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)
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Updated 12 May 2024
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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.


Oil Updates – prices ease but remain near 2-week highs on Russia, Iran tensions

Oil Updates – prices ease but remain near 2-week highs on Russia, Iran tensions
Updated 25 November 2024
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Oil Updates – prices ease but remain near 2-week highs on Russia, Iran tensions

Oil Updates – prices ease but remain near 2-week highs on Russia, Iran tensions

SINGAPORE: Oil prices retreated on Monday following 6 percent gains last week, but remained near two-week highs as geopolitical tensions grew between Western powers and major oil producers Russia and Iran, raising risks of supply disruption.

Brent crude futures slipped 26 cents, or 0.35 percent, to $74.91 a barrel by 7:40 a.m. Saudi time, while US West Texas Intermediate crude futures were at $70.97 a barrel, down 27 cents, or 0.38 percent.

Both contracts last week notched their biggest weekly gains since late September to reach their highest settlement levels since Nov. 7 after Russia fired a hypersonic missile at Ukraine in a warning to the US and UK following strikes by Kyiv on Russia using US and British weapons.

“Oil prices are starting the new week with some slight cool-off as market participants await more cues from geopolitical developments and the Fed’s policy outlook to set the tone,” said Yeap Jun Rong, market strategist at IG.

“Tensions between Ukraine and Russia have edged up a notch lately, leading to some pricing for the risks of a wider escalation potentially impacting oil supplies.”

As both Ukraine and Russia vie to gain some leverage ahead of any upcoming negotiations under a Trump administration, the tensions may likely persist into the year-end, keeping Brent prices supported around $70-$80, Yeap added.

In addition, Iran reacted to a resolution passed by the UN nuclear watchdog on Thursday by ordering measures such as activating various new and advanced centrifuges used in enriching uranium.

“The IAEA censure and Iran’s response heightens the likelihood that Trump will look to enforce sanctions against Iran’s oil exports when he comes into power,” Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia said in a note.

Enforced sanctions could sideline about 1 million barrels per day of Iran’s oil exports, about 1 percent of global oil supply, he said.

The Iranian foreign ministry said on Sunday that it will hold talks about its disputed nuclear program with three European powers on Nov. 29.

“Markets are concerned not only about damage to oil ports and infrastructure, but also the possibility of war contagion and involvement of more countries,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors were also focused on rising crude oil demand at China and India, the world’s top and third-largest importers, respectively.

China’s crude imports rebounded in November as lower prices drew stockpiling demand while Indian refiners increased crude throughput by 3 percent on year to 5.04 million bpd in October, buoyed by fuel exports.

For the week, traders will be eyeing US personal consumption expenditures data, due on Wednesday, as that will likely inform the Federal Reserve’s policy meeting scheduled for Dec. 17-18, Sachdeva said.
 


Saudi Arabia’s private debt market targets over $1.77bn by Q3 2024: report

Saudi Arabia’s private debt market targets over $1.77bn by Q3 2024: report
Updated 24 November 2024
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Saudi Arabia’s private debt market targets over $1.77bn by Q3 2024: report

Saudi Arabia’s private debt market targets over $1.77bn by Q3 2024: report

RIYADH: Saudi Arabia’s private debt market is experiencing significant growth, with eight active funds targeting to raise over $1.77 billion in capital by the third quarter of 2024, according to a new report.

This growth is driven by a sharp rise in investor confidence, with 97 percent of Middle East-based institutional investors now viewing the Kingdom as the most promising market for private debt in the coming year, up from 82 percent in 2023, based on Preqin survey data.

The report, titled “Territory Guide: The Rise of Private Debt Funds in Saudi Arabia 2024,” was published in collaboration with Saudi Venture Capital Co. It highlights the increasing interest from both regional and global investors, fueled by the positive outcomes of the Kingdom's Vision 2030 reforms.

The findings align with the fact that Saudi Arabia accounts for up to 27.5 percent of private debt fund transactions in the Middle East and North Africa region between 2016 and the third quarter of 2024.

In 2022, private debt funds focused on Saudi Arabia raised a record $335 million in total capital, a sharp rise from the $32 million raised by a single fund in 2003.

“This first-of-its-kind report highlights the emergence of private debt funds as a key asset class in Saudi Arabia, driven by the Kingdom’s Vision 2030 and its ambition to diversify the economy,” said Nabeel Koshak, CEO and board member at SVC.

“At SVC, we continue our commitment to support the development of such reports that provide policymakers, investors, and founders with insights and data to inform strategic decisions and policies to nurture the private capital ecosystem further,” Koshak added.

