OPPORTUNITIES IN THE CONSTRUCTION INDUSTRY KINGDOM OF SAUDI ARABIA & THE UNITED ARAB EMIRATES Export Development C

1. OPPORTUNITIES IN THE CONSTRUCTION INDUSTRYKINGDOM OF SAUDI ARABIA & THE UNITED ARAB EMIRATES Export Development Canada Webinar August 21st 2008 1:30 – 2:30 pm

2. Interlocutors • EDC - Infrastructure & Environment • Marie-Claude Erian, Sector Advisor, Ottawa • Canadian Construction Association • Dee Miller,Vice-President, Administration & Finance, JJM Group, Vancouver • EDC – Saudi Arabia & United Arab Emirates • Klaus Büttner, Regional Vice-President, Africa, Europe, and Middle East, Ottawa • Jean-François Croft, Chief Representative, GCC and Yemen, Abu Dhabi • Canadian Trade Commissioner Service • Louis-Pierre Emond, Deputy Director, Middle East and North Africa, Ottawa

3. Agenda • Introduction • Overview of the Gulf Cooperation Council (GCC) market • Construction Opportunities • Kingdom of Saudi Arabia (KSA) • United Arab Emirates (UAE) • Conclusion • Question & Answer Period

4. Enhancing Global Trade for Companies Supporting the Canadian Construction Industry • In today's world, we compete with Canadian and foreign companies in winning new business • We are part of a global supply chain even in pursuing Canadian opportunities • In the long run, successful companies will be those who can compete on the Canadian and international scene • CCA collaboration with EDC is to provide you with information on construction opportunities in growing markets where Canadians have had successes

5. Business Environment - GCC • The GCC, a trade bloc involving the six Arab states of the Arabic Gulf, has some of the fastest growing economies in the world, mostly due to a boom in oil and natural gas revenues coupled with a building and investment boom backed by decades of saved petroleum revenues • The GCC has a desire to establish the region as a financial and tourism centre and to provide job opportunities to the growing young population by establishing new industries • If a Canadian company is established in Saudi Arabia, they will benefit from the government’s membership with the Gulf Co-operation Council (GCC); which will allow them to take advantage of the duty-free arrangements in Bahrain, Oman, Kuwait, Qatar and the UAE • GCC corporate and financial champions are becoming international players as they have an objective to drive expansion beyond the GCC region

6. Business Environment - GCC • For 2008-2010, construction projects announced or underway for the GCC totals $942 billion, the majority of which is: UAE: $441 billion & KSA: $214 billion. • Growth exceeds capacity such that pronounced bottlenecks are already apparent in many areas of the economy. Power, water, real estate, logistics are under immense pressure across the region. • Growth could be constrained by limited labour force and short supply of key inputs such as steel, glass, and cement. • Given demand, there is a strong presence of foreign contractors, EPCers, architects and suppliers. This sometimes results in low bids in order to acquire market share. Thus, Canadian companies have to target where they have a competitive advantage. • More than 130 Canadian companies are established in the region of which approximately 30% or more are related to construction activities.

7. Business Environment - GCC Inflation is escalating: • Real wage gains are being eroded • Non-oil goods and services exports may lose market share • Ability to attract labour will be undermined, slowing domestic demand • A real estate asset price bubble may be emerging … but keep in mind: • Pace of price growth is not that high • Living standards are still rising • Competitiveness not yet compromised • Balance are still very strong

8. Investment Grades Ease of Doing BusinessWorld Bank Rankings1 ** S&P rates borrowers on a scale from AAA to D. Intermediate ratings are offered at each level between AA and CCC (i.e., BBB+, BBB and BBB-). *** Aa1, Aa2, Aa3 : According to Moody’s rating, Aa are judged to be of high quality and are subject to very low credit risk. *KSA’s 10 X 10 Program: goal is to place Saudi Arabia among the top ten competitive investment destinations by the year 2010 1. www.doingbusiness.org/economyrankings/?direction=Asc&sort=1

