'Future holds definite promise for stronger Indo-Saudi ties'

SAUDI ARABIA today reflects a modern and competitive economy. "Now there is an even greater desire to see the Kingdom carry out even more drastic reforms and at yet a faster pace"  consistent with "the Kingdom's own internal rhythms yet sensitive to the requirements of competing in the contemporary marketplace", says His Highness Prince Abdullah bin Faisal bin Turki Al-Saud, Chairman of Saudi Arabian General Investment Authority (SAGIA) in an interview with Amitabha Sen. There is immense scope for India to participate in every imaginable area of business in Saudi Arabia. "There is good basis for a constructive, mutually beneficial relationship and we believe the future holds definite promise for stronger Indo-Saudi ties", he adds. Stating  that Microsoft and Oracle's selecting India as their software writing bases outside the US, as "indeed an impressive achievement", the SAGIA Chairman hopes and expects India to script " the same kinds of successes here as you have achieved at home...We welcome the Indian IT businesses to come and look at the rapidly emerging opportunities in the Kingdom".

AS: Since its creation in April, 2000, the Saudi Arabian General Investment Authority (SAGIA) is creating immense positive impacts on the country’s industrialization. Its policy frameworks and decisions are providing the basis to boost investments in the country, including foreign direct investment (FDI). Within three years of its existence SAGIA has approved FDI proposals worth in excess of US$ 14 billion. What’s the key to SAGIA’s success under your leadership?

Prince Abdullah: We cannot take all the credit for what you describe as ‘success’; it was essentially the Foreign Investment Law (FIL) of April 2000 that set the foundation for a paradigm change in the Saudi Arabian investment climate. SAGIA was created as part of that law.

We operate under the simple belief that being successful in a very competitive market means being conscious of market trends, and for us specifically that means being conscious of what’s expected of us as an investment promotion agency (IPA), and as a service for foreign investors. This means continually monitoring the investment climate, soliciting and studying suggestions from foreign investors representing diverse sectors and countries, and then acting upon them by recommending appropriate changes to the system. In addition to the efforts we’ve made in making the licensing process more streamlined and user friendly, we’ve recently seen a reduction to the negative list, something we’ve been pushing for consistently. Printing and publishing services, a range of telecommunications services, transmission and distribution of electrical power, pipeline transmission services, education services and hospital and health services are areas newly opened to foreign investment.  More recently, SAGIA has been authorized to issue business visas to help inward investment.  A new Insurance Act is expected to become law soon, opening that sector to foreign participation.

We’ve also seen a number of changes in the Foreign Investment Law’s original by-laws. These were aimed at making the rules more business-friendly by providing more flexibility to foreign investors and by strengthening the legal framework of investor rights in the Kingdom, particularly in relation to property ownership, parity with national companies and avoidance of double taxation. These, combined with the passing of the Capital Market Law earlier this year, are evidence of Saudi Arabia’s commitment to improving the country’s investment climate.

Of course, SAGIA considers these as only basic steps toward making Saudi Arabia an attractive destination for foreign direct investment (FDI), and we are aware that much more still needs to be done.

AS: Saudi Arabia which is the most influential and powerful country in the Gulf region, projects a massive US$ 900 billion FDI within in the next 20 years. Would you kindly throw some light on the key areas that offer vast scope of FDI? What are the fundamentals that claim to be major reasons of drawing FDI into those areas?

Prince Abdullah: We think that the discerning investor knows better than us about the opportunities in Saudi Arabia, and so it’s not our policy to target certain sectors for investment. Yet we are aware that several sectors are ripe with investment potential, one of which is water, and for the obvious reasons: as the need for water resources increase daily, we are relying more and more on desalinization for our consumption needs, and this means we must focus on developing more and more efficient technologies to aid in this process. This is so important to us that HRH Prince Sultan bin Abdulaziz has offered an encouragement in the way of the Prince Sultan bin Abdulaziz Prize for water, which aims to reward the efforts of innovative scientists, academics and organizations who carry out applied research in the water resources sector worldwide.

