Startup Wrap – Saudi firms continue to lead regional activity

Updated 26 October 2024

Nirmal Narayanan

October 26, 2024 10:40

RIYADH: Saudi Arabia’s neighbor UAE was the favorite destination for the Kingdom’s non-oil goods in August, with exports seeing a monthly rise of 10.42 percent to reach SR6.78 billion ($1.81 billion).

According to the General Authority for Statistics, Saudi Arabia exported mechanical and electrical equipment amounting to SR2.78 billion to the country, representing a 16.80 percent increase from the previous month.

Outbound shipments of transport equipment to the UAE reached SR2.17 billion in August, marking a month-on-month rise of 57.24 percent.

Bolstering the non-oil private sector is a crucial part of the Kingdom’s Vision 2030 agenda, as it steadily pursues economic diversification by reducing its dependence on crude revenues.

Other major shipments to the UAE in August were chemical products valued at SR448.2 million, and plastic and rubber items amounting to SR359.1 million.

Affirming the growth of Saudi Arabia’s non-oil private sector, the Kingdom’s Purchasing Managers’ Index reached 54.8 in August, and later accelerated to 56.3 in September.

According to the Riyad Bank PMI report, compiled by S&P Global, Saudi Arabia’s growth in the non-oil private sector was driven by improved sales momentum and rising new orders in August and September.

The report also emphasized the significance of non-oil sector growth, given current crude production cuts and declining global oil prices, and added that the Kingdom is better positioned to navigate the challenges of market fluctuations for the commodity.

Other top destinations for Saudi Arabia’s non-oil goods

According to GASTAT, China was another major destination for Saudi Arabia’s non-oil goods, with exports to the Asian giant amounting to SR2.27 billion, representing a marginal decline from SR2.38 billion in July.

The authority revealed that China imported chemical and allied products worth SR1.11 billion in August, followed by plastic and rubber products amounting to SR786.3 million.

In August, Saudi Arabia also exported mineral products amounting to SR176.6 million to China, while outbound shipments of base metals totaled SR78.7 million.

India was another major destination for the Kingdom’s non-oil products, with outbound shipments to the Asian nation in August totaling SR2.08 billion.

According to GASTAT, India imported chemical products worth SR1.55 billion, while the outbound shipment value of plastic products and base metals to the Asian nation stood at SR497.1 million and SR366.1 million, respectively.

Other top destinations for Saudi Arabia’s non-oil goods in August were Singapore, Belgium, and Egypt, which imported goods valued at SR1.22 billion, SR896.8 million, and SR842.9 million, respectively.

In August, Bahrain imported non-oil goods worth SR816.8 million from Saudi Arabia, followed by Turkiye and Jordan at 797.6 million and SR787.9 million, respectively.

Overall, Saudi Arabia’s non-oil exports – including re-exports – in August reached SR27.52 billion, representing a 7.5 percent rise compared to the same month in the previous year.

Compared to July, the Kingdom’s non-oil outbound shipments witnessed a rise of 8.13 percent in August.

An outlook of overall merchandise exports

GASTAT revealed that Saudi Arabia’s overall merchandise exports, however, declined by 9.8 percent in August compared to the same month of the previous year, driven by a 15.5 percent decline in oil sales.

As a result, the percentage of oil out of total exports decreased to 70.3 percent in August, from 75.1 percent in the same month in the previous year.

To stabilize the market, Saudi Arabia cut its oil production by 500,000 barrels per day in April 2023, a reduction now extended until December 2024.

According to the authority, Saudi Arabia sent overall merchandise exports worth SR14.83 billion to China in August, followed by South Korea at SR8.94 billion and India at SR8.82 billion, respectively.

The strong flow of Saudi exports to China signifies strong bilateral relations between the nations. The Kingdom has been the largest trading partner of the Asian powerhouse in the Middle East since 2001, and bilateral trade between the nations reached $107.23 billion in 2023.

China and Saudi Arabia are strategic partners in various sectors, including energy and finance, as well as the Belt and Road Initiative.

According to GASTAT, exports worth SR17.71 billion were sent to other countries through sea by Saudi Arabia in August, while outbound shipments via land and air totaled SR5.03 billion and SR4.78 billion, respectively.

