Interview: Mohammed Al Kathiri
To what extent can Saudi Arabia improve its non-oil trade balance through production of consumer goods? Which areas offer the greatest potential?
MOHAMMED AL KATHIRI: Saudi Arabia is the largest economy in the region, a member of the G20, and the most populous country in the GCC. These factors provide Saudi Arabia the ability to expand its economy from overdependence on oil production. Saudi Arabia’s GDP increased by 4.4% in the second half of 2014 while the growth of non-oil products rose by 13% over the same period. Already a quarter of exports are non-oil products. This gives you an indication of how Saudi Arabia is trying to create a balance in its economy and its exports.
The Kingdom is still dependent on oil exports, but efforts have been made by both the Saudi government and the private sector in recent years to diversify the economy. We have seen the establishment of new industrial cities, the expansion of Jubail and Yanbu industrial areas, and changes in laws and regulations to encourage domestic and foreign investors.
We also have the new Ras Al Khair project coming on-line, which is a huge investment. This is a joint effort between government and private sector, because without the participation of the private sector you cannot successfully diversify. The government, in turn, is easing regulations to support private sector growth and involvement in the large-scale projects.
What is being done to attract international companies to invest in the Kingdom and establish joint ventures with local players?
AL KATHIRI: Saudi Arabia has been working hard to attract international companies for many years. With the establishment of the Saudi Arabian General Investment Authority (SAGIA) more than 10 years ago, the Kingdom showed its commitment to attracting foreign investors, and under the foreign investors law the government has created new incentives to attract overseas investment, such as allowing foreign companies to own land. SAGIA, which is responsible for issuing licences, is helping to reduce the bureaucracy involved in establishing operations here and speeding up the process for companies looking to enter the market.
To better facilitate knowledge transfer SAGIA is undertaking to be more selective in issuing licences to companies that bring value to the economy either through technology or job creation.
For foreign small and medium-sized enterprises (SMEs), it is recommended they look for local partners that know the market and how to do business in Saudi Arabia. This will make it much easier for foreign SMEs to succeed, because they will have a partner who will share costs and risks and who has the right people with knowledge of the market.
How can the Kingdom make the most of its comparative advantages to be competitive with other countries for foreign investment?
AL KATHIRI: The most important thing Saudi Arabia should do is to identify and focus on its strengths. We have a strong industrial sector, which could and should become the central pillar of our economy as we look to diversify away from oil. One of the greatest advantages for industry in Saudi Arabia is access to energy and abundant resources. If you look also at the social and political stability of Saudi Arabia, you find a country that is very safe for foreign investment. The geographic location of Saudi Arabia is also important. By plane we are four hours from India, two hours from Africa and four hours from Europe.
Another great strength is the government’s commitment to spurring economic growth through significant domestic investment. The final comparative advantage that should be highlighted is human capital. We have an incredibly young and dynamic workforce. Significant investment in the Kingdom’s education system, the expansion of training facilities, as well as the creation of the King Abdullah Scholarship Programme will translate into a highly educated, highly skilled national labour market which will encourage greater economic growth.
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