Saudi Arabia Saudi Arabia 2013|2014 Discovering Business in association with Copyright © Allurentis Limited 2013. All rights reserved. Allurentis is delighted to have been involved in association with UK Trade & Investment and the Committee for International Trade on this, the first edition of Saudi Arabia - Discovering Business, and would like to thank all sponsoring organisations for their kind contributions. Saudi Arabia is a hugely exciting market and with our deep rooted relationship the potential for business is vast. We are confident that this publication will raise awareness with all readers and prove to be an invaluable resource. Electronic copies of this publication may be downloaded from Allurentis Limited's website at www.allurentis.com, provided that the use of any copy so downloaded, complies with the terms and conditions specified on the website. Except as expressly stated above, no part of this publication may be copied, reproduced, stored or transmitted in any form or by any means without the prior permission in writing from Allurentis Limited. To enquire about obtaining permission for uses other than those permitted above, please contact Allurentis by sending an email to [email protected] Photos courtesy of: www.istockphoto.com | www.shutterstock.com Contents S S E N Messages SI U HRH Prince Mohammed bin Nawaf Al Saud: Kingdom of Saudi Arabia’s Ambassador to the UK 4 B G Sir John Jenkins KCMG LVO: British Ambassador to the Kingdom of Saudi Arabia 5 N Introduction ERI V Saudi Arabia - a story of continuing economic development 6 O C Map of cities & provinces 10 S DI Facilitating Organisations 3 How UK Trade & Investment can help 12 01 2 The Saudi Committee for International Trade: Building bridges and expanding trade 14 : A Business - Legal - Finance BI A Saudi Arabia: Creates major opportunities for investors - PwC 16 AR Doing business in Saudi Arabia - Squire Sanders 23 DI UK plays major role in liberalisation of Saudi financial sector 28 AU Risk and reward: the Saudi Arabian challenge - Kroll Advisory Solutions 32 S Energy New energy investment focuses on value added refinery capacity 36 Renewables are essential to bridging the Saudi energy gap 40 Industry and Manufacturing Broadening industrial strategy is vital 44 Pioneering development of new economic cities continues 48 Infrastructure - Construction - Civil Engineering 150 years of engineering excellence - Hyder Consulting 52 Wide ranging opportunities from port expansion programme 57 Looking to the future in Saudi Arabia - Parsons Brinckerhoff 60 Huge investment in water infrastructure is crucial 63 Environmental Management For environmental management BeeA’h means business 66 Mining Major development of mineral wealth 70 Transport New rail lines herald Saudi transport revolution 74 Air traffic growth fuels major airport expansion programme 77 Retail Retail expansion reflects rapid economic growth 81 Healthcare Investment targets improve healthcare provision 85 Education Education spending rises to meet needs of youthful population 89 Defence & Security UK remains a strong partner in Saudi defence needs 93 Telecoms Telecoms market undergoes rapid expansion 97 Tourism Tourism strategy for both international and domestic markets 101 Trade Organisations The Arab-British Chamber of Commerce 105 British Expertise 106 The Middle East Association 107 Key Facts 108 Featured Contacts 111 3 SAUDIARABIA: 2013 DISCOVERINGBUSINESS HRH Prince Mohammed bin Nawaf Al Saud: Kingdom of Saudi Arabia’s Ambassador to the UK Saudi Arabia is the United Kingdom’s largest trading largest producer and exporter of oil and holds the largest partner in the Middle East and North Africa region proven oil reserves. We are continually growing and (MENA). Our long standing good friendship is developing plans to expand and diversify our economic underpinned by a thriving historic trading relationship and industrial base. It is an exciting time to be doing as well as our common interests in international business in Saudi Arabia. We are already involved in stability and security. more than 200 joint ventures with UK companies. They include a growing number of 'blue chip' British This new publication Discovering Business in Saudi companies working in law, mining, the railway sector, Arabia highlights this trading relationship and the huge water and engineering and there is room for more. opportunities for British business in the Kingdom in all sectors: from oil, gas, construction and finance to The figures speak for themselves, ours is already a education, health, and housing. proven business relationship; we want it to be even Saudi Arabia is the largest economy in the MENA better. As the Saudi Committee for International Trade region and a member of the G20, OPEC and, since (SCIT) recently told a delegation of businessmen and 2005, of the WTO. According to the World Bank we are parliamentarians visiting the Kingdom, we want to see the 13th most economically competitive country in the more British involvement in the large scale projects in world. We are an emerging regional market in the the Kingdom. midst of a massive development programme, building Alongside the SCIT the Embassy will provide you with new industrial cities as well as further developing our the bridge to doing business in the Kingdom. The current infrastructure to meet the needs of the 21st Commercial Office at the Embassy of the Kingdom of century and of our growing young population. Saudi Arabia in London welcomes enquiries from We want to see UK businesses and investment at the new and long standing business partners. Come heart of that development. Our industry is focused and do business with us and you will be welcomed around our natural resources. Saudi Arabia is the world’s as friends. 