we believe that we were reaching an inflection point and that we saw for the first time two consecutive quarters of growth in venture capital deployment,” he said.
“I anticipate that Q3 will continue to be higher globally and within the region, which is what the trends show and this rate cut will continue to support a potentially higher Q4 globally than Q3,” he added.
Bahoshy tempers his predictions, stating that the increase will be “moderate”, and not reaching 2021-2022 levels.
When it comes to startup strategies, the rate cut should hardly affect valuations or funding strategies, Singhvi said.
“Startups should continue to be as capital efficient as possible and focus on growth and profitability – and their funding strategies should be devised around that,” he added.
VC’s will most likely maintain their plan of action. Singhvi stated that the rate cut will not immediately change the focus areas of VCs in the region.
“VCs will continue to pursue startups which are building transformational businesses within high growth sectors and leveraging technology to build innovative and sustainable businesses,” he added.
Bahoshy also feels the same way. “I don’t think that a change in interest rates is going to impact sectorial shifts,” he said.
He highlighted that an even bigger concern exists within the startup ecosystem across the Middle East and North Africa.
“The biggest challenge for the region remains exits, liquidity and return on investments back to investors, which means that they have shown the success of their investment strategy and paid off their LPs (limited partners), increases risk appetite to raise new funds and to go into less traditional sectors,” Bahoshy said.
Singhvi adds that the increase of liquidity due to reduced rate cuts over time will definitely fuel exits in the region.
“There will be a positive impact of the rate cuts over time on exit strategies for VC backed companies as M&A (mergers and acquisition) activity will pick up and tech IPOs (initial public offerings) will also gain more momentum due to higher liquidity,” he added.
Tushar Singhvi, deputy CEO and head of investments at venture capital firm Crescent Enterprises. Supplied
The geographical impact
When asked about whether the anticipated investment growth will be across the entire MENA region, Bahoshy said that the effects of the rate cuts might be more regionally dispersed rather than concentrated in key markets like Saudi Arabia and the UAE.
“When you look at the sovereign entities, whether it be Saudi Arabia, UAE, and Qatar, what’s more interesting to track is how does interest rate impact oil prices or natural assets that have been beneficial to the sovereign entities,” Bahoshy said.
He questioned whether this would “stimulate oil prices to increase because consumption has increased, or will this lead to a further reduction in the oil prices which have been a big stimulus to investment and wider growth of the economy and venture capital.”
Bahoshy added: “I don’t think that has necessarily a geographical specific impetus here in the region. In fact, many of the economies like the UAE and Saudi Arabia have performed better as a result of government focus and their ability to deploy capital during a time where other geographies haven’t.”
He went on to say that while the interest rate cut may be beneficial, there was a question over how it will impact oil and natural resource prices.
Late-stage startups, get ready
In the first half of the year, early-stage investments were the primary focus, with almost 75 percent of deals flowing in that direction.
Bahoshy explained that this trend could start to change in the next 12 months if interest rates continue to go down.
“However, I don’t think that this specific rate cut is going to stimulate that, but if we continue to see rate cuts to year end and into H1 2025, we may see a return of later stage investment while it’s healthy for early-stage investment to continue to grow,” he said.
Oil Updates – prices set to end week higher after US rate cut
Updated 32 sec ago
Reuters
BENGALURU: Oil prices eased on Friday, but were on track to register gains for a second straight week following a large cut in US interest rates and declining global stockpiles.
Brent futures were down 50 cents, or 0.67 percent, at $74.38 a barrel at 1:04 p.m. Saudi time while US WTI crude futures fell 48 cents, or 0.65 percent, at $71.47.
Still, both benchmarks were up 3.7 percent and 4 percent respectively on the week.
Prices have been recovering after Brent fell below $69 for the first time in nearly three years on Sept. 10.
“US interest cuts have supported risk sentiment, weakened the dollar and supported crude this week,” UBS analyst Giovanni Staunovo said.
“However, it takes time until rate cuts support economic activity and oil demand growth,” he added, regarding crude’s more muted performance so far on Friday.
Prices rose more than 1 percent on Thursday following the US central bank’s decision to cut interest rates by half a percentage point on Wednesday.
Interest rate cuts typically boost economic activity and energy demand, but some also see it as a sign of a weak US labor market.
The Fed also projected a further half-point rate cut by year-end, a full point next year and a half-point trim in 2026.
“Easing monetary policy helped reinforce expectations that the US economy will avoid a downturn,” ANZ Research analysts said.
Also supporting prices were a decline in US crude inventories, which fell to a one-year low last week.
A counter-seasonal oil market deficit of around 400,000 barrels per day will support Brent crude prices in the $70 to $75 a barrel range during the next quarter, Citi analysts said on Thursday, but added prices could plunge in 2025.
Crude prices were also being supported by rising tensions in the Middle East. Walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day.
Security sources have said the Israeli spy agency Mossad was responsible, but Israeli officials have not commented on the attacks.
China’s slowing economy also weighed on market sentiment, with refinery output in China slowing for a fifth month in August and industrial output growth hitting a five-month low.
Saudi Arabia’s expat fee waiver fuels industrial growth, boosting GDP by 14.7%
Updated 19 September 2024
MOHAMMED AL-KINANI
JEDDAH: Saudi Arabia’s decision to waive fees for expatriate workers in the industrial sector has significantly contributed to a robust 14.7 percent increase in gross domestic product, soaring from SR392 billion ($104.5 billion) in 2019 to SR592 billion in 2023.