King Fahad Industrial Sea Port in Jubail was the main exit point for Saudi Arabia’s exports with goods valued at SR3.67 billion.

Al-Batha Port handled outbound goods worth SR1.78 billion, while exports worth SR881.9 million passed through Al-Hadithah Port.

Among airports, King Khalid International Airport and King Abdulaziz International Airport handled export goods worth SR2.38 billion and SR1.84 billion, respectively.

Saudi Arabia’s imports in August

According to the GASTAT report, the Kingdom’s overall imports decreased by 3.93 percent in August compared to the same month of the previous year, reaching SR64.78 billion.

The Kingdom imported goods worth SR14.37 billion from China, led by mechanical appliances and electrical equipment valued at SR6.22 billion.

Official data added that Chinese imports of transport equipment and base metal products amounted to SR1.61 billion and SR1.24 billion respectively.

In August, Saudi Arabia also imported plastic and rubber products worth SR862.5 million from the Asian giant, while inbound shipment value of textiles and work of arts stood at SR838.9 million and SR799.4 million, respectively.

On the import side, China was closely followed by the US and India, with incoming shipments from these nations to the Kingdom valued at SR6.22 billion, and SR4.02 billion respectively.

German imports to Saudi Arabia amounted to SR3.05 billion in August, while inbound shipments from the UAE and Italy were worth SR2.63 billion, and SR2.51 billion, respectively.

According to the report, inbound shipments worth SR39.60 billion came to Saudi Arabia via the sea, while imports valued at SR16.87 billion, and SR8.31 billion came via air and land, respectively.

King Abdulaziz Port in Dammam was the primary entry point for goods in August through sea, with imports valued at SR18.48 billion, representing 28.5 percent of the total inbound shipments.

Jeddah Islamic Port handled inbound shipments worth SR13.65 billion, while King Abdullah Sea Port and King Fahd Industrial Sea Port were entry points to goods valued at SR1.24 billion and SR1.02 billion, respectively.

The report revealed that King Khalid International Airport in Riyadh welcomed inbound shipments worth SR8.57 billion in August, followed by King Fahad International Airport and King Abdulaziz International Airport, which handled imports valued at SR4.02 billion, and SR3.99 billion, respectively.

Al-Batha Port handled incoming shipments coming through land valued at SR3.54 billion, while Riyadh Dry Port was the entry point to imports worth SR2.77 billion.

Updated 26 October 2024

Dayan Abou Tine

October 26, 2024 10:35

RIYADH: Sovereign wealth funds across the Gulf Cooperation Council signed off $55 billion across 126 transactions in the first nine months of 2024, accounting for 40 percent of global deals, a new report showed.

US-based organization Global SWF, which monitors the activities of these bodies, identified the region’s “Oil Five”— Abu Dhabi’s ADIA, ADQ, and Mubadala, along with Saudi Arabia’s Public Investment Fund and Qatar’s Qatar Investment Authority — as leading this robust investment wave.

Currently managing $4.9 trillion in assets, GCC sovereign wealth funds are projected to surpass $5 trillion by early 2025 and could reach $7 trillion by 2030, the report said.

Additionally, central banks in the region are seeing significant increases in foreign reserves that may be funneled into these funds.

Traditional markets, such as the US and UK, remain primary targets for GCC investments, attracting $18.9 billion and $9.5 billion, respectively, over the past year.

China is rapidly rising in prominence, drawing $9.5 billion from GCC investors during the same timeframe.

GCC SWFs have rapidly ascended as dominant players on the global investment stage, capitalizing on a unique mix of high oil revenues, strategic reforms, and market-savvy investment approaches.

Elevated oil prices in recent years have bolstered these funds, allowing them to expand organically — through robust market performance — and through governments channeling excess capital and state-owned assets into SWFs.

Additionally, low debt levels across GCC governments mean they can issue debt selectively, safeguarding fiscal sustainability even when oil prices dip.

Tax reforms, like VAT and corporate levies, further contribute to a more resilient financial foundation, fortifying regional economies against volatility.

A deepening focus on diversifying revenue sources also fosters resilience, seen through investments in sectors including technology, infrastructure, and renewables.

Adding to this is the expansion of GCC financial markets, now home to seven active stock exchanges and over 877 listed companies with a combined market capitalization of $4.3 trillion.

