With the recent announcements relating to Vision 2030, and the uncertainties of Brexit and global oil prices, more companies are looking to Saudi Arabia as a location for export.
It’s political stability, huge investment in infrastructure and access to the largest economy in the Middle East make it an attractive opportunity for international companies looking to expand. Combined with the changes in laws making it easier for international investment and low corporate taxes and set up costs mean that Saudi Arabia is seeing a rapid increase in foreign business being established.
Vision 2030 has had a huge impact on the number of investments to the Kingdom. Some of the announced goals of the program were to increase foreign direct investment to 5.7% from 3.8% of GDP, to increase private sector’s contribution from 40% to 65% of GDP and to increase small and medium enterprise (SME) contribution to GDP from 20% to 35%. Here we take a look at how international investment could affect these industries.
There have been a number of construction announcements since Vision 2030 was unveiled in April this year. International investment has already been sought for the affordable housing projects. Ambitious tourism goals will require a large infrastructure development across sectors such as healthcare, transport, and utilities. A fast growing population will push for additional development in the housing and education sectors. The proposed Saudi Green Card is designed to attract expatriate investment, giving more rights to live and work in the Kingdom long term. Although this will be on an individual level rather than large investors, it is expected to increase requirement for development.
It was announced last month that 100% foreign ownership for the trade sector had been introduced with the new licence having been already granted to Dow Chemical Co. Since then, many more international companies have expressed interest in expanding into the Kingdom.
As far back as January this year, Saudi Arabia was welcoming new business into the Kingdom. Saudi Arabian General Investment Authority governor Abdullatif Al-Othman told Bloomberg “SAGIA welcomes feedback from any investor on any regulation that will enable them to expand and grow their investment in Saudi Arabia. We would love anyone to say look, if you change this law or regulation, I am coming here with these investments. Any regulation.”
A report from Mckinsey in December 2015 commented on the opportunities arising in the Kingdom “After a surge in prosperity over the past decade fueled by rising oil prices, Saudi Arabia’s economy is at an inflection point. We see a real opportunity for the country to inject new dynamism into its economy through a productivity- and investment-led transformation.”
Saudi Arabia’s Deputy Crown Prince, Prince Mohammed bin Salman signed a number of deals in June this year to implement some of the ambitious goals set by Vision 2030. He met with a number of the technology leaders based out of Silicon Valley, signing deals with both Cisco and Microsoft. The deals will ensure the rapid development of the digital infrastructure and US investment into the country.
It will also ensure that the specific Vision 2030 goals of improving high speed broadband access in the Kingdom and to exceed housing coverage by 90 percent in densely populated cities and 66 percent in other urban zones will be met.
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