When most people think of the Middle East, they think of the region’s recent troubles or the spending power of Dubai and the United Arab Emirates. However, there is much more to the Middle East that just the headlines you read in the news media. The Kingdom of Saudi Arabia (KSA), which has a population of almost 28 million people, is fast becoming the place in the Middle East to do business, for numerous reasons.
For example, the KSA is ranked fourth in the world for ‘fiscal freedom’; it has the sixth most rewarding tax system in the world; it is ranked twelfth out of 181 countries for the overall ease of doing business globally and tenth in terms of ease of paying taxes; it has the largest GDP of any country in the Middle East/North Africa region (MENA), representing 25 per cent of total Arab GDP, according to the International Monetary Fund (IMF); and it is one of the world’s fastest growing countries: per capita income is forecasted to rise from US$20,700 in 2007 to US$33,500 by 2020.
And the country isn’t resting on its laurels—it has ambitious plans for the future. It has set itself the target of becoming the global capital of energy as upstream and downstream petrochemicals, minerals, power and water are all vital to the Saudi and global economy. It also wants to act as a transport and logistical hub between East and West. KSA’s roads, railways and air links create a potential consumer base of more than 250 million, all within three hours’ reach. Finally, it is in the process of transforming its knowledge-based industries, such as healthcare, life science, education and IT, as it sees these sectors as crucial drivers of long-term, sustainable change.
To meet this final target, the KSA is investing heavily on educating its population and it leads the way in the Middle East in spending on education in terms of percentage of GDP.
However, while there are many positive reasons for doing business in and with the KSA, the country does also have room for improvement. Historic regulations requiring foreign companies to form local partnerships before launching operations has restricted the growth of third-party service providers. As a result, companies entering the market have had to self-resource and set up their own operations. These self-operated solutions are often designed to local standards that do not meet the needs of international businesses. For example, warehouse designs often do not meet Western standards in terms of operating efficiency and quality standards.
The country has also implemented a national policy of Saudisation, which requires all private sector companies to have a percentage of Saudi nationals represented in their workforce. So forward-looking companies must train Saudi management to Western standards to make sure they can fulfil government quotas using staff that understand the needs of international companies.
Another hindrance to setting up business in the KSA is the transport network, as roads are often under-developed and suffer from congestion.
However, the situation is changing fast. De-regulation has allowed more international third-party companies to establish themselves and offer the types of local logistics operations and energy solutions that companies in the West expect. There are also companies which offer local management teams to facilitate the development of these services by becoming joint venture partners, offering expert knowledge in establishing operations in the KSA.
And the KSA is also investing heavily in upgrading infrastructure, including its road network. In addition, the government is in the process of building what will become the tallest building in the world, a true sign of the amount of investment being made on every level possible.
Overall, the KSA is a great place to do business and the positives heavily outweigh the negatives. You only have to look at the country’s political stability compared with some of the other countries in the MENA region to see why everyone is so positive about the future. It is also a fast-growing market and now is the right time to set up business there, as there are a range of opportunities that have yet to be capitalised on. In a few years, the world will have woken up to the country’s potential, so take advantage now, before it’s too late.