September 2016 Credit Management magazine

FRONT
COVER
FEATURE
industries and biotechnology.
It’s worth noting that free trade is growing in the
region and Saudi Arabia has free trade agreements with
Singapore, the European Free Trade Association, and
importantly the Greater Arab Free Trade Area.
This all encourages the export to Saudi Arabia of
power generating equipment and machinery, transport
related products, medicinal and pharmaceutical
products, industrial machinery, vehicles and associated
parts, food products and scientific instruments.
GROWING SECTORS
The country is estimated to be investing $1000
billion over the next 20 years in a number of projects
that revolve around power, water, communications,
transport, mining, construction, infrastructure and, of
course, oil and gas and petrochemicals.
Looking at the potential for infrastructure there
is scope for growth in a number of key sectors. Take
healthcare for example; the Saudis are spending some
$90 billion to upgrade their system with money being
spent on facilities, training, smart hospitals and health
centres, equipment, information technology and of
course, delivery of services.
Allied to this is, as noted earlier, the need to improve
the education of Saudi nationals. According to UK
figures, the country has the biggest education sector
in the region and some $56 billion – 25 per cent of the
2015 government budget – was allocated to it.
Water, the stuff of life, is seeing around $45 billion
spent to improve the sourcing and waste systems and as
part of this, 20 new desalination plants are being built
together with a number of new sewage treatment plants.
Transport infrastructure is also seeing investment
– rail is getting almost $22 billion and there is a strong
demand for equipment, material and service providers.
There are projects to provide new airport terminals
in Riyadh and Jeddah, as well as more than 30 other
airport related developments.
Despite an abundance of oil, for the moment at least,
energy is also a prime candidate for development. The
Saudis, through Saudi Aramco, are seeking to extract
the natural gas reserves that are held off its Red Sea
coast, and as part of this are planning to spend $25
billion on capital and deep-water technologies. Nuclear
development in the country should mean an estimated
$100 billion going into 16 new nuclear reactors over
the next 20 years. And of course, there is still the
burgeoning oil industry that needs servicing.
The Saudi government published detail on the
National Transformation Program at http://vision2030.
gov.sa/sites/default/files/NTP_En.pdf which offers
plenty of background as to the direction that the
country is planning to move in.
THE MECHANICS OF OPERATING
As would be expected, the Saudis have a very distinct
view on how firms should operate within the country.
In essence, this boils down to whether a firm has a
physical presence. If there is no presence, then firms
must appoint a Saudi based agent to undertake their
trading activities. This is an extension to the principle
of Saudi law that a firm is physically present if it wants
to buy or sell goods. However, the law also requires
that to establish a presence in the country also requires
the investment in a joint venture vehicle. So while
many foreign companies prefer to provide goods and
services from offshore, failure to establish a legitimate
presence in the country will bar a company from
directly meeting with their clients and customers, and
will restrict their ability to operate effectively and
receive payments.
To be continued...
The young of the country
need greater levels of
education and technical skills
to better serve commerce.
This is, no doubt, a prime
driver behind what the
Saudis term Nitaqat, meaning
Saudisation, where foreign
firms need to meet a quota
for employing Saudi nationals
– the aim being to enhance
local employment levels
while reducing dependence
on foreign labour.
The recognised standard
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