Saudi Arabia woos investors with lucrative business environment

Saudi Arabia woos investors with lucrative business environment
Situated at the crossroads of Europe, Asia, and Africa, Saudi Arabia boasts a strategic geographical location that makes it a natural hub for international trade, giving it a unique advantage when it comes to Asia-Europe commerce channels. (SPA)
Short Url
Updated 12 May 2024
Follow

Saudi Arabia woos investors with lucrative business environment

Saudi Arabia woos investors with lucrative business environment
  • Vision 2030 aims to reduce the nation’s dependence on oil, diversify its economy, and build a vibrant society

RIYADH: With an average growth rate of 4 percent over the past seven years and an upward trajectory buoyed by a pro-business environment, Saudi Arabia has demonstrated remarkable resilience amid global economic challenges.

Given its strategic location, robust economy, and ambitious Vision 2030, it’s hardly surprising that the Kingdom stands as a beacon of progress and growth in the region.

A key to this has been attracting foreign direct investment, as well as working on agreements with neighboring countries to ensure Saudi Arabia is seen as being open for business.

Economist and policy adviser Mahmoud Khairy told Arab News that the Kingdom has “enhanced trade relations and reduced barriers” in this regard as it seeks to put its Vision 2030 strategy into action.

That plan aims to reduce the nation’s dependence on oil, diversify its economy, and build a vibrant society.

Khairy added: “The Kingdom has already started to take serious steps to capitalize on its exceptional location through the establishment of logistics and free trade zones, coupled with efforts to diversify the economy under Vision 2030, attracts foreign investment and fosters trade partnerships.”

Khairy emphasized that investments in digital infrastructure and e-commerce platforms have further modernized the Kingdom’s trade ecosystem, enhancing its connectivity with global markets.

Furthermore, he said, tremendous efforts have been made to advance the financial ecosystem, with new measures planned to improve the ease of doing business and develop the investment environment further.

Khairy’s analysis was echoed by Saudi-based economist Talat Hafiz, who told Arab News: “One of the main pillars of Saudi Vision 2030 is to create a business environment that supports economic growth in the Kingdom and attract FDI as well as diversify the Kingdom’s economy. The only way to reach such a goal is through facilitating doing business and trade.”

Gateway to global trade

Situated at the crossroads of Europe, Asia, and Africa, Saudi Arabia boasts a strategic geographical location that makes it a natural hub for international trade, giving it a unique advantage when it comes to Asia-Europe commerce channels and distributing goods through the Arabian Peninsula.

With access to over 424 million consumers within a three-hour flight radius, the nation serves as an efficient gateway to markets spanning three continents.

The Saudi freight and logistics industry, supported by state-led investments in infrastructure, is a vital component of the Kingdom’s economic landscape.

Saudi Arabia has undertaken extensive expansion and modernization efforts at its ports, such as the King Abdulaziz Port in Dammam and the King Abdullah Port in Jeddah, incorporating cutting-edge technology for efficient cargo handling.

Khairy said that the development of such modern ports “increases the country’s capacity to handle large volumes of cargo, thereby improving efficiency and reducing transit times for goods entering and leaving the region.” 

When compared to many Western countries, Saudi Arabia’s corporate tax rates are notably lower, with certain industries and regions even benefiting from tax exemptions or reduced rates.

Mahmoud Khairy, Economist and policy adviser

Hafiz added: “With a combined total of 290 berths, Saudi Arabia’s ports comprise the Middle East’s largest seaport network that not only contributes a great deal to national growth but also showcases the Kingdom’s formidable regional and international standing.”

He went on to emphasize that the country’s ports are capable of accommodating any form of vessel, which is what drove the Saudi Port Authority, also known as Mawani, to provide specialized terminals for various types of loads.

Furthermore, substantial investments are being made in expanding rail and road networks to enhance connectivity and streamline the transportation of goods domestically.

According to Khairy, the expansion and improvement of transportation networks, including roads, railways, and airports, enhance connectivity both domestically and internationally.

