NON-OIL REFORMS BOOST SAUDI BUSINESSES’ CONFIDENCE

Saudi Arabia’s growth prospects look promising as the government unveils non-oil initiatives, such as opening up the tourism sector, according to the country’s business executives.

The kingdom’s business leaders see major transformation ahead – almost two-thirds expect their businesses to change radically over the next five years, according to a new report by HSBC.

“But they are bullish about their ability to weather this disruption: 89% foresee their companies growing over the same period and almost four in 10 Saudi businesses are expecting their businesses to grow by 15% or more in the next year,” the report noted.

As much as 50% of the business executives surveyed expect growth to average 15% more over the next five years, and 29% anticipate growth of around 29% during the same period.

Most Saudi Arabian businesses (57%) are more optimistic about growth than a year ago, well above the global average (47%), HSBC stated in the report.

Saudi business executives are also looking to expand their market base and many are looking further afield for growth. According to the survey, as many as three in 10 Saudi business executives say they are pursuing this strategy.

“Saudi firms making changes are seeking more international suppliers (28%) and increasing use of digital/technology (28%),” HSBC said.

Domestic businesses are becoming increasingly diverse with 43% now trading with Middle East and North African (MENA) countries, 39% with Europe and 32% with countries in the Asia Pacific (APAC) region.

Trade prospects beyond the region are fuelling confidence. European markets are already rivalling the MENA region in importance.

On current trends, APAC will be the top international trading region in three to five years, with MENA close behind. Trade with North America is growing fastest, up from 9% in 2018 to 23% in 2019, according to the report.

Saudi businesses are also keen to take advantage of globalisation and believe in open and free international trade, which is a force for good.

“Over the next five years, they believe trade will drive innovation (83%), provide new businesses opportunities (82%), support employment (79%), improve efficiency 79%) and address inequalities (77%),” HSBC said.

Sustainability is also of growing importance. Roughly seven in 10 Saudi businesses say they have a role to play in the UN’s Sustainable Development Goals (SDG).

Business sentiment is reaching new heights in the kingdom.

Saudi Arabia's non-oil private sector entered the final quarter of the year on a stronger footing, with business conditions improving at the fastest pace since August 2015, according to Markit. Output and new order growth quickened in October, with the latter rising at the sharpest rate since June. On the price front, average selling prices declined for the second time in the past five months, as firms sought to stimulate additional customer orders.

"The upturn in business conditions seen in October was led by a steep and accelerated increase in new business - the sharpest seen since June. Export sales also rose, though at a slower pace, indicating that the main impetus continued to come from the domestic market," Markit said in its latest report in November. "Increased demand resulted in higher overall output in October, with the rate of growth accelerating for the third month in a row to the highest since December 2017."

The upturn in economic sentiment is attracting international investors.

At the Future Investment Initiative in Riyadh, the Saudi Arabian General Investment Authority (SAGIA) signed and exchanged 24 investment agreements with a combined value of more than US$20 billion in value.

Some of the major agreements, included a US$5 billion investment agreement between Al Akaria Saudi Real Estate Company and the U.S.-based Triple 5 Worldwide to develop the Arabian Dream project, a tourist destination that will attract upwards of 70 million visitors annually, and employ over 25,000 Saudi nationals.

Invest Saudi has revealed that the government issued 800 new foreign investor licenses in the first nine months of the year. The government issued 251 foreign licenses in the third quarter alone, compared to 193 during the same period last year.

Leading the list of top five segments in demand was information and communications, which saw 52 new licenses, followed by construction (41), manufacturing (33), professional scientific and technical (32), and wholesale and retail (23).