According to a report by the Economic Studies Center at the Federation of Saudi Chambers, this policy has not only spurred GDP growth but also enhanced non-oil exports, which have climbed to approximately SR208 billion, marking a 12 percent increase since 2019.
Effective until Dec. 31, this initiative is part of the Kingdom’s broader strategy to stimulate growth and attract investment in its industrial sector. The report also notes that the opening of new markets and the signing of various trade agreements have played crucial roles in this upward trend, with the local content value in non-oil sectors reaching SR1.14 trillion by the end of 2023.
Over 8,000 industrial firms have benefited from the waiver, which eliminated around SR5 billion in expatriate labor fees. The analysis highlights that this policy has encouraged industrial establishments to adopt innovative business models, localize advanced technologies, and attract skilled professionals, ultimately increasing the availability of products to meet local demand.
The number of products bearing the Saudi quality mark has also seen a rise, reflecting enhanced product quality. A comprehensive analysis conducted by the Saudi Press Agency evaluates the decision’s impact based on seven economic indicators, including GDP contribution, the growth of industrial establishments, and investment volumes.
Key findings indicate that the industrial sector’s GDP surged from SR392 billion in 2019 to SR592 billion in 2023, with a 14.7 percent contribution rate. The number of industrial establishments grew from 7,625 in 2019 to 11,868 in 2024, a growth rate of 55.6 percent, while investments in the sector increased by 54 percent, reaching SR1.5 trillion compared to SR992 billion.
Moreover, the report reveals a substantial rise in foreign investments due to government support measures, such as covering financial fees and implementing the local content system. The number of foreign factories jumped from 622 to 1,067, reflecting a 71.5 percent growth rate, while invested capital soared from SR43 billion to SR93 billion, marking a staggering 116.2 percent increase.
In terms of employment, the industrial sector employed around 1.2 million workers by the end of the first quarter of 2024, with 358,000 being Saudi nationals, resulting in a 28 percent Saudization rate. Workers in this sector accounted for 12.9 percent of all nationals employed in the private sector.
The report underscores that various government incentives have encouraged the private sector to increase Saudization, creating more job opportunities for citizens. The industrial sector emerged as the largest contributor to job creation for Saudis between Jan. 1, 2023, and March 31, witnessing a 59 percent increase with over 82,000 new jobs added.
Saudi EV market poised for significant growth by 2026, Petromin CEO predicts
Updated 19 September 2024
MANAL AL-BARAKATI
RIYADH: Saudi Arabia is preparing for a substantial rise in electric vehicle sales as battery prices fall and infrastructure improves, according to an industry leader.
In an interview with Arab News at the EV Auto Show in Riyadh, Kalyana Sivagnanam, CEO of Petromin Group—a Saudi-based provider of automotive, lubricant, and EV charging solutions—indicated that EV sales could soon approach parity with internal combustion engine vehicles within the next 12 to 18 months.
“By 2026/2027, you’re going to see a massive surge in the sales of electric vehicles,” Sivagnanam stated, linking this growth to rapidly changing market conditions and declining battery costs.
In certain markets like China, the price of EVs is already nearly equivalent to that of traditional vehicles, a trend expected to gain momentum in Saudi Arabia, he added.
Sivagnanam pointed out that Saudi Arabia’s Vision 2030 has played a crucial role in nurturing the EV sector, attracting major global players such as Lucid Motors, which has commenced local manufacturing, as well as new entrants like Ceer and Hyundai.
“The EV industry definitely in Saudi Arabia is looking very, very promising,” he remarked, noting that some forecasts predict EVs could make up 35 to 40 percent of the market by 2030.
He also discussed the “chicken and egg” challenge of EV adoption, where limited charging infrastructure deters consumers from buying electric vehicles.
The top executive stressed the significance of initiatives like the Public Investment Fund’s EVIQ program, designed to enhance the country’s EV charging infrastructure. “In the months and years to come, we can see how this will pave the way for more adoption of electric vehicles.”
Electromin, a subsidiary of Petromin Corp., is closely monitoring the pace of EV sales to inform its expansion of charging stations. “Our ability to install chargers will depend on how fast the vehicles sell,” Sivagnanam explained.
The CEO highlighted Electromin’s comprehensive services for fleet customers, providing decarbonization strategies as well as EV charger installation and maintenance.
“For example, if you are a fleet company, you don’t want to go to somebody for chargers, somebody for maintenance, and someone else for your vehicles,” he said, emphasizing the need to streamline the transition to electric vehicles.
Electromin has already made notable progress, establishing the first national AC charging network in Saudi Arabia, with chargers accessible in 52 cities. “Today, any customer in the Kingdom, doesn’t matter where he drives, he will find an AC charger,” Sivagnanam remarked.
Although these are not fast chargers, they ensure that drivers can access charging facilities wherever they are, he added.
The company has also provided Saudi Arabia’s first electric van to Pepsi, the inaugural electric bus to Red Sea, and a passenger bus to Riyadh Air.
With growing government support and robust corporate initiatives, Saudi Arabia’s EV market is set for considerable expansion in the coming years.
“What is very exciting about this journey is the way this country is focusing on sustainability and EV adoption,” the executive concluded.