“This seamless connectivity facilitates the movement of goods and people, supporting supply chain efficiency and enabling businesses to access global markets more effectively,” he added.

Saudi Arabia’s well-established logistics infrastructure offers unparalleled opportunities for logistics companies and manufacturers looking to capitalize on its strategic advantages.

Business-friendly environment 

The Kingdom offers a business-friendly environment characterized by stable economic policies, government incentives, and a youthful, tech-savvy population.

Hafiz noted that Saudi Arabia “jumped significant places in the World Bank’s Ease of Doing Business index and IMD, making the Kingdom among the world’s top improvers.”

Ease of Doing Business index ranked economies from 1 to 190, with the Kingdom standing at number 62 in the final report issued in 2020.  

Saudi Arabia ranked 30 in 2023’s IMD World Digital Competitiveness Ranking, which assesses the capacity and readiness of an economy to adopt and explore digital technologies as a key driver for economic transformation in business, government, and wider society.

The government, through Saudi Arabia’s General Investment Authority, also known as SAGIA, offers various incentives to attract foreign investors. These incentives comprise low corporate tax rates, streamlined business regulations, and robust infrastructure development.

“When compared to many Western countries, Saudi Arabia’s corporate tax rates are notably lower, with certain industries and regions even benefiting from tax exemptions or reduced rates,” Khairy pointed out.

He went on to say that “the digitalization of bureaucratic processes makes it easier for investors to navigate the business environment and set up operations in the country.”

The incentives play a significant role in investor decisions by enhancing the attractiveness of Saudi Arabia as an investment destination.

Businesses are drawn to markets with favorable tax regimes and simplified regulatory frameworks, as they contribute to higher profitability and operational efficiency, according to Khairy.

Hafiz added: “These developments, which are aligned with Saudi Arabia’s Vision 2030, will hopefully increase FDI’s contribution to the Kingdom’s gross domestic product from 3.8 percent in 2016 to 5.7 percent by 2030.”

With this, Saudi Arabia presents lucrative opportunities for foreign investors and entrepreneurs seeking to establish their presence in the region.

Furthermore, initiatives such as the establishment of special economic zones and the growth of the venture capital sector underscore the country’s commitment to fostering innovation and entrepreneurship.

The VC sector has over 80 active firms, with more entering the market, highlighting the commitment to nurturing innovative startups.

Adding to this, the continuous infrastructure development initiatives like NEOM and Red Sea Global underscore the dedication to establishing top-tier business environments and fostering opportunities across diverse industries.

Over 200 international firms, including Northern Trust, PepsiCo from the US, IHG Hotels and Resorts, PwC, and Deloitte from the UK, have opened their regional headquarters in Riyadh.

The Kingdom had previously announced that it would not award any deals to any foreign company or commercial entity with a Middle Eastern base outside Saudi Arabia starting from January 1, 2024.

Driving innovation through technology

Embracing the transformative power of artificial intelligence and machine learning, Saudi Arabia is spearheading initiatives to harness these technologies for economic growth.

Under the leadership of Crown Prince Mohammed bin Salman, the nation is investing in AI research, education, and infrastructure to propel its industries into the digital age.

According to Khairy, collaboration between academia, industry, and government can harness AI’s potential to enhance productivity and competitiveness across sectors.

AI adoption can lead to new products, services, and business models, optimizing operations and decision-making, he explained.

Generative AI, a cutting-edge technology, holds immense potential for revolutionizing supply chain and procurement operations in Saudi Arabia.

The National Strategy for Data and AI, initiated in 2019, outlines the country’s commitment to advancing AI capabilities and data-driven decision-making.

Generative AI, powered by large language models like OpenAI’s ChatGPT and Google’s BERT, stands out as a transformative technology with the potential to revolutionize supply chain and procurement operations.

Within the context of Vision 2030, generative AI aligns with goals of economic diversification, localization, and sustainability, positioning Saudi Arabia as a key player in international supply chain management.

“The new National Industrial Strategy of the Kingdom not only focuses on raising the number of factories in Saudi Arabia to 36,000 but also improves its technological capabilities,” according to Hafiz.

