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Why 2021 should be the year you expand your business into Saudi Arabia

Why should you consider expanding your business to Saudi Arabia – the largest economy of the Middle East?

  • Multiple Government initiatives, policies and regulatory changes attracting foreign investments

  • Geographical advantage of having direct access to three continents – Asia, Africa and Europe

  • Privatization of many industries and services previously owned by Government

  • Fast-growing market and high consumer buying power

  • Largely underserved and untapped market

  • Low competition

While some of the above factors are here to stay, a few will not. For example, the competition in the Saudi market will not stay low for long. If you plan to set up a new business in Saudi Arabia or expand your existing one here, the best time to do so is right now.

Here’s why.

100% Foreign ownership

Until recently, a foreign business owner was required to have a local partner or sponsorship to setup a company in Saudi Arabia, meaning that the business needed to be owned by a Saudi national. Although businesses have been working with this model for a long time, the fact remains that trusting a local to own your Saudi entity is a risky and costly affair. This kept many businesses in the past from expanding to the Kingdom.

However, with recent changes in regulations and policies enrolled in alignment with the Saudi Vision 2030 initiatives, the Ministry of Investment of Saudi Arabia (MISA) now allows for 100% foreign ownership in properties and companies across a wide range of industries.

This has made setting up a business in the Kingdom a standardized process accessible to a broad spectrum of companies. This has led to an upsurge in new foreign businesses in the Kingdom.

In 2019, 1,131 new international companies were established in KSA recording a 54% growth as compared to the previous year. Out of these, 61% were fully owned foreign businesses underscoring the huge impact international investments and business have on the economy.

Even amidst the pandemic, Saudi licensed 506 new overseas companies in the first half of 2020. This statistical consistency is largely due to the proven resilience of country’s economy and responsible leadership by the government reinforcing investors’ confidence.

Entering the Saudi market before it becomes crowded would prove to be a wise strategic decision for any internationally growing business. By the time the economy starts to recover in the first half of 2021, you will have your business established giving you a head start.

Low competition and pent-up demand

The markets in Saudi have witnessed low competition over decades due to the stringent rules, regulations and complicated requirements for foreign businesses to enter the country. However, with that changing, the landscape of the Saudi market is on the verge of a massive shift.

COVID has masked high-growth opportunities in various new and upcoming industries that regulatory changes had opened up, leading to a pent-up demand across the nation that has two-thirds of its population under the age of 35.

However, this largely open market with high spending power won’t remain untapped for too long as a new wave of businesses from across the globe are looking to expand into this territory in the near future. The sooner you make your move the better.

With the right timing and marketing strategy, your company can gain market dominance, simply by being the first.

New and upcoming industries and markets

Technology is undoubtedly one of the fastest growing sectors in the country. The opportunities for technology and advanced technology based companies is unlimited mainly due to the explosive growth in smartphone usage, deep internet penetration and young population demographic. By 2024, Saudi Arabia is expected to have 95.9% internet penetration.

Technology industries with high growth forecasts include eCommerce, Digital media, IT Consulting and Implementing, Fintech etc. Cloud and Security technologies are also seeing wide adoption in organizations across the country.

The Kingdom’s eagerness to privatize the existing government entities fully or partially through public-private partnerships, to diversify its economy, has unlocked opportunities in a plethora of new industry segments. Opportunities are waiting to be explored in Travel and Tourism, Media and Entertainment, Hospitality and Healthcare, Education, Infrastructure and Construction.

Businesses and startups belonging to these industries could gain a huge market share if they plan their entry into the Kingdom well before the competition.

Government bids and projects

Having a local establishment for your business in Saudi Arabia deems you eligible to bid for government projects and contracts. This is not possible when managing your business remotely or without having an established local business entity.

The Saudi government is actively seeking service providers across multiple industries including marketing, sales, digital services, technology, and more. There are also many opportunities in manufacturing, construction and other sectors.

Optimistic consumer sentiment during COVID

Throughout the pandemic, the consumer behavior in Saudi Arabia has remained steady even though there has been a shift in the spending patterns of consumers with the primary focus being on essential goods and services.

The Consumer Confidence Index in Saudi Arabia was at its all-time high at 121 in the first quarter of 2020, since it was first recorded in 2010. It dropped to 104 in the second quarter of the year still managing to get over 100. The index above 100 shows optimism and below 100 indicates pessimism.

Steady consumer optimism through the entire duration of the pandemic is a promising sign for businesses. The economy is expected to bounce back in a span of 2-3 months in the post COVID phase.

Make your move now

Most successful business owners are the ones that can see the opportunities in the future and grab them before others can. Being the first has many advantages – getting a higher market share, building consumer-brand loyalty, establishing an industry standard, getting the best local talent and more.

These advantages are amplified when applied to KSA because of the government support and policies, low competition, untapped market, and pent-up consumer demand.

To take action on this and start setting up your business in Saudi Arabia today,reach out to AstroLabs for more information and for support on the process.

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