Saudi Arabia's political and commercial opening expands business opportunities in the country
Although it still costs a little, Saudi Arabia is trying to shed the cliché of being a petromonarchy. In recent years, political and economic reforms have been approved that have increased the government's income from oil from 90% to 60%, as explained by businessman Rene Nieuwenhuijs, who has worked for the Saudi administration, during a virtual session this Monday organized by the Chamber of Commerce of Madrid. The coronavirus is being the catalyst for the reforms that have been taking shape for years. From now on the country has a VAT of 5% that will be extended to 15% next year. The latest commercial laws seek to facilitate foreign investment. The main objective: to diversify the economic activity and leave behind the crude oil monoculture.
The opportunities for foreign investment will be in the next few years in housing and infrastructure construction projects. "The Saudi population is very young and in the next few years aid will be given for the purchase of housing. Construction will be a booming market", said Hussein Balaghi, CEO MENA Business Investment Group, during his speech at the session organized by the Chamber of Commerce. The entrepreneur also pointed to dryland agricultural production as an investment in the future. As it could not be otherwise, the reinforcement of the health system will be key when the worst of the pandemic passes. "They will need the know-how of foreign companies and their technological potential," explained Balaghi.
Another key to the reforms that have been put in place is to improve the training of the inhabitants, especially vocational education. The authorities want to increase the number of Saudis working in the private sector and so have launched "Saudization" plans, which involve certain tax surcharges for expatriate workers. For this new phase, the role of online training will be crucial. Internet commerce and digitalization will also play a major role in the coming years in terms of investment opportunities in the country.
To carry out all these projects, Saudi Arabia wants to open up to the international market and improve its international integration. "The new corporate law puts foreign entrepreneurs on an equal footing with Saudi entrepreneurs and everyone has to pay corporate tax," said Aida Kellal, Middle East advisor for the Cuatrecasas law firm. The specialist outlined the changes that have taken place in the region in recent years. "Saudi Arabia has only been a member of the WTO (World Trade Organization) since 2000. This is very recent. Until then, investment was prohibited unless authorized by the Executive. In these 20 years we have gone from a totally closed country to a trade opening", explained Kellal. Despite this, investment is allowed but not free. Every year the list of activities where foreign investment cannot enter is updated.
The tax administration, although it had been modernised in recent years, had very high rates of tax evasion. This trend is decreasing as a result of the outbreak of the coronavirus and the increase in government spending. "The Treasury is becoming increasingly tough in punishing tax offences," said Kellal.
The virtual session was attended by Rene Nieuwenhuijs, owner of a digital agency, who has worked for the Saudi Administration. "We have been working with them since 2014.They needed an application and a web platform and we contacted them through the consultancy firm Oliver Wyman", said Nieuwenhuijs, who also acknowledged that the beginning was complicated. "Saudi Arabia offers many opportunities, but it is a very different country from what we are used to," he said. Despite this, the Dutch entrepreneur explained that people are very hospitable and open-minded. "If you do your job well and they like it, all doors open," he concluded.