A visionary path forward

As Saudi Arabia continues its journey towards economic diversification and innovation, it remains poised to emerge as a global leader in business and technology.

“I believe that the sky is the limit when it comes to business opportunities in Saudi Arabia, especially in economic sectors that could add value to the Kingdom’s economy such as advanced technologies: AI, digital economy, internet of things and other sectors, especially advanced renewable energies,” Hafiz said.

Saudi Arabia’s youth population, combined with its dedication to education and technological advancement, positions it as a powerhouse of talent and innovation.

In the era of supply chain diversification, Saudi Arabia has emerged as a compelling rival in the global logistics market. The Kingdom presents an attractive proposition for businesses seeking to optimize their supply chains and expand their global footprint.

As Saudi Arabia continues on its path to becoming a global supply chain hub and a leader in AI and machine learning, it is prioritizing programs that equip its youth with the skills and knowledge required for these transformative job opportunities.

By all accounts, Saudi Arabia can leverage generative AI to not only enhance its supply chain and procurement processes but also empower its youth to thrive in the workforce of the future.

“The technology sector is experiencing rapid growth, driven by government initiatives and increasing investment in areas such as digital transformation and artificial intelligence,” Khairy said.


‘Blue tech’ needs private sector boost, says RSG official

‘Blue tech’ needs private sector boost, says RSG official
Updated 11 sec ago
Follow

‘Blue tech’ needs private sector boost, says RSG official

‘Blue tech’ needs private sector boost, says RSG official

RIYADH: Private sector firms need to lead the way and invest in so-called blue tech in order to protect the world’s oceans, according to a leading official at Red Sea Global.

Speaking to Arab News during the Future Investment Initiative in Riyadh, Raed Al-Basseet, environment and sustainability officer at the company, called on businesses to adopt innovative approaches that contribute to environmental preservation. 

This includes blue tech — which refers to refers to any innovation made for the sea.

Al-Basseet also reaffirmed RSG’s commitment to sustainability — and how this reflects on the project’s return on investment. 

He called on the private sector to take “the first steps” and invest in “cutting edge approaches to preserving the environment,” adding: “Enhancing the environment and … conservation is the right thing to do for the private sector, but also when we realize the first benefits out of that, and out of these initiatives, we will also have real return on investment as a developer, as a private sector, from that investment.” 

Al-Basseet was keen to emphasis RSG’s focus on environmentalism, saying the company has “sustainability at its DNA.”

He added: “And that actually, from a practical sense, means that (in) all of our activities, master planning and development, design, construction, delivering on these projects, as well as operating these projects, sustainability is at the core of everything that we do.” 

He emphasized that the long-term success of the projects relies on preserving natural assets, making sustainability integral to achieving favorable outcomes. 

Highlighting key initiatives, Al-Basseet pointed out the company’s significant investment in blue tech, adding: “The investment in technology does require the support of a multitude of stakeholders. Private sector does have a role. Red Sea Global is very proud that they have in the 

Al-Basseet also spoke about the company’s efforts in coral conservation, including supporting research that is happening now within the Red Sea.


Saudi-US bilateral accords ‘not that connected’ to Israel normalization

Saudi-US bilateral accords ‘not that connected’ to Israel normalization
Updated 35 min 53 sec ago
Follow

Saudi-US bilateral accords ‘not that connected’ to Israel normalization

Saudi-US bilateral accords ‘not that connected’ to Israel normalization

RIYADH: Saudi Arabia’s foreign minister said on Thursday that some of the bilateral agreements the kingdom has been negotiating with Washington are “not that tied” to the normalization of Saudi relations with Israel and are “moving ahead.”

He noted that potential US-Saudi agreements on trade and artificial intelligence are “not tied to any third parties” and “can progress probably quite quickly.”

“Some of the more significant defense cooperation agreements are much more complicated. We would certainly welcome the opportunity to finalize them before the end of the Biden administration's term, but that’s reliant on factors outside of our control,” he said.

