The New Saudi Arabia

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Saudi Arabia seeks to attract $427bn with industrial program

Time: January 26, 2019

(Khalid Al-Falih, pictured earlier this month, said the Kingdom would announce projects worth SR70 billion. (File photo/Reuters)
  • The move is aimed at diversifying the economy away from oil and creating jobs
  • There are plans to announce projects in the military, chemicals and small businesses industries worth $50 billion

RIYADH: Saudi Arabia aims to attract private sector investments worth SR1.6 trillion ($427 billion) over the next decade through an industrial development program aimed at diversifying the economy, Energy Minister Khalid Al-Falih said on Saturday.
Investments will be made through the National Industrial Development and Logistics Program (NIDLP), one of the programs set out under Vision 2030, a wider reform strategy led by Crown Prince Mohammed bin Salman and intended to wean the economy off hydrocarbons and create jobs for Saudis.
Falih said the kingdom would on Monday announce projects worth 70 billion riyals that are “ready for negotiations” under the NIDLP to boost industry, mining, energy and logistics.
At a later stage, it plans to announce projects in the military, chemicals and small businesses industries worth $50 billion, he added without giving a timeframe.
“The (NIDLP) program targets 1.6 trillion Saudi riyals … it is quite ambitious but it is over a 10-year period so we have got the time to do it,” Falih told a press conference.
The program will seek to raise money from both domestic and foreign investors.
“We will have a huge contribution from the private sector outside the kingdom, but we will leave the bigger share for the Saudi private sector,” Falih said.
The program will integrate the mining, industry and energy sectors, which Falih said were each vital to the kingdom’s plan to empower the private sector and make it the main driver for economic growth.
After decades of spending on development projects, the government has made attracting greater foreign investment a cornerstone of its Vision 2030 plan.
But foreign investors have been rattled in recent months by Saudi Arabia’s deteriorating relations with Western governments after the murder of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October.
Transport Minister Nabeel Al-Amudi told the press conference that NIDLP would launch 60 initiatives in the logistics sector, including five new airports and 2,000 km of railways, and aims to attract more than 135 billion riyals of investments.
“We aim by 2020 that the logistics sector contributes 221 billion riyals to GDP,” he said.
Under Vision 2030 the kingdom aims to have the private sector operate much of its transport infrastructure, including airports and sea ports, with the government keeping a role as regulator. ($1 = 3.7503 riyals) (Writing by Hesham Hajjali, Ghaida Ghantous and Marwa Rashad; Editing by Edmund Blair and Clelia Oziel)

This article was first published in Arab News

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Saudi Arabia unveils seven principles to raise investment

Time: January 23, 2019

Ibrahim Al-Omar, governor of the Saudi Arabian General Investment Authority. (SPA)
  • The rapid pace of economic transformation in the coming years is opening exciting investment opportunities

 

JEDDAH: Saudi Arabia has unveiled seven investment principles, issued by royal decree and based on international best practice, that will support the development of a competitive investment environment in the Kingdom.
“The rapid pace of economic transformation in the coming years is opening exciting investment opportunities, both in Saudi — a G20 economy opening up to international businesses — and in the broader Middle East,” said Ibrahim Al-Omar, governor of the Saudi Arabian General Investment Authority (SAGIA).
The investment principles are: Ensure equality between Saudi and foreign investors; ensure protection of investments; enable sustainability of investment; provide access to equal investment incentives; implement social and environmental standards and ensure investor compliance with Saudi health, safety and environmental regulations; facilitate access procedures for foreign workers and their families; and ensure a solid transfer of knowledge, technology and enhancement of local human capital.

This article was first published in Arab News

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Market upgrade to boost foreign investments in Saudi Arabia to $30-$50 billion

Time: January 22, 2019

Mohammed bin Abdullah al-Quweiz, the president of Saudi Capital Market Authority, speaks to Al Arabiya in Davos.

Mohammed bin Abdullah al-Quweiz, the president of Saudi Capital Market Authority, has said he expects inflows of around $30-$50 billion to invest in the country’s stock market because of the recent upgrade in emerging market indices.