Altogether, these factors position GCC sovereign investors as influential, stable forces capable of shaping financial landscapes both regionally and globally.

Global SWF noted that GCC sovereign wealth funds hold a unique geopolitical edge, maintaining solid relationships with both Western and Eastern powers, which enhances their strategic agility in global investments.

Furthermore, these funds command substantial influence domestically, controlling 70 percent of equity markets within the GCC— a clear testament to their significant impact on both local economies and international financial landscapes.

Saudi Arabia is intensifying its focus on domestic investment, with the Kingdom’s PIF driving major growth in local projects.

The fund’s assets surged 29 percent to reach $765.2 billion in 2023, largely through directing money into Saudi infrastructure and real estate, which grew 15 percent to SR233 billion.

PIF’s assets are expected to exceed $1 trillion by 2025, making it a global heavyweight.

The report said that Saudi Arabia stands out as the largest economy in the GCC, contributing half of the region’s $2.2 trillion activity. By 2029, the Kingdom’s GDP is expected to hit $1.43 trillion, making up 51 percent of the GCC’s projected GDP of $2.8 trillion.

This growth is being driven by non-hydrocarbon sectors, reflecting Saudi Arabia’s ambitious Vision 2030 plan aimed at reducing its reliance on oil and gas while boosting sectors like tourism, entertainment, and renewable energy.

PIF plays a critical role in this transformation by strategically deploying capital across various industries to diversify the economy.

Emerging trends in FDI, debt Issuance, and partnerships

Most GCC countries have crafted long-term strategic plans aimed at fostering economic growth and reducing oil dependency, with a focus on attracting foreign direct investment for sustainability and resilience.

According to the report, over the past six years, approximately 84 percent of FDI inflows into the GCC have been directed toward Saudi Arabia and the UAE, with significant increases noted between 2021 and 2023.

The region now accounts for 4.2 percent of global FDI inflows, up from 1.3 percent in 2019.

According to the Saudi Ministry of Investment’s latest report, the Kingdom’s money from foreign investment hit $25.6 billion in 2023, exceeding the National Investment Strategy target by 16 percent.

Saudi Arabia aims to increase FDI to 5.7 percent of its nominal GDP by 2030, a significant rise from the current 2.4 percent, with a goal of attracting $100 billion annually.

GCC SWFs are also increasingly raising third-party capital as part of their strategic plans, enhancing risk management and ensuring long-term sustainability.

According to the report, Mubadala stands out as the most successful fund in this area, having issued 36 bond tranches totaling $29.2 billion since its inaugural $1.8 billion dual-tranche bond in 2009.

Additionally, Mubadala has secured $18 billion in equity from both domestic and international investors. Other funds in Abu Dhabi, like ADQ, have also entered the bond market, with ADQ issuing a $2.5 billion bond in May 2024.

Saudi Arabia’s PIF has raised $21.9 billion through 15 bond tranches, and is preparing to issue a 3-year sukuk and an 8-year green bond.

According to S&P Global, Saudi Arabia and the UAE are set to continue leading the Middle East’s sustainable bond market, having issued $16.7 billion in the first nine months of 2024.

The agency predicted ongoing strong activity in this sector, spurred by banks and the rising importance of green bonds.

PIF has been at the forefront, raising $3 billion in 2022 and $5 billion in 2023 through these tools, with $5.2 billion allocated to environmentally focused projects as of June 2024.

Green sukuk, which fund renewable energy initiatives, are gaining momentum, now accounting for 35-40 percent of sustainable bond issuances in the region, up from 25-30 percent at the end of 2023.

Global SWF also said that the region’s funds have actively pursued bilateral investment agreements, often exceeding $5 billion, particularly as the COVID-19 pandemic subsided.

PIF has established subsidiaries in countries like Egypt and Iraq, while Mubadala has launched Country Investment Programs to strengthen economic ties with nations such as France and the UK.

Collaboration with local sovereign funds has been prevalent, especially in Egypt, where PIF pledged $10 billion to stabilize the economy.

Turkiye has also attracted attention, with ADQ launching a $300 million technology fund and making significant earthquake relief pledges.

The UK remains a key focus for Gulf SWFs, with substantial post-Brexit investment commitments.

