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Investment
in Arriyadh
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Good Investments are not Hard to Find
Because Arriyadh is a dynamic city that continues to undergo
remarkably vigorous development, the opportunities for direct
foreign investment are legion. For the next five or six years, there
will be many outside companies that will profit from working
on or supplying goods and services to the remarkable Arriyadh
public transport program.
But there are many other areas where profitable business will be
done by overseas companies. Indeed, given the demand on local
firms that the sheer pace of change and development has created,
the opportunities are arguably far greater than in most other
prosperous capital cities around the world.
One way to analyse the scope for business in Arriyadh is
to look at what is currently going on. ADA figures show that
there are some 3,000 different projects under way worth in the
neighborhood of SR260 billion. While government contracts
comprise the vast majority of this work, it is notable that 51
private sector projects account for around SR60 billion. There
are a further 56 public/private undertakings on which the
expenditure is SR36 billion.
What will impress is the range of works that is being
undertaken. Public services and housing along with schools
and colleges top the project list with transport of public sector
infrastructure not far behind. The fact that the health sector has
a “mere” 127 projects in hand worth SR8.5 billion attests to the
high level of healthcare facilities that already exist in the city.
These, like so much else, are however under constant expansion
and improvement. There remain areas where foreign investors
can enter this market with specialisms such as diagnostics or
opthalmology.
Foreign business is entering the Saudi market at every level.
The most high profile of course is retail. Shopping is a Saudi
pastime and there is plenty of quality retail space available in
new luxury malls just completed or under construction. When it
comes to eateries, brand-conscious customers are looking not just
for well known names but also good quality, good value meals,
with the food sourced both locally and from abroad.
Manufacturing is thriving in the face of solid demand. Some
sectors such as the production of plastics packaging and
dairy produce are well-established with strong R&D facilities.
Manufacturers supporting the construction industry also
have strong developmental backgrounds. However, other
manufacturing areas are open to opportunities that better, more
cost-efficient production approaches can bring. Though one of
the strengths of Saudi society is its conservatism, the market is
wide open to new ideas and new products.
At every level there is a hunger for technology transfer and
the acquisition of new operational and financial management
skills sets. The only exception is perhaps IT, where a thriving
and predominantly young coding community is growing up
with generous financial and physical support. Arriyadh’s new
Information Technology and Communications Complex (ITCC)
flags up commitment to foster Saudi IT talent. This does not
mean however that foreign investors cannot set up their own
Saudi operations, with products perhaps aimed at the entire Arab
world. There are also clear openings for entrepreneurs who
have the talents and connections to bring promising computer
programs to market, qualities which computer geeks themselves,
the world over generally lack. Saudi Arabian programers may
not yet have emulated the success of an app like Angry Birds, but
watch this space.
Long Term Rewards
Modern cities such as Arriyadh also have significant demands
for services, not the least of which are repair and maintenance
of an increasingly sophisticated infrastructure. Strong suppliers
who can undercut the post-installation support offers from
original equipment manufacturers are in a strong position to win
profitable work.
The take-home message for all would-be foreign investors is
that Arriyadh is open for business, to them as much as to local
companies. There is a myriad of opportunities that can be seized,
either in partnership with local firms or via stand-alone entities.
The Council of Ministers this August further eased procedures
for international firms to take on a wide range of projects, which
now include energy investments.
Indeed, the trend is all one way. However, one consideration
should not be forgotten by those looking closely at the
huge potential of the Saudi market. It is open for long-term
investment. There are sustained profits to be made by foreign
businesses that bring the right products and services to the
market. But this is not an environment for those wishing to turn
a fast buck and exit. The Kingdom’s markets will reward those
outside concerns that are willing to take the long view and grow
their own businesses along with Saudi’s crucially important non-
oil economy.