“The other work streams are not that connected, and some of them are progressing quite quickly, and we hope to see movement forward.”

Ruling out the possibility of Saudi Arabia recognizing Israel without the establishment of a Palestinian state, Prince Faisal stated that this remains the only viable solution, regardless of Israel’s acceptance.

Speaking at the Future Investment Initiative summit in Riyadh, he emphasized that the creation of a Palestinian state is rooted in international law and UN resolutions.

“In reality, the establishment of a Palestinian state is not tied to whether or not Israel accepts it; it’s tied to the principles of international law,” he said. “The UN resolutions that led to the establishment of the state of Israel clearly envisioned a Palestinian state as well, so we need to make that happen.”

Prince Faisal asserted that normalization of Saudi-Israeli ties is “off the table” until there is a resolution regarding Palestinian statehood. He further highlighted the broader implications, stating, “The security of the region as a whole is at risk if we do not address the rights of the Palestinians.”

Addressing the ongoing crisis in Gaza, he called for a cease-fire, emphasizing the dangers of an Israeli overreaction following the events of October 7th. “We have seen the reality that Israel’s reaction and its continuing military assault have led to a humanitarian catastrophe,” he remarked. He described the situation in northern Gaza as dire, with blockades and no safe zones for civilians, stating, “That can only be described as a form of genocide. It is certainly against humanitarian law, and that is feeding a continuing cycle of violence.”

On the prospects of an immediate cease-fire, Prince Faisal expressed caution, saying, “I hope it’s the case that we can see a cease-fire in the immediate hours, in the immediate short term. I’m not sure that that’s the case. I don’t have the details.”

He acknowledged US efforts to facilitate negotiations, adding, “We are not part of the direct negotiations, but we certainly support the efforts that the US has undertaken to find a pathway to a ceasefire. I hope it comes to fruition.”

He noted that previous attempts at cease-fire negotiations had failed due to new demands from Israel. “In most of those instances where the talks collapsed, it has been because new requirements or demands were added on the part of Israel,” he explained.

Prince Faisal also addressed Saudi Arabia’s position on Lebanon, emphasizing a hands-off approach. “We have never fully disengaged. But we believe it’s up to the Lebanese politicians to seek a direction that puts Lebanon on the right track,” he stated.

He added: “It’s not up to any outside influence, any outside countries, or any outside powers to tell the Lebanese what to do or to influence the political process in Lebanon. That is our opinion.”

Regarding relations with Iran, Prince Faisal indicated that recent discussions focused on regional de-escalation. “I hope that Iran, like us, is working toward regional de-escalation on all fronts, not just in Lebanon. That’s very much the focus of my conversations with my Iranian counterpart,” he said. While he could not be “confident of anything that is in the control of other parties,” he emphasized the importance of avoiding further escalation.

“I have made it clear to our Iranian counterparts that it is important to avoid any further escalation. My sense is that they realize the risks of escalation and would prefer to avoid it. But, of course, they have their own strategic calculations.”


NBK eyes partnerships in Saudi Arabia to tap Vision 2030 opportunities across diverse sectors

NBK eyes partnerships in Saudi Arabia to tap Vision 2030 opportunities across diverse sectors
Updated 21 min 27 sec ago
Follow

NBK eyes partnerships in Saudi Arabia to tap Vision 2030 opportunities across diverse sectors

NBK eyes partnerships in Saudi Arabia to tap Vision 2030 opportunities across diverse sectors

RIYADH: The National Bank of Kuwait is looking to partner with different companies in Saudi Arabia as the Kingdom’s Vision 2030 opens opportunities for financial partnerships, a senior executive said. 

Speaking to Arab News on the sidelines of the Future Investment Initiative in Riyadh, the General Manager of the National Bank of Kuwait in Saudi Arabia, Anas Al-Ubaid, highlighted that NBK has developed strong connections with key players, including other financial institutions.

“We have a good partnership with a lot of government bodies, corporates, and even private banking or high net worth individuals,” Al-Ubaid said.