“These expected inflows are part of the remaining funds, and the other active investments will move after the decision to upgrade,” al-Quweiz told Al Arabiya on the sidelines of the World Economic Forum in Davos.

He said “the foreign investor will be able to own more than 50 percent of Saudi companies” adding that this will attract more foreign inflows to the Saudi financial market.

“The number of foreign investors has tripled in anticipation of the market being upgraded to emerging market indices,” al-Quweiz said. He said that there are more than 450 foreign investors in the Saudi market.

Al-Quweiz pointed out that the percentage of foreign ownership in the Saudi stock market is about 5 percent. He attributed this to recent decisions that have facilitated the entry of foreign investors.

However, he said the comparison of the Saudi market with other markets, which have been operating for a long time, might be inappropriate as “the Saudi market exposure to foreign investments was decided only in 2015.”

The Saudi stock market index is expected to be upgraded to emerging market indices starting in March 2019 in five stages ending in 2020 with the FTSE Russell index.

   

This article was first published in Al Arabiya English  

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Saudi Arabian General Investment Authority licensed investments rise by 99% in 2018

Time: January 14, 2019

SAGIA seeks to align itself with Vision 2030. (Supplied)
  • SAGIA seeks to align itself with Vision 2030

JEDDAH: The achievements report of the Saudi Arabian General Investment Authority (SAGIA) for 2018 showed a 99 percent increase in the number of licensed investments and a 100 percent increase in the number of investment expansion requests.
The report also showed that the time required for issuing a new license has been reduced to 2.5 hours, the time required for modification services has been reduced to three hours, and the investors’ general satisfaction rate has reached 94 percent.
Ibrahim Saleh Al-Suwail, deputy governor of SAGIA, highlighted the most important investment sectors in Saudi Arabia, pointing out that the networking and information technology sector had the largest number of investments in 2018 compared to 2017, with an increase of 200 percent in the number of investment projects.
He added that the professional, scientific and technical services sector has ranked second, with an increase of 155 percent in the number of investment projects, followed by the wholesale and retail trade sector, which ranked third with an increase of 103 percent, and the manufacturing sector, which ranked fourth with an increase of 74 percent.
Al-Suwail said that the rise in the number of licensed investments and the number of investment expansion requests in Saudi Arabia was the fruit of Crown Prince Mohammed bin Salman’s visit to a number of countries and capitals, which played a great role in highlighting the potential and investment opportunities in the Kingdom to achieve Vision 2030 through signing several agreements with countries that have economic experience in various fields.
“The crown prince’s visit to these countries has succeeded in establishing a new image for the Kingdom and creating a competitive environment and a serious campaign to reduce the country’s reliance on oil revenue,” he continued.
Al-Suwail pointed out that SAGIA has recently taken several steps to provide its services with reliability and ease and within a competitive time period through establishing links with several government agencies, including the Saudi Industrial Development Fund, the Ministry of Justice, the Ministry of Commerce and Investment, the Ministry of Municipal and Rural Affairs, and Meras eServices Platform, which provides access to the e-services of more than 40 different government agencies.
Through its strategy, SAGIA seeks to align itself with Vision 2030.

This article was first published in Arab News

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Saudi Arabia implements initiatives to improve business environment

Time: January 11, 2019

Commerce and Investment Minister Dr. Majid bin Abdullah Al-Qasabi. (SPA)
  • Tayseer working with more than 40 government agencies as well as the private sector
  • Tayseer currently working on more than 300 initiatives that aim to improve the business environment

