SAUDI’S NEW SCHEME SETS STAGE FOR INNOVATIVE START-UPS

A new scheme that grants residency permit to qualified expatriates should go a long way in attracting leading global entrepreneurs, innovators and investors in Saudi Arabia.

“Our aim is to attract innovators from across the world to live and work in Saudi Arabia – and this reform will play a significant role in doing so,” said Eng. Ibrahim Al Omar, governor of the Saudi Arabian GeneralInvestment Authority (SAGIA). “These investors and entrepreneurs will help to drive the private sector growth, which is needed to realise the ambitious goals set out in Saudi Vision 2030.”

The residency permit will enable expatriates in Saudi Arabia to gain access to a range of additional privileges alongside their residency, including allocating visas for their families and enabling them to own real estate in the kingdom. There will be two separate forms of the programme, one acting as a permanent residence permit, and another that is renewable on an annual basis.

“It is important that stakeholders understand that Saudi Arabia offers significant long-term opportunities,” said Eng. Al Omar. “We want to attract people who will build a foundation and a network in Saudi Arabia, and who will play a role in the future development of the Saudi economy and benefit from the growth opportunities it presents. We believe that this reform will make a real difference.”

In the past year, SAGIA also launched a specialised Entrepreneur License, which allows international entrepreneurs to launch a fully foreign-owned start-up company in Saudi Arabia. These recent reforms have led to a 70% spike in the number of new foreign business licenses issued by SAGIA in Q1 2019, when compared to the same period last year.

The latest survey of Saudi citizens’ perceptions of entrepreneurship underscores a strong desire to start their own businesses.

According to the 2018/19 Global Entrepreneurship Monitor (GEM) Saudi Arabia National Report, just over a third of the Saudi population has expressed their intention to start a new business in the next three years

Over 5% had started a nascent business not more than three months old, and nearly 7% were running new businesses between three months and 3.5 years in operation. Together, those involved in the nascent and new phases show that a total of 12% of Saudi Arabia’s adult population was involved in early stage entrepreneurial activity.

“Among the countries in the MENA region, Saudi Arabia occupies an intermediate position with regard to the percentage of the adult population that declares its intention to start a new business within the next three years,” GEM said.

“As Saudi Arabia develops, entrepreneurial intentions may be progressively less influenced by necessity, where people are compelled to create their own source of employment, and more by the development of an entrepreneurial-minded society as the country advances with its Vision 2030 plan.”

Another key highlight of the report is the financing needs of Saudi entrepreneurs, which is increasingly being met by informal investors. The survey shows that 12% of the adult population in Saudi Arabia provided funds to entrepreneurs, nearly equal to the entrepreneurship rate. This is an increase over the prior two years and suggests some role in the upward movement in total early-stage entrepreneurial activity (TEA).

“Saudi Arabia’s population has a high level of informal investment in entrepreneurs compared to other countries in the MENA region, and also higher than the United States and the average for high-income economies,” GEM said. “This demonstrates both the willingness of people to finance entrepreneurs and the critical importance of this funding source for entrepreneurs in Saudi Arabia.”

Saudi SMEs are eyeing new opportunities and bidding for new contracts amid a surge of projects that are under way in the kingdom.

The Human Resources Development Fund (HRDF) recently revealed that more than 7,000 SMEs joined its platform to partake in bidding opportunities valued at SAR 394 million. The Forsah.sa platform is one of the services provided by the 9/10ths programme and connects buyers and vendors across the kingdom by allowing the former to submit their purchase requests online, so that approved SMEs can access them and offer their proposals based on their field. The platform has already approved SAR 73 million worth of bids.

“The portal offers a number of platforms including Tojjar, APPWEB, Forsah, Bahr, Kanaf, ATWAR, ZADD and EMADAD with the aim of changing the work culture among individuals and the society through encouraging and supporting entrepreneurship and SMEs, as well as enabling entrepreneurs to create jobs from those start-ups,” HRDF said.

The Saudi start-up scene is also heating up with Saudi Aramco Wa’ed Ventures providing funding to Hazen.ai, a start-up focused on artificial-intelligence-based traffic analytics and monitoring solutions. Hazen.ai is building advanced traffic cameras with the capability to detect dangerous driving behaviour through video analysis.

Similarly, Zid, a Saudi-based e-commerce company, announced a USD 2 million pre-series A investment led by Elm VC and joined by regional and international VCs, as well as other angel investors.

Saudi start-ups are emerging as major job creators. The GEM report notes that last year, 7.2% of the Saudi adult population received income from paid work obtained via a digital platform.

Taking into consideration that this figure is greater than half of the current Total Early-Stage Entrepreneurial Activity rate in Saudi Arabia (12.1%), it is safe to say that work based on digital platforms is rapidly becoming popular in the kingdom.

“Additionally, the average time allocated by people involved in gig activities is substantial. In Saudi Arabia, 78% of individuals allocated between 10 and 40 hours per month to these activities, while 18.5% allocated more than 40 hours,” GEM noted.