While actual investments may not always meet lofty targets, these agreements lay important groundwork for future capital deployment.

• Al-Sayari speaks of organization’s critical role

Updated 25 October 2024

Arab News

October 25, 2024 21:16

WASHINGTON DC: Ayman Al-Sayari, the governor of the Saudi Central Bank, emphasized on Friday the resilience of the global economy despite ongoing challenges.

Speaking at the International Monetary and Financial Committee during the IMF and World Bank Group annual meeting, he noted positive signs of growth and a gradual decrease in inflation, but cautioned about rising global sovereign debt, calling for credible fiscal and debt management reforms to sustain financial stability.

Al-Sayari highlighted the International Monetary Fund’s critical role in fostering consensus and supporting international trade by countering protectionist practices.

He praised the body’s policy advice and technical assistance as essential for countries seeking economic resilience.

Al-Sayari also spoke of the Kingdom’s robust non-oil growth, low inflation, record-low unemployment, and solid banking sector as outcomes of Vision 2030’s economic transformation agenda.

Since the beginning of the COVID-19 pandemic Saudi Arabia has provided over $36 billion in development assistance and contributed more than $200 million to the IMF’s Poverty Reduction and Growth Trust’s Subsidy Account, he added.

He concluded by stressing the importance of multilateral cooperation to tackle rising debt and economic vulnerability in low-income nations, warning that inaction risked a global debt crisis that could destabilize the financial system.

Updated 25 October 2024

Dayan Abou Tine

October 25, 2024 15:08

RIYADH: Saudi Arabia’s capital Riyadh is poised for significant population growth, with the number of residents projected to rise from 7 million in 2022 to 9.6 million by 2030, according to a new report.

London-based real estate consultancy Knight Frank projects that the city’s population will comprise 4.1 million Saudis and 5.5 million expatriates by the end of the decade, marking a 38 percent increase driven by a compound annual growth rate of 4.1 percent.

This will drive a need for 305,000 additional housing units for Saudi nationals between 2024 and 2034, driven by household formation, increased homeownership, and internal migration from other regions.

The forecast predicts greater growth than envisaged by World Population Review, which in April used UN figures to put Riyadh’s 2030 population at 8.5 million.

The Knight Frank report anticipates a significant rise in the expat population in Riyadh, which on current figures makes up approximately 52.3 percent of the city’s total population. 

It projects an increase of 1.85 million expats by 2030, followed by an additional 2.3 million by 2034. As a result, the ratio of Saudi nationals to non-Saudis is expected to decline from 0.92 in 2022 to 0.75 by 2030.

This shift is primarily driven by the rising demand for expat workers needed to support the construction of large-scale developments and manage the new facilities in Riyadh.

Estimating housing demand from this group is challenging due to variations in household sizes, according to Knight Frank, but 77 percent of expats indicated a desire to own their homes in a previous survey conducted by the firm.

Riyadh’s growth is underpinned by Saudi Arabia’s Vision 2030, which aims to diversify the economy and increase global investments. Currently, Riyadh makes up 21.8 percent of the Kingdom’s total population, with 17.8 percent of Saudi nationals living in the capital.

With the Regional Headquarters Program encouraging multinational companies to relocate their regional operations to Saudi Arabia, Riyadh has naturally become the focal point for economic activity.

This initiative, combined with significant infrastructure and urban development projects, is driving both the expatriate and Saudi populations to rise.

Major projects, such as the New Murabba and Diriyah Gate, are further establishing Riyadh as the center of Saudi Arabia’s transformation.

Riyadh is also gearing up for Expo 2030 and World Cup 2034, which will see the construction of eight out of 11 new stadiums. To support this growth, the King Salman International Airport will be established, along with Riyadh Air, connecting the capital to 100 global cities.

According to the Ministry of Investment’s latest report, the capital led foreign direct investment inflows in 2023, attracting SR33 billion — positioning Riyadh as the leading administrative region.

This growth reflects the city’s role as both the Kingdom’s political and economic powerhouse, where investor confidence is bolstered by large-scale developments and strategic government initiatives.

With 62 percent of the population under 30 according to Knight Frank, the city is focused on providing new housing, employment opportunities, and recreational options to meet the demands of its young and rapidly growing demographic.