JEDDAH: In 2018, Saudi Arabia implemented a number of initiatives and reforms that aim to improve its business environment and enhance its competitiveness.
In this regard, the Executive Committee for Improving the Performance of Private Sector Businesses (Tayseer), headed by Commerce and Investment Minister Dr. Majid bin Abdullah Al-Qasabi, monitored and implemented initiatives and reforms to provide a stable and motivating environment for the private sector.
Tayseer works with more than 40 government agencies as well as the private sector, represented by the Council of Saudi Chambers, under one umbrella to empower and develop the private sector.
Tayseer follows the most important international reports in order to improve the Kingdom’s regional and global rankings. They include the Doing Business report issued by the World Bank Group, and the Global Competitiveness Report of the World Economic Forum.
Tayseer is working on more than 300 initiatives that aim to improve the business environment. Following the launch of the Meras platform, starting a business now requires only one step and one day. It used to require 17 days and 10 steps.
Also, business and commercial visas are issued within 24 hours of a mission receiving the request, and commercial delegations’ visas are issued within two days. Previously, the issuance of commercial visas took several weeks.
Business visas do not require an invitation letter, and are issued within 24 hours of a mission receiving the request. Commercial visas through visa service offices are issued within 24 hours. For commercial delegations, the duration for visa issuance has been reduced from 30 days to just two.
The time required to begin receiving electricity services has been reduced to nine days through a two-step process, and compensation mechanisms have been developed to address cases of service interruptions or delays.
Regarding trade, the single-window platform Fasah has been launched to facilitate customs clearance and import and export procedures.
The Saudi Center for Commercial Arbitration was established to settle disputes according to the best international practices.

This article was first published in Arab News

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Interview: Saudi market inclusion a ‘once-in-a-lifetime’ opportunity – Dalma Capital CEO

Time: January 02, 2019  

Dalma Capital Management’s offices in Dubai International Financial Centre

Dalma Capital Management’s offices in Dubai International Financial Centre

Dalma Capital

Dubai-based Dalma Capital Management’s chief executive, Zachary Cefaratti, said that a “confluence of factors” convinced the company to set up the first Dubai International Financial Centre-based Saudi Equities Fund in May this year.

“The first and foremost was the portfolio manager,” Cefaratti told Zawya during an interview at the company’s offices in the DIFC last month.

“This is a star portfolio manager in Saudi equities. So having the chance to work with him was, for us, the key driver, but of course Saudi itself was an opportunistic decision from our side as well,” Cefaratti said.

The Quencia Saudi Equity Open Ended PC will be managed by Dalma Capital’s managing director of asset management, Majed Kabarra, who is the former head of EFG Hermes’ Saudi Arabian asset management business.

Although there are lots of Saudi equities funds already domiciled in the kingdom, Cefaratti said that this is aimed at global investors seeking exposure to the market. He said the inclusion of Saudi Arabia into MISCI’s Emerging Markets index was a “once in a lifetime opportunity” for any market, and that it was likely to drive around $45 billion of investor inflows into the kingdom.

Cefaratti argued that based on historical analysis, the inflows were likely to push price-to-earnings multiples of the Saudi stocks set for inclusion into the 17-19 times range, up from 14.5x as of November 18, according to Eikon data.

“It’s the largest market not to be included (in MSCIs’ Emerging Markets Index) yet. So this is the last big inclusion play for someone to make,” Cefaratti argued.

He also said that the changes that are set to take place in the kingdom “will not impact on companies evenly”, presenting opportunities for asset managers able to carry out fundamental analysis and pick stocks as opposed to merely creating an exchange-traded fund to track the market index.

“The fees that we’re charging are quite competitive – they wouldn’t have been much lower for a passive fund – but we think a passive strategy wouldn’t have delivered to investors the results that they can generate from active management,” Cefaratti argued.

Dalma Capital’s first fund was a hedge fund originally incorporated in Delaware. It was raised in 2012 and was known as the Aesthus Fund, but was rebranded as the Dalma Unified Return Fund when the company relocated to Dubai in 2013, taking its name from Dalma Island in Abu Dhabi, which is known for its pearl fishing.

Early starter

Cefaratti, who is the company’s principal founder and CEO, is a former child actor from California who says that he began investing the proceeds of his paid acting jobs into municipal bonds in the United States at the age of seven, and began trading equities by the time he was 11-12.