He added: “We’re here on the market since 2006. We’re serving the market. We partnered up with the majority of the names in that market, even with banks. Once the opportunities arise, definitely we could partner up with them.”

Al-Ubaid also explained how the bank’s approach goes beyond traditional lending to provide customized financial solutions that meet specific client needs and support their business growth.

“The way we look at it here at NBK, it’s not just about lending. It’s about providing tailored financial solutions for our clients, serving their needs, and also helping them to grow their businesses,” he said.

Al-Ubaid continued: “There is no definite sector that we’re looking at. We’re looking at all areas that we could help with and help our partners in the markets.”

He added: “Our expertise is in tailoring solutions for clients, whether corporates or individuals,” highlighting NBK’s focus on customized financial services that support Vision 2030.

He further underlined that the Saudi market offers significant growth potential for banks, particularly as demand rises for customized financial solutions.

“I would say there’s a lot of opportunities in the markets for banks and financial institutions to grow in that area. Definitely. The market is eager to see more tailored solutions for clients, especially now the clients in Saudi,” Al-Ubaid said.

On the first day of the event, NBK signed four agreements worth $1.6 billion, underscoring the growing demand for sophisticated financial solutions within Saudi Arabia’s evolving market.

One agreement was inked with ACWA Power – worth SR2.6 billion ($690 million) – to support the company’s expansion in energy and water resource sectors across the Middle East and North Africa.

Additionally, NBK established an SR1.8 billion credit facility with Al Gihaz Contracting Co., helping fund the Kingdom’s largest energy storage project.

Agreements were also signed with Pan-Kingdom Holding Group and Alyusr Leasing to further their operational goals, with the deals valued at SR1 billion and SR750 million, respectively.


Riyadh Air secures $1.3bn credit facility ahead of 2025 launch

Riyadh Air secures $1.3bn credit facility ahead of 2025 launch
Updated 12 min 57 sec ago
Follow

Riyadh Air secures $1.3bn credit facility ahead of 2025 launch

Riyadh Air secures $1.3bn credit facility ahead of 2025 launch
  • Initiative aligns with Riyadh Air’s goal to serve over 100 destinations by the end of the decade

RIYADH: Saudi Arabia’s Riyadh Air has secured a $1.3 billion credit facility from a consortium of Gulf banks to fund its upcoming launch in 2025, according to the airline’s chief financial officer.

Speaking to Arab News at the Future Investment Initiative in Riyadh, taking place from Oct. 29 to 31, Adam Boukadida described this as the airline’s first corporate finance deal.

This initiative aligns with Riyadh Air’s goal, backed by the Kingdom’s Public Investment Fund, to serve over 100 destinations by the end of the decade through strategic partnerships.

“This is the first corporate finance deal for Riyadh Air. We’re very excited about that. It’s for up to SR5 billion. It’s what is called an accordion structure,” Boukadida said.

He noted that the transaction involves eight financial institutions, with six being Saudi banks, alongside Gulf International Bank and Emirates NBD from Dubai. “So, we’ve got a complement of local and regional powerhouses to support us in our first transaction,” he added.

The CFO explained that the transaction is for 12 months, with an option to roll over and extend, which the company anticipates will occur. The funds will serve as the backbone of the airline’s balance sheet and will be utilized for general corporate purposes as needed.

“It is in Saudi riyals and it’s very well priced. We have a great credit rating, of course. There’s a strong belief from our banking partners about the purpose of this and the importance of being part of the first syndicated revolving credit facility,” he said.

Since the company is currently non-operational, Boukadida mentioned that they may consider various financial instruments in the future, including debt, capital markets, and bonds. “It’s really good financial practice to start and support and build out your balance sheet with what would be called a club or syndicated loan there for working capital benefits and requirements,” he explained.

Boukadida also highlighted that the airline plans to have just 130 aircraft over the next five years. “In aviation, especially with the size and scale we’re looking to achieve at Riyadh Air, we explore many creative financial solutions in the future, whether that be leasing or mortgage-type aircraft financing transactions,” he said.