Riyadh’s workforce to expand by 39 percent by 2034

Knight Frank forecasts the number of working-age Saudi nationals in Riyadh will increase by about 1 million over the next decade, reaching 4.2 million, which corresponds to a compound annual growth rate of 2.8 percent.

If internal migrants relocate to Riyadh for work, this could add another 275,000, resulting in a total workforce growth of 36 percent.

As of the first quarter of 2024, the employment-to-population ratio for working-age Saudi nationals is 54.3 percent, suggesting that around 510,000 new local employees may enter the workforce by 2034.

With an estimated existing workforce of 1.7 million Saudis in the region, overall growth could yield an increase of 16 percent to 23 percent by 2030 and 29 percent to 39 percent by 2034, depending on the scale of internal migration.

During this recent period, new workforce entrants were primarily absorbed by the private sector and government-related entities, while employment in the civil service has remained stable, the report said.

According to latest figures from the World Bank, female labor force participation has reached 34.5 percent, exceeding the Vision 2030 target of 30 percent and prompting a new goal of 40 percent by 2030.

Both government and private sectors are implementing legal reforms and initiatives to empower women, with programs focusing on women’s roles in economic development.

Companies such as Red Sea Global are prioritizing gender diversity, with women occupying significant positions across various departments.

Meeting future demand

Riyadh’s new housing supply comes from four main sources, including the Ministry of Housing, which oversees affordable projects through the National Housing Company and private firms.

There are also government developments led by the Public Investment Fund and Roshn, private sector initiatives from real estate companies, and self-development by families purchasing land for construction.

Currently, about 330,000 housing units have been announced by government-related entities.

The projected demand from Saudi nationals is estimated at 220,000 units from 2024 to 2030 and 305,000 units from 2024 to 2034, suggesting that current construction efforts align with expected housing needs.

Knight Frank reported that significant commercial real estate development is underway in Riyadh to support a projected 32 percent increase in office space and a 24 percent rise in retail space by 2030, driven by an expanding workforce and a growing expat population.

The urgency for new projects across sectors like financial services, transport, storage, and ICT is underscored by tight market conditions.

Riyadh accounts for 30 percent of Saudi Arabia’s financial and business services output and 39 percent of transport, storage, and ICT output, reinforcing its status as a key hub for innovation and economic activity.

Updated 25 October 2024

MANAL AL-BARAKATI

October 25, 2024 12:30

RIYADH: Saudi Arabia is rapidly positioning itself as a global leader in wellness tourism, a sector that promises significant economic returns while aligning with the Kingdom’s Vision 2030. 

With the market expected to reach $1.1 trillion by 2025, the Kingdom is strategically focusing on this burgeoning industry to diversify its economy and enhance the quality of life for residents and visitors, a report by Red Sea Global highlighted.

The rise of wellness tourism in Saudi Arabia reflects a broader transformation within the Kingdom as it seeks to establish itself as a premier destination for global travelers seeking health, well-being, and cultural enrichment.

Wellness tourism: A lucrative market

The global wellness industry, currently valued at $5.6 trillion, is projected to grow to $8.5 trillion by 2027. 

This growth is being driven by an increasing global focus on fitness and well-being, particularly in the wake of the COVID-19 pandemic, which has heightened awareness around the importance of physical and mental health. 

Within this expansive market, wellness tourism alone was valued at $436 billion in 2020 and is expected to grow at an annual rate of 21 percent by 2025. 

This rapid growth underscores the significant opportunities that this industry presents for countries such as Saudi Arabia, which are keen to diversify their economies beyond oil.

The Kingdom is harnessing this growth to drive tourism’s contribution to the national GDP, a key objective under Vision 2030, which aims to increase its share of the economy from 3 percent to 10 percent by the end of the decade.

The Kingdom’s focus on wellness tourism is not just about capitalizing on a lucrative market but also about transforming the overall landscape by offering unique, high-quality experiences that cater to this growing global demand.

Speaking to Arab News, Fahad Mushayt, CEO of the Saudi Tourism Investment Co., also known as ASFAR, emphasized the economic potential of this sector, saying: “International wellness tourists spend, on average, 35 percent more than traditional leisure travelers. This is a market segment that we cannot afford to ignore as we aim to welcome over 150 million visitors by 2030.” 