He “blew up in the dotcom” era, he admits, when he was holding lots of technology stocks, but got a job in finance aged just 16 through an internship at Washington Mutual (now owned by Chase Manhattan) and continued to work his way through university, when he opened both an insurance and mortgage brokerage, but sold both after graduating to set up a fund management company in 2011 that eventually became Dalma Capital Management.

“I always had a knack for the markets. I had a passion for investment management. I do have conviction that alpha (a measure used by fund managers to calculate the excess return they achieve over a specified benchmark such as the S&P500 or the FTSE 100) can be delivered by a skilled portfolio manager or by portfolio managers that are innovative in their strategies,” he said.

Despite this, he found himself having to change the strategy for his company’s initial fund, the Dalma Unified Return Fund, midway through its lifespan because of the difficulties in generating excess returns.

The huge injection of liquidity by central banks which has taken place across global markets since the financial crisis in late 2008 has largely found its way into financial markets, causing a bull run in most asset classes.

“When the market became quite toppish and equity long-shorts… the risk-reward became less attractive,” he said. The investment strategy for the fund, which is now closed to new investors, changed to focus on private debt.

In an email to Zawya following the interview, Cefaratti said that the fund had managed to generate alpha, with the fund generating a composite compound annualised return of 5.787 percent per annum over a six-year investment period, which he said outperformed the HRRX equity hedge fund index (HRFXEHI), which has delivered a compound annualized return of 3.46 percent over the same period.

Building a platform

Since then, the company has launched a number of other funds, but has also become a provider of fund platforms for hedge fund traders and private equity managers looking to execute their own strategies, providing all of the regulatory and back office services, as well as advising on risk.

Of the 12 funds listed on its website, Cefaratti said the company is managing four internally and is hosting eight on its platform. He also said there are other funds it is working on that are not listed on its site and that in total it has $525 million of assets under management.

The company employs 13 people, although two of these work directly on the Alternative Investment Management Summit – an annual summit for managers of real estate, hedge funds, private debt and private equity funds, family offices and other alternative asset managers. The summit’s 2018 edition is due to take place in Dubai next week at the end of what has been a challenging year for alternative asset managers – especially in the Middle East.

Globally, the HRRX Equity Hedge Fund Index has declined in value by 6 percent since the start of the year, while a Thomson Reuters Index of UAE real estate stocks has declined in value by 27.4 percent by at close on Thursday, 15 November, according to Eikon data.

It is perhaps the private equity that has been hardest hit, though, with the collapse of the region’s biggest and best known operator, Abraaj Group, dampening enthusiasm for the sector and raising questions around governance.

A panel debate takes place during a previous AIM Summit event

Foreign interest

“The situation with Abraaj is certainly a topic that seldom goes unmentioned in meetings with foreign investors these days so it remains a topic of conversation amongst those within the DIFC. It’s unfortunate to see the reputational impact that it’s inevitably having on Dubai, the DIFC, but ultimately it wasn’t really a case of a firm acting… I mean a lot remains to be seen but from what I understand it’s a case of mismanagement at the top level and largesse,” Cefaratti said.

Joint liquidators from PwC were appointed to Abraaj Holding – a Cayman Islands holding company for Abraaj Group – in June this year and investigations into its demise are ongoing, but a review carried out by Deloitte stated that the firm commingled investors’ money with its own to cover a cash shortfall, Reuters reported in June.

“To me, the easiest way of preventing the entire Abraaj scenario… would have been the implementation and use of a third-party fund administrator. And for a firm of that size to not be using a third party fund administrator is certainly not in line with best practice,” Cefaratti said.

“We require all of the funds on our platform to use a third party fund administrator,” he argued, stating that the use of a firm such as Apex Fund Services, with whom it works, was relatively inexpensive as it provides an independent input into the preparation of individual funds’ financial statements.

“So when anyone doesn’t use them it always kind of raises my eyebrows. It’s not going to save the investors any money and it’s removing a very important check and balance,” Cefaratti argued. “Particularly because all these funds are segregated, they’re off-balance sheet. So there’s really no reason not to outsource that function.”

