2020 has been hard on many companies, but this isn't another COVID article about business challenges; this is about how you can make moves now to start 2021 in a strong position. Saudi Arabia is one of the most important business destinations in the Middle East, with a fast growing market and high consumer spending power, coupled with many new government-funded initiatives seeking top international vendors. Competition is still relatively low but as the rules for foreign investment have changed to make it easier to expand to the Kingdom, competition won’t stay low for long.
Historically, companies that wanted to do business in Saudi Arabia needed to have a local partner, and, even with that partner, establishing a business in the country was extremely hard--both in terms of time and financial burden. This is not the case anymore as the Saudi government has opened up 100% foreign ownership across a variety of industries and has made setting up relatively easier.
If you have been considering expanding to Saudi Arabia, now is the time to take your position in the market, before your competitors do.
Why Set Up in Saudi?
The government has been actively investing in the development of several key sectors such as tourism and leisure, manufacturing, technology and digital, which are all seeing rapid growth due to policy reforms and many new government contracts. As part of the Vision 2030 master plan, the infrastructure of the country is being reshaped, with a focus on the education, healthcare and housing sectors and integrating the financial sector with international markets and banking systems. The government has started to privatize various government assets and services; in 2020 alone this is forecast to create over 10,000 private sector roles. All of these government projects are only open to companies that are set up locally, so to gain access to these bids you need to have a local entity established first.
There have been key steps to develop and nurture the SME sector, including Monsha’at, the department that works to remove regulatory, procedural and informational obstacles faced by SMEs. The amount of venture capital available to Saudi-based startups has mushroomed over the last few years, with funds like STV (over $500m USD in capital) fueling growth-stage companies and a network of other smaller funds and government programs supporting earlier stage startups.
There has been a big push to digitize many areas, including government processes and using electronic payments. The Saudi Monetary Agency has undertaken a number of initiatives, including the introduction a regulatory sandbox for fintech companies, licensing dozens of such cutting-edge technology companies in the last year.
The Kingdom has high consumer purchasing power and consumer optimism has remained steady throughout the COVID-19 pandemic.
Competition across many sectors has been low for a number of years due to complicated requirements for foreign companies to enter; however, this has been changing since the 2016 announcement of Vision 2030 and there is an expected rush of foreign companies to be the first movers into the market.
Why now?
With many sectors now open for 100% foreign ownership and with no minimum capital requirements, we are seeing a growing number of businesses interested in expanding to the Kingdom. The number of companies established increased by 54% in 2019 from 2018 according to official figures from Invest Saudi, and although COVID-19 has delayed some company expansion plans in 2020, there is still significant interest from companies that have decided to make the move.
Forward-thinking companies that expand to Saudi Arabia now will be able to get that competitive edge but fast action is needed to be first. If you are waiting to start your setup process, this is your call to action! We want to get you ready for 2021 and have your company established in Saudi by the start of the new year.
Although the landscape has changed, with government-backed initiatives, increased access to funding and local talent, incubator and accelerator programs and many operational processes moved online, there are still challenges.
We advise that there is a minimum timeline of three months to fully complete the setup process--although it can be longer for complex company structures--so starting now for a 2021 presence is essential.
Daniel Bateman, Business Development Lead at AstroLabs urges companies to act now to be ready for 2021: "Although these may be unprecedented times, being an early entrant into an emerging market gives any firm an almost insurmountable head start. While your competitors are pulling back due to the uncertainty around COVID-19, this is your opportunity to lean in and be in a position to build a durable first-mover advantage towards improving your market share and/or profitability over a long period. If you plan on being operational in Saudi Arabia by January 2021, now is the time to initiate the setup process as it takes approximately three months to fully establish a 100% foreign-owned company in the Kingdom."
Nabil Awan from Cold Chain Packing expanded to Saudi Arabia this year “In line with our strategy towards digital transformation, we decided to pursue our long-term commitment to the Kingdom of Saudi Arabia, officially registering Cold Chain Packing & Logistics with the support of Astrolabs under the Ministry of Investment from April 13th, 2020.
We strongly believe digital is the new normal and no longer just an option, so our roadmap includes new digital products, services and workshops to support our clients with exceptional user experiences.
We are excited about this new development as it allows us the opportunity to support the future of the Kingdom’s 2030 Vision and local content drive. Astrolabs have been the ideal partner in helping set up in KSA during a time of uncertainties. The regular support and communication was key during the set up phase.”
How to start ?
Working with a knowledgeable, reliable local partner will reduce the setup timelines as opposed to trying to manage the process alone. The partner will be able to guide you not only through the company set up process but also post setup, enabling you to have the best start with your business in Saudi Arabia. Make sure the partner you select is covering all 16 steps needed to fully establish your company and you aren’t left with delays from missed steps.
If you are interested in setting up now to be ready for 2021, AstroLabs can help you. Over the last couple of years, our dedicated operations team in Riyadh has helped 60+ companies from around the world by acting on their behalf to set up--navigating the different government entities and processes that are required to expand into the Kingdom. We’ll help you issue all of the required licenses to operate your company in Saudi Arabia, including registering with the Ministry of Investment, Ministry of Commerce (Commercial Registration), Chamber of Commerce, Ministry of Labor, General Organization for Social Insurance, General Authority for Zakat and Tax, and Wasel Address.
After we complete these steps, you’ll be able to open a bank account, sponsor visas and start doing business legally in Saudi Arabia. We also include three months of coworking at AstroLabs Riyadh for the first member of your team, giving you a soft-landing office in a community of like-minded people and one less thing to worry about.
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