This higher spending is crucial for driving the Kingdom’s tourism revenues, particularly as it seeks to attract high-spending international visitors who are increasingly looking for destinations that offer more than just relaxation. Travelers are seeking comprehensive wellness experiences that combine physical, mental, and spiritual well-being.

Economic impact and Vision 2030

The substantial investments in wellness tourism are a critical component of Vision 2030, which seeks to reduce the Kingdom’s reliance on oil.

The growth of wellness tourism is expected to play a pivotal role in increasing the broader sector’s contribution to non-oil GDP, thus supporting broader reforms that are designed to make the Kingdom more resilient in the face of global economic fluctuations.

Shahbaz Tufail, executive vice president of DAR Engineering, told Arab News: “The ongoing development of new entertainment options, as well as aligning value and service propositions to the international travel palette, clearly demonstrates the intent of Vision 2030.

“To appeal to a broader audience, providers must align with global hospitality and travel trends such as ecotourism, wellness, smart hotels, sustainability, and AI.”

The development of luxury wellness resorts, such as those in Riyadh and the Red Sea region, is a key strategy to attract high-end tourists. 

Riyadh’s visitation targets, for example, are projected to more than double from 13.6 million in 2022 to 27.4 million by 2030, driven by the expansion of wellness-focused hospitality offerings. 

These figures highlight the Kingdom’s ambitious plans to not only increase the number of visitors but also to enhance the quality of their experiences, ensuring that Saudi Arabia becomes a destination of choice for wellness travelers from around the world.

The focus on this form of tourism is also expected to generate significant employment opportunities, particularly in the hospitality, healthcare, and wellness sectors. 

As the Kingdom continues to develop its wellness tourism infrastructure, it will require a skilled workforce to meet the demands of this growing industry. 

This will not only create jobs but also contribute to the development of a more diverse and knowledge-based economy, in line with the objectives of Vision 2030.

Meeting global wellness trends

Saudi Arabia is not only responding to global wellness trends but also setting new benchmarks. 

The growing demand for retreats that focus on mental health, advanced diagnostic services, and culturally immersive wellness experiences is being met with innovative offerings across the Kingdom. 

AMAALA, for instance, integrates traditional healing practices with modern wellness technologies, appealing to travelers seeking authenticity and luxury. 

This combination of tradition and innovation is a key strength of Saudi Arabia’s wellness tourism sector, offering visitors unique experiences that cannot be found elsewhere.

AMAALA also offers family-friendly wellness programs, which are becoming increasingly popular as more people look for travel experiences that promote health and well-being for their loved ones as well as themselves. 

Men-specific retreats are also  gaining traction, reflecting a broader shift towards inclusivity in this market. These offerings ensure that Saudi Arabia remains a competitive destination in the global wellness industry, appealing to diverse demographics and ensuring it becomes a significant driver of the Kingdom’s economic growth.

Strategic developments in wellness tourism

Saudi Arabia’s commitment to wellness tourism is evident in flagship projects like AMAALA and the Red Sea, developed by Red Sea Global, known as RSG. 

These projects are part of a broader strategy to position the Kingdom as a global leader in luxury and sustainable tourism. 

AMAALA, situated on the northwest coast, is set to become the Kingdom’s premier wellness hub, focusing on luxury and sustainability. 

By 2040, the project aims to deliver a 30 percent net conservation benefit to local ecosystems, showcasing its commitment to environmental stewardship. This commitment to sustainability is a key differentiator for Saudi Arabia’s wellness tourism sector, setting it apart from other global destinations.

The economic impact of these projects is significant. With 79 hotels planned across the Red Sea and AMAALA, these destinations are projected to contribute SR33 billion ($8.79 billion) annually to the Kingdom’s economy upon completion. 

Covering a combined area of more than 32,000 sq. km, these projects are not only about luxury but also about sustainability. 

The Red Sea destination is entirely off-grid, powered by 760,000 solar panels, and the project is scheduled for full completion by 2030. 

The scale of these developments reflects the Kingdom’s broader vision to lead in sustainable tourism, setting new benchmarks in environmental responsibility while attracting an international audience.

As the global wellness tourism sector continues to grow, Saudi Arabia is well-placed to capitalize on this trend, driving economic growth, creating jobs, and enhancing the quality of life for its citizens and visitors alike.