David Dawkins, lead author of the report at Preqin, commented: “Global investment firms are not alone in closely watching the growth and evolution of Saudi Arabia’s nascent private debt industry.”

Dawkins also noted: “For other developing economies in the Middle East and beyond, Saudi Arabia’s success in this area will strengthen the impetus for improving transparency to secure the capital needed for sustainable growth in a net-zero world.”

The study further revealed that among all private debt funds with investments tied to Saudi Arabia that concluded between 2016 and the third quarter of 2024, mezzanine funds accounted for 50 percent of total exposure, with direct lending and venture debt funds closely following at 30 percent and 20 percent, respectively.

Support for startups and small to medium-sized enterprises in the Kingdom is also reflected in the high proportion of venture debt, which represents 75 percent of all funds in the market with Saudi Arabia exposure.

The report also highlighted that private debt marked its second consecutive year as the asset class with the highest proportion of Middle Eastern investors intending to increase their investments in the coming year. Nearly 58 percent of investors expressed this sentiment, up from 50 percent in 2023.

The percentage of investors considering private debt the most promising asset class in the region rose by 12 percentage points, from 31 percent in 2023.

Private debt is expected to further bolster Saudi Arabia’s growing entrepreneurial community as the nation advances toward its Vision 2030 goals. Since 2018, new regulatory frameworks have been implemented, ushering in an era of increased transparency and equity within the private debt sector, closely aligned with the Kingdom’s broader investment vision.


Closing Bell: Saudi main index rises to close at 11,864 

Closing Bell: Saudi main index rises to close at 11,864 
Updated 24 November 2024
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Closing Bell: Saudi main index rises to close at 11,864 

Closing Bell: Saudi main index rises to close at 11,864 

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Sunday, gaining 24.38 points, or 0.21 percent, to close at 11,864.90. 

The benchmark index recorded a trading turnover of SR4.22 billion ($1.12 billion), with 124 stocks advancing and 99 declining. 

The Kingdom’s parallel market Nomu also posted gains, climbing 345.06 points, or 1.13 percent, to close at 30,885.34, as 49 stocks advanced and 32 declined. 

The MSCI Tadawul Index increased by 4.74 points, or 0.32 percent, to close at 1,491.56. 

The best-performing stock of the day was Arabian Contracting Services Co., whose share price surged 9.97 percent to SR167.60. 

Other notable gainers included Saudi Reinsurance Co., rising 4.97 percent to SR45.45, and Saudi Public Transport Co., which climbed 3.98 percent to SR23.00.     

Al-Baha Investment and Development Co. led the decliners, falling 6.06 percent to SR0.31. Aldrees Petroleum and Transport Services Co. dropped 4.33 percent to SR123.60, and Batic Investments and Logistics Co. declined 3.23 percent to SR3.59. 

Leejam Sports Co. announced the opening of four new fitness centers. These include a men’s center and the first ladies’ center in Al-Rass city, Qassim Province, as well as the first men’s and ladies’ centers in Al-Qunfidah city, Makkah Province.  

Branded under “Fitness Time” and “Fitness Time - Ladies,” the centers will feature state-of-the-art facilities, high-spec sports equipment, and modern designs. 

The financial impact of these openings is expected to reflect in the fourth quarter of 2024. Despite the announcement, Leejam Sports Co. closed the session at SR180, down 0.34 percent. 

Obeikan Glass Co. reported a net profit of SR29.89 million for the nine months ending Sept. 30, a 58.3 percent drop from the same period in 2023. The decline was attributed to lower average selling prices due to global market conditions and increased administrative expenses related to a new investment in a subsidiary, Saudi Aluminum Casting Foundry.  

The stock ended at SR49.60, down 1.59 percent. 

United Mining Industries Co. announced the issuance of two exploration licenses for gypsum and anhydrite ore from the Ministry of Industry and Mineral Resources. The company plans to conduct studies to determine the availability of raw materials, with financial impacts to be announced upon completion.  

Its stock closed at SR39.60, up 0.26 percent.


Morgan Stanley receives approval to establish regional HQ in Saudi Arabia

Morgan Stanley receives approval to establish regional HQ in Saudi Arabia
Updated 24 November 2024
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Morgan Stanley receives approval to establish regional HQ in Saudi Arabia

Morgan Stanley receives approval to establish regional HQ in Saudi Arabia

RIYADH: US-based investment bank Morgan Stanley has been granted approval to establish its regional headquarters in Saudi Arabia, as the Kingdom continues to attract international investment.