9. Announced Projects 2008-2010 GCC Projects all Sectors ($ Millions) GCC Projects by Country ($ Millions) Industry Power MEED Projects August 1/08

10. Announced Projects 2008-2010 in the UAE and the KSA UAE Projects all Sectors ($ Millions) KSA Projects all Sectors ($ Millions) MEED Project August 6/2007

11. GDP: 564 billion (2007) Annual growth rate: 4.1% (2007) Population: 28.1 millionPer capita GDP: $ 37,300 (2007) Inflation: 4.1% (2007) CANADA – SAUDI ARABIA TRADE (2007) Canadian Exports to Saudi Arabia $ 648 million Canadian Imports from Saudi Arabia $ 1.8 billion As a part of the GCC, KSA has approved duty exemptions covering the import of more than 400 items. The Council has also implemented a customs union which has harmonized customs tariff at 5% of an items value. Why Saudi Arabia? Other important information: • KSA plans to spend a trillion dollars on infrastructure and other project investment over the next 15 years. • The industry growth forecast over 2007-2011 averages 5.46%, with government-led activity in infrastructure driving demand. Business Environment • Largest economy in the Middle East and North Africa (MENA) region holding 25% of the total Arab GDP. • Construction industry is the largest in the MENA region and the largest non-oil economic industry in KSA, both in residential and industrial building. • Government is attempting to promote growth in the private sector by privatizing industries such as power and telecom. • The Saudi Arabian General Investment Authority (SAGIA) is undertaking a multi-billion (US) dollar development strategy centred around the building of greenfield economic cities around the country. • The economic cities are designed to attract foreign and domestic investment into the downstream energy, transport, industry and knowledge-based sectors. • Objective is to create jobs to retain Saudi youth; expected population growth from 28 to 36 M by 2025.

12. The Economic Cities – Saudi Arabia

13. King Abdullah Economic City Project comprises: • Sea Port • Capacity of 10 million twenty-foot equivalent Unit (TEU) of containers per year. • Industrial district • Will cover 63 million m². Will consist of industrial and light industries, research and development, business office, services, hospitality, education and community services. • Waterside resort • The number of hotel rooms and suites are proposed to be 25,000 hotel rooms in more than 120 hotels. • Financial island • The Central Business District will offer 3.8 million m² of office space, hotels and mixed-use commercial space. • Residential district • Will include 260,000 apartments and 56,000 villas. This area include residential, commercial and recreational areas. • Education and health zone • Location: 100km north of Jeddah • Size: 168 km² • Cost: 100 billion SAR (US$ 26.6 Billion) • Sponsor: EMAAR • Jobs: 500,000 • Status: Phase 1 completed – Industrial Zone • Phase 2 is next • Completion: estimated between 2025-2030

14. King Abdullah Economic City List of Companies Awarded Contracts in Phase 1 • Aseer – Trading, Tourism and Manufacturing and Contracting Sectors • Al-Fozan Co. – Manufacturing of construction material • Al-Muhaidib – Wholesaling of Building Material • Dallah Al-Baraka – Cleaning and Maintenance – Construction • Khayyat Group – Construction of a cement project • Bin Laden Group – Construction conglomerate awarded the construction of the residential towers • Orascom – Construction, cement plant • AlBabtain – Power and Telecommunications • Saudi Oger – Construction, Printing, Telecommunication, Real Estate Development, Utilities, IT Services

15. EDC Business in KSA • In 2007, EDC’s business volume in Saudi Arabia equated to $ 192 million in support of 94 Canadian companies