4 S E G A S S E M Sir John Jenkins KCMG LVO: British Ambassador to the Kingdom of Saudi Arabia I am delighted to have been invited to provide a I am pleased that many new UK companies are now foreword to the 2013 edition of Discovering Business setting up operations here in response to the in Saudi Arabia. opportunities available. Maximising local content and employment of Saudi nationals is increasingly the The UK has a strong and historic relationship with route to successful business here. Saudi Arabia. The Kingdom remains our largest trading partner in the Middle East. With a population ‘Discovering Business in Saudi Arabia 2013’ will reach of some 28 million and GDP increasing by some 6% a strong target audience of companies and individuals a year, the Saudi market is an important source of high interested in doing business in the Kingdom. This value opportunities. publication will be distributed at major conferences, trade missions and road shows relating to Saudi Arabia UK companies are already pursuing a wide range of and will also be available online. The overviews of key investment opportunities in Saudi Arabia in a range of sectors and business opportunities provide up to date sectors including education, healthcare, infrastructure information about high value projects and signpost and financial services. readers to sources of information, advice and support. Britain is the Kingdom’s second largest cumulative I also encourage companies to contact my investor, with approximately 200 joint ventures worth experienced UK Trade & Investment team in Saudi an estimated £11.5 billion. UK exports of goods to Arabia which is well equipped to advise British Saudi Arabia amounted to some £3.26 billion in 2012: companies wishing to enter and compete in the Saudi an increase of 6% on the previous year: with an market, as well as to help Saudi companies looking for estimated further £3 billion in exports of services. UK partners. There is considerable Saudi investment in the UK. Saudi exports to the UK rose by 42% to £1.75 billion I hope you will find this Guide useful. Good luck in during the same period. your endeavours here! 5 SAUDIARABIA: 2013 DISCOVERINGBUSINESS Saudi Arabia - a story of continuing economic development Fortified by record hydrocarbon revenues and massive financial plans include thousands of kilometres of new roads and railways, as reserves of more than US$500 billion, Saudi Arabia has the ability to well as airport expansion, new urban transport systems, investments in continue spending heavily on developing its economy for many years water, sewerage, electricity plants, telecoms and the IT sector and the ahead, regardless of the price of oil. construction of four million new homes. Within the next three years new phosphates, aluminium and iron Leading investment areas also include development of oil & gas smelting industries will add billions of dollars annually to the facilities, the petrochemicals sector, mining and the development of economy. Much of this new industrial and business development in the new economic cities. Kingdom is intended to be led or achieved in partnership with both The non-oil economy is of growing importance, with petrochemical domestic and foreign investors. sales at around US$12 billion a year. Saudi Basic Industries Prospects for increased trade and investment between the UK and Corporation (SABIC) has achieved production in excess of 50 million Saudi Arabia are significant and growing as a result. The Kingdom is tonnes a year of chemicals and intermediates, industrial polymers, ranked eighth among the world’s ten high growth economies by the fertilisers and metals and is a significant force in the global International Monetary Fund (IMF). petrochemicals market. Regular visits at Prime Ministerial and Ministerial level underline the SABIC, is 70% government owned and the Kingdom’s biggest and importance of the bilateral relationship, while continuing close contact most diversified manufacturing company, active in chemicals and between the British and Saudi Royal families highlights the depth of intermediates, industrial polymers, fertilisers and metals. the relationship. A joint venture of the country’s oil producer, Saudi Aramco and Dow The country’s 2013 national budget illustrates the need for Saudi Chemical, will add to petrochemical output when a US$20 billion Arabia to remain a key target for British export efforts. It envisages State integrated complex comes on stream in an expanded Jubail Industrial spending of US$218.7 billion, 19% up on 2012, with revenues City in 2016. This venture, known as Sadara Chemical Company, is projected to reach US$330.5 billion. forecast to become one of the world’s largest industrial companies. The Kingdom intends to spend more than US$367 billion over the next The Government is focusing a large part of its spending plans on ten years on a wide range of infrastructure investments. Ambitious development of an ambitious industrial diversification strategy. This is 6 N O TI C U D O R “ NT I Saudi Arabia is pursuing investments and reforms that the Government is determined will position the Kingdom as one of the world’s most competitive economies by the beginning of the ” next decade . based on the creation of new economic cities and industrial clusters in Rolls-Royce, Shell, HSBC, Tate & Lyle, GlaxoSmithKline (GSK), Marks sectors unrelated to oil production. The strategy seeks to promote & Spencer (M&S) and Harvey Nichols. regional economic development and generate hundreds of thousands In addition, an estimated 6,000 UK companies export to Saudi Arabia of new jobs for the local population. and there is room for many others to join them, given the expansion of The projects are not only aimed at nurturing new industries but also at the economy and the Kingdom’s increasing merchandise imports. providing attractive residential communities, with social and Invisible trade is an increasingly important element in bilateral trade and educational infrastructure developed to international standards, where likely to grow as the Saudi banking and insurance sectors seek to people will want to settle for lifestyle and jobs. expand. Education and training is also a fast growing area. The Foreign As more globally integrated ways of conducting business become the & Commonwealth Office (FCO) says there are 22,000 Saudi students in norm, it is expected that much more Foreign Direct Investment the UK, nearly one third of them women, many