This move aligns with Saudi Arabia’s regional headquarters program, which offers businesses various incentives, including a 30-year exemption from corporate income tax and withholding tax on headquarters activities, as well as access to discounts and support services.

Saudi Investment Minister Khalid Al-Falih confirmed the progress of this initiative in October, stating that the Kingdom has successfully attracted 540 international companies to set up regional headquarters in Riyadh—exceeding its 2030 target of 500.

“Establishing a regional HQ in Riyadh reflects the growth and development of Saudi Arabia and is a natural progression of our long history in the region,” said Abdulaziz Alajaji, Morgan Stanley’s CEO for Saudi Arabia and co-head of the bank’s Middle East and North Africa operations, according to Bloomberg.

Morgan Stanley first entered the Saudi market in 2007, launching an equity trading business in Riyadh, followed by the establishment of a Saudi equity fund in 2009.

This approval follows a similar move by Citigroup earlier this month, with the bank also receiving approval to establish its regional headquarters in Saudi Arabia.

Fahad Aldeweesh, CEO of Citi Saudi Arabia, emphasized that this development would support the firm’s future growth in the Kingdom.

Goldman Sachs, another major Wall Street bank, also received approval in May to set up its regional headquarters in Saudi Arabia.

Prominent international firms that have already established regional headquarters in Saudi Arabia include BlackRock, Northern Trust, Bechtel, PepsiCo, IHG Hotels and Resorts, PwC, and Deloitte.

In addition, a recent report from Knight Frank noted that Saudi Arabia's regional headquarters program has led to increased demand for office space in Riyadh, with the city’s office stock expected to grow by 1 million sq. meters by 2026.

In August, Kuwait’s Markaz Financial Center echoed this sentiment, predicting a significant uptick in the Kingdom’s real estate market during the second half of the year, driven by the regional headquarters program.


QatarEnergy strengthens global footprint with offshore expansion in Namibia 

QatarEnergy strengthens global footprint with offshore expansion in Namibia 
Updated 24 November 2024
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QatarEnergy strengthens global footprint with offshore expansion in Namibia 

QatarEnergy strengthens global footprint with offshore expansion in Namibia 

RIYADH: QatarEnergy has expanded its portfolio through a new agreement with TotalEnergies to increase its ownership stakes in two offshore blocks in Namibia’s Orange Basin. 

According to a press release, the state-owned energy firm will acquire an additional 5.25 percent interest in block 2913B and an additional 4.7 percent interest in block 2912 under the new deal, subject to customary approvals.  

Once finalized, QatarEnergy’s share in these licenses will rise to 35.25 percent in block 2913B and 33.025 percent in block 2912.  

Saad Sherida Al-Kaabi, Qatar’s minister of state for energy affairs and CEO of QatarEnergy, said: “We are pleased to expand QatarEnergy’s footprint in Namibia’s upstream sector. This agreement marks another important step in working collaboratively with our partners toward the development of the Venus discovery located on block 2913B.” 

TotalEnergies, the operator of both blocks, will retain 45.25 percent in block 2913B and 42.475 percent in block 2912. Other partners include Impact Oil & Gas, which holds 9.5 percent in both blocks and the National Petroleum Corp. of Namibia, which owns 10 percent in block 2913B and 15 percent in block 2912.   

Located about 300 km off the coast of the African country, in water depths ranging from 2,600 to 3,800 meters, these blocks host the promising Venus discovery. The Venus field has attracted considerable attention as a significant find that could impact Namibia’s energy future.  

This offshore acquisition complements QatarEnergy’s recent ventures into renewable energy. In October, the company announced a 50 percent stake in TotalEnergies’ 1.25-gigawatt solar project in Iraq.  

The initiative, part of Iraq’s $27 billion Gas Growth Integrated Project, aims to enhance Iraq’s energy self-sufficiency by addressing its reliance on electricity imports and reducing environmental impacts.   

The solar project, set to deploy 2 million bifacial solar panels, will generate up to 1.25 GW of renewable energy at peak capacity, supplying electricity to approximately 350,000 homes in Iraq’s Basra region.  

QatarEnergy will share equal ownership of the project with TotalEnergies, which retains the remaining 50 percent. 

The firm’s dual focus on traditional and renewable energy highlights its strategic approach to meeting global demands while addressing sustainability concerns.  

Its involvement in Namibia’s offshore blocks and Iraq’s shift toward renewable energy highlights a well-rounded portfolio that includes fossil fuels and clean energy investments.