“Doing Business in Saudi Arabia”

1. “Doing Business in Saudi Arabia” EMITA seminar: UAE & Saudi Arabia – a wealth of opportunities David Lloyd OBE Consultant The Middle East Association 6 March 2007

2. Saudi Arabia has the largest economy in the Middle East. The manpower requirement to meet the Kingdom’s current level of project development across the board is for 1.2 m engineers, skilled and unskilled workers. Introduction • Safety and Security: Saudi Arabia does a have a problem, but it must be seen in context. Security is good and the country is no less safe than the UK. Some would say safer. • Ease of Access: Poor • Availability of Market/Country Information: FCO & UKTI websites are always a good starting point for travel, business and other advice and may allay some misconceptions.

3. General • King Abdullah is and has been the driving force behind economical and social reform in the Kingdom. He has also assumed international stature. Women more in evidence. Media less constrained. • WTO accession in November 2005– very important to the Saudis. It is the gateway to encouraging FDI and is expected to encourage non-oil export growth.

4. Economy: • Nominal GDP growth for 2006: 12.4%. Total revenue: $174.7bn. Government expenditure: $104bn. Fiscal surplus: $70.7 bn. Oil export revenues 18% above 2005: $191bn. Non-oil exports: $12bn. • Estimated Saudi oil production levels in 2007: 9m bpd at an average price of $43 per barrel. • Inflation: 1.8% • Capital Markets and Insurance Laws are now firmly in place. IPOs oversubscribed. Foreign bank ownership of 60% now allowed and 10 licences awarded • The Tadawul All Share Index crash in March was a shock to many small Saudi investors and necessary lessons about rapid unchecked growth have been learnt. • 3.0% pa birth rate driving infrastructure development. Current population including expatriates thought to be about 23m and growing younger every year. High unemployment (could be as much as 30%), generally low level of skills • Job creation vital. But Saudi-isation of jobs probably more of a hindrance than a help. Priority requirement is training and education

5. Doing business: • A lengthy process, requiring much patience and perseverance. But first know your market. In Saudi you are looking at 3 centres: Jeddah, Riyadh and Eastern Province. The best vehicle for initial familiarisation is the Trade Mission. • Allow 2 years to decide on the right sort of partner and to establish a good working relationship. Imperative to visit and re-visit the market to achieve this. • Joint ventures and local manufacture are very welcome and foreign principals can now hold a controlling interest. • Women can also conduct successful business in the Kingdom, although it is not always easy. Don’t be daunted! • Competition. Most ME markets are price sensitive. Saudi Arabia is cash-rich and the Golden Goose may lay an egg at Fortnum and Mason prices, if the product is special; but Sainsbury/Tesco prices are the rule of thumb. • Priority Sectors: Training and Education; Oil & Gas; Water and Water management; Power; Health; Construction.

6. Some projects: • Oil production to increase to 12 mbd. $1.8bn investment in the Shaybah field to increase Arabian extra light by 250,000bd. Major increase in refining capacity too of which the $8.5bn Rabigh project is the leader. • Rail landbridge – 3000 km: Jeddah to Riyadh. Jalamid-Al Zabira-Riyadh to Ras Al Zour, the Mining Industrial City. • Mining – bauxite and phosphates • IWPP power and desalination • King Abdullah Economic City at Rabigh on the West coast: £26bn. port, marina, business park, financial centre, residential and golf course) costing USD 26bn of predominantly private sector finance. To which add Hail, Madinah and Jizan. UK exports last year: £1.6 bn in visibles. Double that with invisibles. KSA is our largest, end-destination ME market.

7. “Doing Business in Saudi Arabia” EMITA seminar: UAE & Saudi Arabia – a wealth of opportunities David Lloyd OBE Consultant The Middle East Association 6 March 2007