funded by the King (FDI) will be attracted to the Kingdom, especially in the new cities Abdullah Scholarship Programme. which represent the key to the Kingdom’s economic development and diversification. The Saudi Government is especially keen to address the problems associated with a disproportionately high youth population and mitigate All of this offers a range of long term opportunities for British unemployment among this group. There is a growing requirement for companies. UK visible and invisible exports are currently valued at suppliers of vocational training and scientific education. more than US$9 billion and the Kingdom is by far the UK’s largest market for goods and services outside the OECD and the most The record 2013 National Budget continues the Kingdom’s significant trade and investment partner in the Middle East. expansionary plan to diversify and grow the country’s economy but also to raise social standards, particularly in education and healthcare. Britain is also the second largest foreign investor in Saudi Arabia after the US, with around 200 UK/Saudi joint ventures. A broad spectrum of Saudi Arabia has allocated US$100 billion for a five year healthcare British companies are active in the Kingdom, including BAE Systems, improvement programme and the UK is making efforts to contribute to 7 SAUDIARABIA: 2013 DISCOVERINGBUSINESS this development. In 2011, the Department of Health signed a the pillars of UK/Saudi relations. The Al Yamamah military agreement Memorandum with the Saudi Ministry of Health to enhance to supply the Royal Saudi Air Force (RSAF) with Tornado aircraft in cooperation. This is intended to establish clinical partnerships and 1985 represented the largest ever export contract won by the UK. train Saudi postgraduate medical staff. This relationship, augmented by investment offset agreements, was The Kingdom, which is the world’s largest producer of desalinated reinforced with the signing of the Al Salam contract in 2008, to provide seawater, is also seeking expertise to address an urgent need to Typhoon fighters and other equipment to the RSAF. economise on the use of water through new technologies and Saudi Arabia continues to spend heavily on the modernisation and management methods. expansion of its armed forces and security agencies. In 2012, BAE Electricity generation also needs to grow substantially to cope with the Systems signed a US$3 billion contract to supply 22 Hawk trainer jets demands of an expanding population and industrial development. This to the Saudi Air Force. is creating opportunities along the whole supply chain for engineering Defence and internal security remain major areas of opportunity, with procurement, equipment suppliers, sub-contractors and consultants. an increasing emphasis on technologies, where UK companies have An estimated US$90 billion is expected to be invested in water, proven abilities. Anything that plays to the “Saudisation” agenda and sewerage and power projects over the next ten years. domestic manufacturing is favoured, whether civil or military. The Al Long discussed improvements to urban transportation are also likely to Salam defence deal, for example, stipulates that an aircraft production go ahead. Finance Minister, HE Dr. Ibrahim Al-Assaf, says that US$53 line for the Typhoon will be established in Dhahran. billion from the country’s 2012 surplus is to be allocated to additional transport spending in 2013, mainly on mass transport systems for Offset investment deals related to previous defence contracts have Riyadh, Jeddah, Dammam and Mecca. These are huge projects and seen a number of joint ventures, civil and military, established in the will create multiple contract opportunities over several years for Kingdom, including a Tate & Lyle sugar refinery and a GSK suitably qualified UK companies. pharmaceutical manufacturing plant. One sector where British firms are clearly leaders in the Saudi market Such investments blend well with the Saudi Government’s wish to is defence. For almost half a century following the supply of British develop a broader and more private-sector based economy and equip Lightning fighters in the 1960s, defence sales have constituted one of graduates who are currently unemployed with the right skills. 8 N O TI C U D O R T N I The proportion of private sector schemes is likely to rise in future as the Government seeks greater private sector participation in project development. This is likely to be reflected in private sector power developments, water and wastewater projects and in real estate development. The accession of Saudi Arabia to the World Trade Organisation (WTO) in December 2005, set the stage as the Government indicated that subsidies to state owned industries were to be scaled back and management of utilities gradually handed over to the private sector. Saudi Arabia is pursuing investments and reforms that the Government is determined will position the Kingdom as one of the world’s most competitive economies by the beginning of the next decade. In 2011, the Kingdom achieved its aim of attaining a top ten ranking in the World Bank’s “Doing Business” Report, which tracks 183 economies and monitors how easy it is in them, to start medium to small scale enterprises. While this ranking has since slipped slightly, Saudi Arabia General While abundant opportunities lie ahead for British firms, contracts are Investment Authority (SAGIA) is now also seeking a top 15 ranking seldom easily won in Saudi Arabia. Building relationships requires for the Kingdom in the World Economic Forum’s “Global patience and perseverance in a country that, while modernising and Competitiveness” Report. expanding its economy, is deeply conservative. Traditional norms These ambitions are indicative of how the business environment in apply and business is not concluded quickly. However, the rewards Saudi Arabia is gradually improving for foreign investment. The result for those willing to run the course are likely to be immense and is an increasingly competitive market. long lasting. 9 SAUDIARABIA: 2013 DISCOVERINGBUSINESS Map of cities & provinces 10