Saudi Arabia: A gateway to Investment in MENA ? A closer look at the Opportunities and Challenges…

The group members: Dina Al-Qawasmeh (ID:1210101)Muntaha Qadri (ID:1210512)Rawan Al-Shehri (ID:1010071)

Outline

• Introduction• Opportunities• Challenges• Recommendations• References

Key Facts about Saudi ArabiaFACTS

• Saudi Arabia occupies about 80% of the Arabian Peninsula

• 24 government ministries• 13 provinces• Religion

Islam, which is the basis of the legal system and of government.

• Population27 million, including nearly 8.5 million expatriates (2010 census).

• Saudi Riyal (SR) pegged to U.S. dollar ($1=SR3.745)

• Follows the Shariah Law

AFFILIATIONS• Founding member of Gulf

Cooperation Council (GCC), • United Nations, • League of Arab States, • Organization of the Islamic

Conference (OIC),• Organization of Petroleum

Exporting Countries (OPEC)• The World Bank• The International Monetary Fund• The World Trade Organization

(WTO)

Opportunity: Key Factors of SuccessEconomic stability

• 5th in the world for Fiscal freedom”

• 3rd most rewarding tax system in the world

• global liquidity squeeze, KSA became an attractive, high-liquidity environment for local and foreign ventures.

Dynamism and growth

• Growing private credit and increased public expenditures on infrastructure and other projects provide a broad basis for robust opportunities in Saudi Arabia.

• Strong and sustained growth in domestic demand.

Foreign Investment

• The variety of domestic and export-oriented investment opportunities in Saudi has attracted steadily increasing foreign direct investment as the economy has been progressively opened.

• 22nd out of 185 countries for the overall ease of doing business globally.

Market size

• As the region’s largest economy and the world’s 19th largest, the sheer size of the markets that Saudi-based projects serve is “a competitive advantage, allowing Saudi businesses to benefit from economies of scale.

Statistical Evidence

Some more OpportunitiesFlexibility of transferring and allocation of companies shares between shareholders according to regulations.

Saudi Arabia permits transferring of capital and profit abroad.

Saudi Arabia has low inflation rates and pursues to conclude mutual agreements with a number of countries in regards of promoting and protecting investment as well as preventing double taxation.

Challenges

General Foreign Investors

Businesswomen Future

General Challenges

• Lake of skilled employees. • Saudization.• Geopolitical challenges.• Cultural barriers.• Gender inequality.• Trading across borders and enforcing contracts.• Underdeveloped by world standards, holding back

investment and innovation.

Foreign Investors Challenges• Language barriers.• The minimum capital requirements for projects

licensed are:– SR 25 million for agricultural projects.– SR 5 million for industrial projects.– SR 2 million for all other categories of projects.

• Restriction on several industries. ( example, insurance and real estate, brokerage, equipment, etc )

Businesswomen Challenges

• Indirect Access to Government Services.• Requirement to have a Male Manager.• Lack of supportive Business laws.• Mobility and transportation.• Access to Capital.

Future Challenges

• The competitiveness of national products.• Competing in the international markets.• Following technology and its expansion.• W.T.O’s regulations.• Sustainability development. • Skilled labor, manpower and developed

managements.• Developing the industrial sector.

General

• Facilitate the process to have a Saudi visa.

• Decrease minimum capital requirement.

• Try to ease entry rules and regulations.

• Encourage private sector growth.

• Focus on sustaining the country development.

• Try to eliminate corruption.

• Maintain healthy international relationship

Risk Management

• systematic methods toward risk management and mitigation must be adopted

• Engage external specialists and risk consultants to conduct investigative integrity and reputational due diligence before they enter into new relationships, as well as fraud-related reviews and the design and implementation of fraud prevention programs within their established ventures in the Kingdom

Business Environment

• Improving the ease of doing business in the Kingdom, through:

• spurring modernization of the general business environment

• improving the microeconomic fundamentals of competitiveness, .

• Catalyze public-private collaboration

• Stricter protections against director misconduct to strengthen protection of minority shareholders and encouraged investor confidence.

FOR FOREIGN INVESTORS: The most effective approach is to complete rigorous investigative due diligence on potential partners and counterparties before

entering into the relationship. Prevention is better – and cheaper than cure!

Gain support throughout the Investment Cycle

Final Words

Saudi Arabia is in the process of becoming a world-class investment while being equipped with the institutional basis for productivity gains. However, keeping the challenges in mind we feel that it has a lot of potential but is a long way from reaching that potential. The positive side is that the government has recognized the urgency of the matter and are gradually moving from their traditional ways to more international standards.

References• http://www.sidf.gov.sa/En/INDUSTRYINSAUDIARABIA/Pages/FutureChalle

ngesFacingSaudiIndustries.aspx• http://www.jcci.org.sa/Arabic/servicecenters/KBKCentre/Documents/Saud

i_Businesswomen_Report.pdf• https://www.linkedin.com/pulse/20140811222955-217978279-why-saudi

-arabia-s-investment-climate-could-soon-radically-change• http://www.sagia.gov.sa/en/Investment-climate/Some-Things-You-Need-T

o-Know-/Investment-Incentives/• http://www.mideastlaw.com/middle_eastern_laws_saudi_arabia.html