Hear from Proven’s CEO on the Saudi Arabia Business Trends for 2017
The Vision 2030 announcement in April 2016 brought many changes across Saudi Arabia as the Kingdom took moves to diversify the economy away from oil. The changes and updates saw focus on building the private sector and emerging industries. There were updates in licensing to appeal to foreign investment and moves to increase the Saudi workforce. As we enter 2017, we look at the most noticeable updates and hear from our CEO, Zaid Al Mashari, with his comments.
As part of Vision 2030, growth in the mining industry is a key aspect in the plans. Saudi Arabia has considerable mineral and metals resources and has invested heavily into the natural resources industry with Ras Al-Khair Industrial City. The city has been quietly growing for the last 8 years until its inauguration in November 2016. More can be read about the city in this post.
Unlike other countries in the Gulf Region, where much of the mining infrastructure remains underdeveloped, Ras Al-Khair City produces significant commercial scale. So much so that the Saudi government sees mining becoming the third pillar of the economy after petroleum and petrochemicals. By 2020, Ras Al-Khair City is expected to double its current output and contribute $26 billion (SR97 billion) to the GDP.
CEO comment – “Whilst Ras Al-Khair Industrial City has seen rapid growth over the last 8 years, the building work has not stopped, there are still multiple tenders out for the construction of Phase B of the city. There are many opportunities here for foreign investment.”
There were a number of government initiatives announced last year to improve the current housing availability. In March, the Saudi government signed agreements with South Korea and a Saudi-South Korean consortium to develop 100,000 housing units in northern Riyadh over a 10 year period. Foreign companies were invited to tender for the affordable housing project with companies from the UK, France and China among those.
Riyadh, as the capital and largest city of Saudi Arabia, is a key area point for both travel and trade. King Fahad Road and King Abdullah Street are popular areas for business with a number of key commercial properties based in these two locations. Large shopping malls have a strong presence in Riyadh and comprise the majority of consumer interest, offering extensive retail opportunities for foreign investment.
To the west, Jeddah maintains an extensive port, which has contributed to the city being a commercial hub. Prime corporate office space and retail space are in demand. Chanel, Louis Vuitton and Gucci all have retail units in the city. Retail sales largely contribute to the economic revenues here. Reduced restrictions on wholesale and retail ownership will assist with attracting foreign investment.
CEO comment – “In addition to housing, there is a strong demand for office and retail space. In efforts to reform the economy, the Government is looking particularly towards manufacturing and services as key areas. There are numerous opportunities for foreign investment in real estate, construction, service providers, retailers, community centres.”
Saudi Arabia will lead IT spending in the Middle East in 2017, investing an annual budget of $7.5bn in technologies such as cloud, big data and social. Deputy Crown Prince Mohammed bin Salman held key meetings in Silicon Valley last year and signed deals with the likes of Microsoft and Cisco to transform Saudi Arabia’s digital infrastructure.
The Saudi government wants to accelerate e-commerce with the recent establishment of Noon, aimed at being the Middle East version of Amazon.
The government is expected to encourage e-payment through banks and telcos, as well as e-government payments. There is predicted growth in smart city initiatives in 2017. Government departments and their partners are expected to look at enabling innovative transportation, public engagement and emergency response services.
CEO comment – “the current economic climate sees companies looking at cost cutting initiatives but forward thinking companies investing for the future will look at their IT spending as an investment. Digital initiatives will increase in 2017 as technologies are leveraged in an effort to achieve desired business outcomes.”
Saudi Arabia has the potential to become the logistics hub of the Gulf region. It is already heavily reliant on imports and will need to increase imports to meet its National Transformation Plan.
Research consultancy Solidiance has recently published a white paper stating that the logistics market within the six GCC countries was worth US$47 billion in 2016. Saudi Arabia, with a market size of $19bn, made up 43 per cent of that.
“With soaring trade volumes and a number of projects in the pipeline to improve freight infrastructure, Saudi Arabia is capable of outshining the United Arab Emirates’ focus as the GCC’s main trading hub,” the report stated.
CEO comment – “There have been several new free zones created in the Kingdom. Most notably the 63 sq km industrial area that makes up about one-third of the new King Abdullah Industrial City. Of which is served by the Kingdom’s first privately run port, King Abdullah Port. Opportunities in logistics are growing due to the increase in consumption and the National Transformation Plan.”