He believes the Abraaj saga has “unfortunately caused a scar that will take a very, very long time to heal”.

“Again, I would say, it’s rare for me in the last six months to have a meeting with a foreign investor or a foreign manager that doesn’t ask about Abraaj. But we will recover, this (Dubai) is a strong financial centre, the DFSA (Dubai Financial Services Authority) is clearly very attentive to it.”

Indeed, he credits the set-up in Dubai, and the advantages it offers to investors, as being the reason for establishing his company in the region.

Alongside the advantages in terms of the timezone it provides between east and west, Cefaratti said that it has “several unique and interesting characteristics”.

Onshore operator

“I view it as the only tax-free – or zero tax, I should say – onshore jurisdiction in the world. When I say onshore, my definition of onshore is that the companies operating there should require substance and substantive operations in the jurisdiction. Whereas Cayman Islands, for example… in our universe we have dozens of companies in the Cayman Islands and I’ve never been there,” Cefaratti explained.

“Everyone in the DIFC has substance here, the DFSA is very rigorous in terms of requiring companies to have real operations here.”

He says that Dalma Capital Management has “consistently” grown during its six years in Dubai, but has focused more on performance than on asset growth as that is how its fees are structured.

“We’ve had a fortunate (time) considering that it’s been a challenging market….for a lot of asset management firms, and for asset managers in general, particularly hedge funds,” he said.

Speaking at the Funds Forum Middle East and Emerging Markets event in Dubai earlier this month, Tarek Sakka, CEO of alternative investment manager Ajeej Capital, said that, for Saudi Arabia, the best strategy for potential investors would be “to identify those market leaders that will be the beneficiaries of this restructuring that’s happening” as a result of the kingdom’s Vision 2030 implementation.

“What we’re seeing is a substantial move from unorganised trade to organised trade. With the changes that are happening, there’s going to be leaders that are going to capture significant market share from the unorganised trade that is going to be challenged, and those will be very compelling opportunities,” Sakka argued during a panel debate at the Dubai-based event.

He also said opportunities would be created around regulatory changes, such as in the insurance sector, and that new sectors would develop in new or under-exploited areas such as entertainment and in catering to religious tourists.

(Reporting by Michael Fahy; Editing by Shane McGinley)

(michael.fahy@refinitiv.com)

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© ZAWYA 2018

This article was first published in ZAWYA

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Saudi logistics sector: Huge prospects in transport projects

Time: December 22, 2018

BASIL M.K. AL-GHALAYINI

This week, I will try to explain the importance of transportation — a key pillar of the Saudi logistics sector — and its growth potential.
Means of transportation are vital for creating an attractive investment environment in every field. They facilitate the progress of the national economy by mobilizing passengers and goods and attract private investments in key transportation projects.
In a push to diversify its economy, Saudi Arabia is determined to increase the role of the private sector in the development of its transport infrastructure, as well as in the operation of seaports, railroads, airports and related supply channels.
Public-private partnerships are being pursued to fund several key schemes, while a number of the country’s publicly operated facilities are being earmarked for full privatization. The plan is to attract investments in the transportation sector worth over SR70 billion by 2020.
Although Saudi Arabia has 26 airports of which three are international, six regional and 16 domestic, the local and international cargo contribution to the Saudi transportation pillar is still limited compared with seaports and land channels.
As for seaports, the country has the largest seaport network in the Middle East with 10 major ports and around 200 piers. There are three industrial and six commercial ports. All ports are managed, operated and maintained by private sector companies under long-term contracts. The ports authority supervises the development of major seaports and modernizing major ports through a strategic investment plan worth SR30 billion ($8 billion).
Rail transport in the country is vital for driving economic development as it provides a cost-effective and competitive mode of transportation, primarily for the mining industry.
A network is also being developed through significant investments. Between 2015 and 2024, the Saudi Arabia General Investment Authority (SAGIA) plans to invest more than $141 billion on rail-related projects.
Road-based transport is also a major form of freight transportation. The government is planning to further expand the road network and improve safety under the National Transformation Plan 2020. The Saudi road logistics market is highly fragmented and competitive, with a number of major players participating, including Crescent Transportation, Almajdouie Transport, and Saudi Land Transport Co.
With several projects and initiatives already underway with strong private sector participation, I strongly believe that considerable investment opportunities await domestic and international players who are eager to participate in the development of Saudi Arabia’s promising transportation sector.

Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.

This article was first published in Arab News

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Leading Emirates health care, education investor eyes Saudi Arabia

Time: December 10, 2018

Abhishek Sharma worked as a financial analyst at Bank of America, Merrill Lynch and Lehman Brothers before launching Foundation Holdings in 2016. (Supplied)

LONDON: Since launching Foundation Holdings in 2016, Abhishek Sharma has scoured the GCC and India for investment opportunities.

Now, the prominent UAE health care and education investor is closing in on targets in Saudi Arabia.

“We are eyeing two interesting investments in KSA at the moment. Saudi Arabia accounts for between 40 percent and
50 percent of the GCC’s GDP (gross domestic product), so it cannot be overlooked.”

He added: “The reforms taking place are truly fantastic … the exuberance and the youth … the pace of change.”

Foundation aims to invest $550 million in GCC and Indian companies by 2021, roughly evenly split between the two regions. Already there are two solid strings to Foundation’s bow; one is a venture called One Living, which involves an alliance with UAE real estate developer Bloom Holding to develop accommodation for teachers and doctors in the UAE. Secondly, it has established a health care operator called Right Health, acquiring almost three dozen clinics and a pharmacy.

Sharma admits to being both idealistic and commercially minded.

“Education flows in my blood. My mother was a teacher in Dubai and then she went on to become the vice dean of the American College in Dubai,” he said.

Sharma said the GCC’s K-12 education sector was expected to be worth $26 billion by 2023, almost double what it is now, according to Boston Consulting.

“In KSA alone the K-12 market will catapult from being worth $5 billion this year to $12 billion by 2023.”

Sharma kicked off his career at Lehman Brothers in the US, and has worked for Merrill Lynch and Sun Capital where he built up an expertise in telecoms and media. Education is a passion for him.

“At Foundation we have always believed that the biggest walls are not with North and South Korea, or the US versus China, it’s actually due to fact that 50 million kids don’t go to school, 250 million go to failing schools, poor teachers, inadequate infrastructure and so on,” he said.

“The gaps we see in education  — and health care is in the same boat  — are massive. When I looked at these markets, I became more intrigued both personally and commercially.”

Sharma is a former head of education investments at Dubai-based Amanat Holdings and held a senior position at Ithmar Capital, where he helped to list Abu Dhabi health care provider Al Noor Hospitals Group in London in 2013 (Ithmar was a significant shareholder in Al Noor).

Since his return to the UAE from the US in 2008, Sharma has noted that a dozen health care groups have listed on local exchanges. His prediction is that 10 years out, education will take off in a similar way. “In the GCC, education is on the cusp of a golden run and we will see household names coming to market,” said Sharma.

Foundation invests on behalf of six family offices across the Arabian Gulf, and its shareholders include the Sharma family and chairman Murtadha Ahmed Sultan, also a director of Omani engineering firm WJ Towell. Foundation likes to take at least a 25 percent stake in target companies for between $15 million and $40 million.

Sharma said Foundation tends to be an active shareholder with the idea being to grow a company, fix things that may need fixing, grow revenues, work with management in a constructive way and prepare it for an IPO down the line.

Until now, most of Foundation’s investments have been in the GCC, where “because of the cycle, we have found some very attractive opportunities, prices were competitive and we were able to move quickly.”

Sharma is a glass-half-full sort of person. Is the world a more troubled place than 20 to 30 years ago?

“Yes, the headlines are more negative these days. But there have been phenomenal advances, in medical technology — people are healthier and live longer. The same with education. The pace of progress and the technology means youngsters have more opportunity to grasp things compared to what I had when I was growing up in India.”