Regarding a recent agreement with Aramco, which was signed during the FII, Boukadida said, “It’s likely that Aramco will be our biggest fuel supply source.” He said the two companies want to jointly explore ways to make the aviation industry more sustainable.

On sustainable aviation fuel, he said affordability remains a significant challenge. “Generally speaking, sustainable aviation fuel, or SAF, is about three or four times more expensive than normal jet fuel. So that’s something that needs to be addressed for sure,” he remarked.

Shifting to digitization, Boukadida discussed the airline’s ambition to provide an Amazon-like experience. “We’re a digital company that enables travel rather than a traditional legacy airline,” he said. “We will offer, and we announced it yesterday, version 1.0 of what we call ‘offer and order.’ It’s very similar to an Amazon experience or, in the region, a noon.com experience where you do your basket online retail shopping,” he added.


Closing Bell: Saudi main index closes in green at 12,022

Closing Bell: Saudi main index closes in green at 12,022
Updated 31 October 2024
Follow

Closing Bell: Saudi main index closes in green at 12,022

Closing Bell: Saudi main index closes in green at 12,022

RIYADH: Saudi Arabia’s Tadawul All Share Index edged up on Thursday, gaining 3.3 points, or 0.03 percent, to close at 12,022.11.

The total trading value of the benchmark index was SR6.54 billion ($1.74 billion), with 103 listed stocks advancing, while 124 retreated.

The MSCI Tadawul Index decreased by 4.06 points, or 0.27 percent, closing at 1,507.31.

The Kingdom’s parallel market Nomu gained 356.19 points, or 1.33 percent, to close at 27,225.18, with 39 stocks advancing and 31 retreating.

The best-performing stock of the day was Astra Industrial Group, whose share price surged by 7.10 percent to SR178. 

Other top performers included Electricity and Water Utilities Co. in Jubail and Yanbu, which saw a rise of 5.95 percent to SR58.8. 

Electrical Industries Co. and Jadwa Saudi REIT Fund also recorded gains of 5.42 percent and 5.38 percent, closing at SR7.97 and SR11.36, respectively.

The worst performer was Arabian Pipes Co., with a share price decline of 5.75 percent to SR131.2. 

Americana and Arab Cooperative Insurance Co. also saw drops, with shares decreasing by 4.6 percent and 3.37 percent to SR2.28 and SR12.62, respectively. 

Methanol Chemicals Co. and Thimar Development Holding Co. also fell by 3.03 percent, closing at SR17.28 and SR41.65, respectively.

On the announcements front, Saudi National Shipping Co. reported preliminary financial results for the nine months ending Sept. 30, showing a net profit of SR1.69 billion, a 39.84 percent increase from the same period last year. 

This was attributed to improved operational performance and higher global shipping rates, especially in the chemicals and oil transportation sectors. 

The company’s stock closed at SR29, down by 1.02 percent.

Americana reported a net profit of SR440.18 million for the same period, marking a 48.22 percent annual decline. 

According to a Tadawul filing, the decline was impacted by lower earnings before interest, taxes, depreciation, and amortization, increased depreciation charges from new store openings, and the introduction of corporate tax in the UAE. 

The company’s stock ended the session at SR2.28, down 4.6 percent.

Modern Mills for Food Products Co. posted a net profit of SR157.89 million, a 4.8 percent increase from the same period last year, despite incurring a one-time finance cost of SR8.4 million due to debt restructuring. 

This growth was driven by top-line expansion, new product launches, and a favorable product mix. Its stock closed the session at SR43.9, unchanged.

Saudi Reinsurance Co. reported a net profit after zakat of SR474.95 million, reflecting a 351.33 percent increase from the same period last year. 

According to a Tadawul filing, this increase was due to several factors, including a 39 percent rise in net profit from insurance results, a 67 percent increase in insurance revenues, and a 947 percent surge in net investment profit, largely from capital gains on its Probitas Holding stake sale. 

The firm’s stock closed at SR37.15, down by 0.67 percent.