16. Why United Arab Emirates? Other important information: • The construction industry is forecast to grow by 7.1% in 2008 • Announced construction projects in UAE amount to US$ 300 billion in 2007-2012, concentrated mainly in Dubai and Abu Dhabi • Abu Dhabi is the centre of the construction boom, with huge potential for growth in the coming five years as the nation’s capital is severely underdeveloped and the government has clear intentions to maximise investment in construction as a part of the Abu Dhabi 20-30 Plan Business Environment • Spectacular growth in 2007 • Oil windfalls are financing mega infrastructure and development projects; UAE government pushing economic diversification such that non-oil revenues represent 35% of total GDP in 2007. • The construction industry, which as full UAE government backing, has contributed strongly to the UAE’s economic boom, accounting for roughly 7.5% of total GDP in 2007. • Political will to turn Dubai into the region’s main trade centre, including establishment of commercial ‘free zones’ such as Dubai International Financial Centre, Dubai Internet City, and Dubai Media City. • Logically, should see slowdown in growth of residential construction projects (likely by 2010). However, infrastructure, hospitality and commercial projects should grow. • In an effort to build a tax base and economic foundation before the reserves run out, the UAE's investment arms, including Abu Dhabi Investment Authority, retain over $900 billion in assets. GDP: 167 billion (2007) growth rate: 7.3% (2007) Population: 4.4 millionPer capita GDP: $ 23,200 (2007) Inflation: 11% (2007) CANADA – UAE TRADE (2007) Canadian Exports to UAE $ 995 million Canadian Imports from UAE $ 30.4 million As a part of the GCC, UAE has approved duty exemptions covering the import of more than 400 items. The Council has also implemented a customs union which has harmonized customs tariff at 5% of an items value.

17. Key Developers Source: MEED Magazine, MEED Projetcs – July 28/08

18. EDC Business in UAE • In 2007, EDC’s business volume in the UAE equated to $ 582 millionsupporting 185 Canadian companies.

19. Three Tips for Trading with KSA and UAE While complex markets with a different culture from Canada, entrepreneurs can be prepared to do business there. Experts in the region boil their advice down to three “Cs”: Commitment, Capacity and Contacts. • Commitment: The first step to success is a triple dose of relationship building by investing a long term market development. Arab hospitality is legendary; they place a high value on loyalty and respect. • Capacity: The scale of everything in the region is large. Canadian companies need to rethink their strategy in the context as purchase orders are large compared to what Canadians are generally exposed to in North America • Contacts: You must have a partner or agent to navigate this country. Many people in KSA and UAE want to be an agent and many want to sign a long-term contract. The challenge is to find someone who really understands your business and your expectations.

20. EDC: A Focus on Infrastructure • Canadian Clients • In 2007, we served over 1,100 clients for $9.3 billion of business in Engineering & Construction, Environment, Power and Tourism industries. • Key Strategy for GCC: Matchmaking • Goal to match Canadian companies with needs of top developers in the KSA and UAE – developing relationships with key decision makers and influencers. • EDC local representative, based in Abu Dhabi, to manage and grow relationships in the region. • Leverage on EDC financial services to facilitate trade.

21. Infrastructure Trade Mission UAE (Dubai and Abu Dhabi) & KSA (Riyadh and Jeddah) November 13 to 25, 2008 • Presentations on business climate, opportunities, construction norms, and legal framework • Meetings with key developers, local contractors and engineers • In each cities, opportunities of café style one-on-one meetings with various buyers • Canadian panel in each countries addressing their experience and opportunities • Site visits on projects underway • Networking receptions • Optional participation at the Big 5 Exhibition, Dubai, November 23-27 • Draft Program available for those interested To get more information please contact marketing@edc.ca

22. Construction shows • Cityscape, Dubai, 6-9 October 2008 • Attracts regional and international investors, property developers, governmental and development authorities, leading architects, designers, consultants and all senior professionals involved in the property industry. It provides an annual forum that celebrates the very best in real estate, architecture, urban planning and design from around the world. • http://www.cityscape.ae/index.html/ • The Big 5 exhibition, Dubai, 23- 27 November 2008 • The largest trade show for the Construction industry in the Arabian Gulf. A unique event, combining five major exhibitions under one roof (Building & Construction; Water technologies; Air conditioning; Cleaning & Maintenance; Glass & Metal). Featuring more than 2,000 companies from 67 countries. 50,420 key buyers and decision-makers from the public and private sector attended the 2007 event, as well as architects, engineers and contractors. • http://www.thebig5exhibition.com/