He added: “I always believe that my best day is tomorrow, the day that hasn’t come,” he said.

“People forget the world is changing in a positive way. I personally don’t believe we are in a more troubled place. I feel the borders today are more like nets, not physical borders of earlier times. Today people and youth are exposed to things very quickly.”

In days gone by, he said, people thought what was happening in Korea had nothing to do them so didn’t really care.

“But what happens in Korea does matter because it impacts China, it impacts the US and ultimately impacts GCC and emerging markets,” said Sharma.

“And for me and Foundation, I better know what’s happening because it affects my investment strategy.”

The way Sharma sees it, among the big issues going forward is how to get kids educated.

“The biggest walls today are about inequality, poverty. If you solve those problems a lot of other things would, hopefully, more easily fall into place.”

Few would argue with that.

This article was first published in Arab News

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9 areas open for investment in Haj and Umrah sectors

Time: November 27, 2018   

Sara Al-Ayed

By Zain Anbar

Okaz/Saudi Gazette

JEDDAH — Some nine areas of activity in the Haj and Umrah sector are available for investment by male and female entrepreneurs, Deputy Chairperson of the National Committee for Entrepreneurship at the Council of Saudi Chambers Sara Al-Ayed told Okaz on Tuesday.

A program is set to be launched in cooperation with the related authorities to acquaint entrepreneurs of these opportunities.

The opportunities are in fields like packaging, import and supply of food and beverages, public health, financial solutions, transport, crowd management, traffic flow control, travel and accommodation, waste management and housing, Al-Ayed said.

She expects growth in activities in digital economics including e-commerce, e-services, supply chain sectors, and logistics performance, among others.

This article was first published in Saudi Gazette

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Desalination in Saudi Arabia: An attractive investment opportunity

Time: November 25, 2018 

  

Saudi private-sector companies and their global counterparts operating in the desalination, water treatment and renewable energy sectors have benefitted from a win-win partnership in major desalination projects initiated by the Saudi government over the past few decades. The future looks even more promising as further investment opportunities present themselves.

Since its initial launch in 1928 by King Abdul Aziz, the desalination industry in Saudi Arabia has evolved significantly. At the outset, machinery was brought in for seawater distillation, providing a much-needed supply of fresh water for Jeddah residents as well as for Hajj and Umrah pilgrims arriving in Jeddah by sea.

Saudi Arabia ranks among the top five countries in the world in terms of water scarcity. In order to meet this challenge, substantial investment has been made in seawater desalination, water distribution and wastewater treatment. Today, about 50 percent of the country’s drinking water comes from desalination, 40 percent from the mining of non-renewable groundwater, and only 10 percent from surface water in the mountainous regions, particularly the southwest.

Thanks to heavy investment in water desalination, Saudi Arabia now leads the world in the production and consumption of desalinated water. This thriving sector counts 31 desalination plants in 17 locations, operated and managed by more than 10,000 employees. Several more desalination plants are under construction with a budget of SR91 billion ($24.3 billion) through 2020.

In 2017, the Saline Water Conversion Corp. (SWCC) — the Saudi government corporation in charge of seawater desalination — produced a record 1.4 million additional cubic meters of desalinated water in 13 months, almost equivalent to the construction of a new desalination plant worth SR13 billion, without any additional capital costs. The SWCC was recognized by the Guinness Book of World Records as the largest water desalination company in the world, with a daily production capacity of 5 million cubic meters.

The idea of privatizing the SWCC, which falls under the Saudi Vision 2030 reform plan, has been a topic of debate for several years. The state-owned company, which is responsible for almost 60 percent of desalination in the Kingdom, has been making changes to its structure and operations to facilitate the transition for some time.

The Electricity and Cogeneration Regulatory Authority foresees an investment of SR300 billion required for desalination projects in the Kingdom over the next two decades. This scale of investment — necessary for the growth and development of this vital sector — presents highly attractive investment opportunities both for the Saudi private sector and global companies in the field of water desalination, water treatment and renewable energy.

 

• Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.

 

This article was first published in Arab News

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