The Chamber of Commerce of Madrid brings investment in Saudi Arabia closer to Spanish companies

Spanish companies have great opportunities in international markets. The scenario caused by COVID-19 has forced many governments to encourage foreign investment in their respective countries in order to alleviate the negative effects of the pandemic and regenerate their productive fabric. In this regard, the Madrid Chamber of Commerce, Industry and Services organised a virtual conference on Wednesday with the aim of bringing the Saudi Arabian market closer to Spanish companies with interests on the ground.

The list of speakers was divided between professionals from the private sector and representatives of the Saudi administration. Among them were José Diego Manzanera, CEO of Gulf Business Consulting; Basel al-Qahtan, Director General of Health and Life Sciences at the Ministry of Investment and Director of the Health Affairs Development Unit at the Ministry of the Saudi National Guard, and Ahmed al-Zahrani; Luis Ortega, General Manager for the Middle East, Africa and Asia at Pagero; and finally, Pablo Lamas, Director of Comparative Sales at Qatar Airways Spain.

The first introductory remarks highlighted the Kingdom's fertile economic situation despite the pandemic. Saudi Arabia is the largest economy in the Middle East, and expects GDP growth of 3.7% by 2021, according to IMF data. The annual GDP forecast for this year is $790 billion, and GDP per capita is over $20 billion, the second highest in the region after the United Arab Emirates.

Saudi Arabia is also the world's largest oil producer, but the COVID-19 crisis has forced the authorities to launch Vision 2030. This ambitious economic diversification project aims to minimise economic dependence on the hydrocarbon sector. This new impetus to the government's programme has been caused by a 2.9% year-on-year contraction in Saudi Arabia's finances. 

Oil demand fell sharply in the early 2020s, but the Kingdom is gradually recovering to pre-COVID-19 levels, hovering around $66 despite the price war with Russia. Moreover, the oil sector accounts for approximately 80% of the country's revenues and accounts for almost 45% of GDP. In terms of exports, 80% of the country's revenues come from 'black gold'. 

Riyadh's measures to mitigate the reduction in oil revenues were aggressive. These included an increase in VAT from 5 to 15 per cent in July 2020, as well as the joint launch of $61 billion in support packages for the private sector. These included tax exemptions and tax deferrals and direct aid to the banking sector and small and medium-sized enterprises. They also included 60 per cent wage subsidies for private sector employees, payment deferrals and utility discounts.

In introducing the event, the honorary president of the Madrid Chamber Club, Juan José Sánchez Puig, urged attendees to take advantage of the good economic and political relations between the Wahhabi kingdom and Spain to undertake the investment plans. The Vision 2030 plan is a great opportunity for Spanish companies, especially for those specialising in the digitalisation and artificial intelligence sector, an area coveted by Riyadh. 

Among the objectives of the House of Saud for the Vision 2030 plan are to increase foreign direct investment from 3.8% to 5.7% of GDP, to integrate the top 10 of the Global Competitiveness Index, to increase the contribution of the private sector to GDP from 40% to 65% or the recognition of at least three Saudi cities among the 100 best ranked in the world, among others. To this end, Riyadh has financed 11 different programmes to undertake reforms. 

The opportunities for Spanish companies include areas such as wastewater treatment, according to Gulf Business Consulting's executive director, José Diego Manzanera. The water distribution infrastructure is obsolete and deteriorating. Saudi Arabia also has the highest per capita water consumption, at around 278 litres per person per day. The Vision 2030 plan aims to build 16 new desalination plants, 3,600 kilometres of new pipelines and seven wastewater treatment plants.

Another sector that promises to be key in the future is renewable energy, and should therefore be taken into account by Spanish companies. The main sectors that make up the Saudi regime's main aspirations are tourism, transport and logistics, and, ultimately, ICT, i.e. the development of information and communication technologies.

However, the main sector, according to Basel al-Qahtan himself, is healthcare. Saudi Arabia plans to invest $66.67 billion in healthcare infrastructure and boost private sector participation from 40 to 65 per cent by 2030. Plans call for privatising 295 hospitals and 2,259 health centres over the next two decades, requiring 2,700 doctors and two additional 20,000 beds. An incentive for investment is that foreign investors in the health sector will be able to form a 100 per cent-owned company, according to Riyadh. 

In short, Saudi Arabia stands out as one of the most interesting opportunities for global investment, and a market where Spanish companies have a lot to say. For the time being, the economic diversification plan promoted by the Saudi authorities has not had the desired effect, so it is expected that the Kingdom will continue in the same direction of economic openness.