23. Useful Links and Contacts • Saudi Arabia • Riyadh Chamber of Commerce and Industry • www.riyadhchamber.com • Jeddah Chamber of Commerce and Industry • www.jcci.org.sa/JCCI/EN • United Arab Emirates • Abu Dhabi Chamber of Commerce and Industry • www.abudhabichamber.ae • services@adcci.gov.ae • Canadian Business Council – Dubai • www.cbc-dubai.com • Developers • Emmar Propertieswww.emaar.com • Nakheel www.nakheel.com • Dubai Propertieswww.dubai-properties.ae • Aldar Propertieswww.aldar.com

24. TCS Services • The Canadian Trade Commissioner Service (TCS) helps Canadian companies and organizations do business abroad by increasing revenues and lowering the costs of global business through four key services: • 1. Prepare for International Markets • Determine if you are internationally competitive; Decide on a target market; Collect market and industry information; Improve your international business strategy • Find Qualified Contacts • Potential buyers and partners, Professionals in financial and legal institutions, Technology sources, Agents, Manufacturers' representatives, Foreign regulatory authorities, Foreign investment promotion agencies • 3. Assess Market Potential • Market intelligence; Advice on improving your market strategy • 4. Resolve Problems • Customs clearance and shipping, unfair business treatment, contract bidding, storage and warehousing, insurance coverage and claims, overdue accounts receivable, and more

25. TCS At Home and Abroad 13 regional offices across Canada Vancouver, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, Montreal, Quebec City, Halifax, Moncton, Charlottetown, St John’s Canadian Consulate in Dubai, United Arab Emirates • John Burbridge, Head of Consulate and Senior Trade Commissioner, dubai-td@international.gc.ca Canadian Embassy in Abu Dhabi, United Arab Emirates: • Michael Lazaruk, Senior Trade Commissioner • Imad Arafat, Locally-engaged Trade Commissioner • Abdbi-td@international.gc.ca Canadian Embassy in Riyadh, Saudi Arabia • Jeff Blackstock, Senior Trade Commissioner • Joe Fakhri, Locally-engaged Trade Commissioner • Ryadh-td@international.gc.ca

26. Thank You / Merci Klaus Büttner, Regional Vice-President International Business Development Group – Africa, Europe & Middle East Tel:(613) 598-2760/ Fax:(613) 598-2503 Email:middleeast@edc.ca Marie-Claude Erian, Sector Advisor Infrastructure & Environment Tel:(613) 598-2969/ Fax:(613) 597-8667 Email: inf-env@edc.ca Jean-Francois Croft, Chief Representative – GCC & Yemen based in Abu Dhabi, UAE Tel:(613) 597-7882 Fax:(613) 598-2503 Email: gcc@edc.ca Visit our website at www.edc.ca

27. Appendix 1 Trade Regime in UAE • Imports into UAE can only be undertaken by importers who have appropriate trade license issued by the respective Department of Economics/ Municipality of each Emirate. • The UAE practices a liberal trade policy with no protective tariff or non-tariff barriers on imports. All goods imported into the UAE are subjected to 5% import duty (only tobacco attracts 100% import duty) on c.i.f. value at any point in the UAE. C.i.f. value is normally calculated with reference to commercial invoices covering the relative shipment of the goods. However, the Customs Department of the UAE is not bound to accept the value as in the invoices. In such cases, an estimation of value by the customs will be used for calculation of import duty. At present the Federal government is discussing the possibility to drop the custom tax of 5% and to replace it by a VAT (3 to 5%). • Trade practices in Dubai are in line with normal international standards. All correspondence should be in English or Arabic. As a sophisticated market, full technical specifications should be provided with CIF Local prices with Middle East references. • Payments are normally effected by letter of credit. • There is no corporate tax in the UAE. The only exceptions are oil producing companies and branches of foreign banks. There is also no sales tax or personal tax.