Power is another area that offers major investment opportunities. The reasons for this are also obvious: our population is increasing rapidly, and as industry is forced to grow in order to care for the needs of this population, we must see to it that more and more efficient means for producing and using power are created. In the Kingdom, we tend to think of water and power together because water desalination plants are also efficient sources of power.

There is also considerable potential in the mining sector. Saudi Arabia has been proven to be home to the largest mineral deposits in the Gulf region, thanks largely to the extensive exploration effort sponsored by the government. We would like to see more investment in getting these minerals out of the ground and into production and use worldwide. A good example of the investment potential in mining is found in phosphates. We have some of the largest yet undeveloped phosphate deposits in the world, and Ma’aden, the Saudi Arabian Mining Company, has said that it’s now time for developing these reserves, referring to it as the company’s priority for the next decade. Studies indicate that with investment in developing our phosphate resources, we could become the second largest producer of fertilizer in the world.

Education and training is another area in which we would like to see more FDI. Approximately 74 percent of our population is below 30 years of age, and 46 percent falls within the adolescent group. This demographic profile means we will need to set up more schools and colleges with the goal of developing our human resources to their fullest capacity.

Other areas of immediate investment potential include Information Technology, telecommunications, and tourism, which has been identified as a major growth sector for Saudi Arabia. Aside from the Kingdom’s religious significance, we are blessed with many places of beauty and historical importance, and it would be our pleasure to share these with the rest of the world. Of course it goes without saying that we would all stand to benefit from the process of cultural exchange usually derived from tourism; for us this would mean shedding the many misconceptions about Saudi Arabia.

AS:  Your emphasis on the issue that SAGIA, rather than the Kingdom as a whole, is going for principles rather than programmes and atmosphere rather than set programmes by bureaucrats in opening up the market, is a clear message to prospective investors world over. To what extent, as the head of the country’s investment body, do you feel the message has reached appropriate quarters?

Prince Abdullah: Saudi Arabia has liberalized its investment climate; we have a new foreign investment law and SAGIA is one of the main instruments created by the government to see that law put into effect. That, of course, is the message we are trying to spread. For us this is at minimum a two-fold endeavor: the first is to dispel the many myths about Saudi Arabia in general, and the second is much more specific – the targeting of our message to appropriate quarters, as you noted.  We have already taken the first steps toward this goal of promoting Saudi Arabia.  For example, SAGIA recently used the launch of its new brand in London as a platform to communicate several key messages to the media and business community. Our new corporate logo – with an image invoking both the coming together of hands and a welcoming arch with blue skies – is bolstered by our new motto: partnering business. SAGIA will do everything possible to live up to its promise of improving the investment climate in Saudi Arabia and offering excellent services to both potential investors and those who have already established themselves in the Kingdom. We have a long way to go in fulfilling our mission, but there’s never been any doubt about what it is, or that we are moving steadily in the right direction.

AS: The major campaign to draw more and more investment into Saudi Arabia is that it is safe both politically and economically to invest in the Kingdom. While saying so, as SAGIA chairman what message would you like to convey to the rest of the world including India?

Prince Abdullah: That Saudi Arabia is changing. We have overcome major obstacles in our short history and have achieved sufficient economic development to bring about the economic welfare of our people. In order to do this we have invested most of our oil wealth in economic development, with the result that in only three decades we have built a modern and competitive economy. Now there is an even greater desire to see the Kingdom carry out even more drastic reforms and at yet a faster pace. A very dynamic internal dialogue is fueling this drive toward change, while striving to maintain a pace that is both consistent with the Kingdom’s own internal rhythms yet sensitive to the requirements of competing in the contemporary marketplace.

AS: Do you consider that there should not be any ceiling – both at upper and lower ends – in FDI so that small and medium but technologically sound companies can think of investment in the Kingdom?

Prince Abdullah: As the Kingdom’s IPA, the ideal situation for us would entail no negative list and no investment ceilings. We are also strong advocates of SMEs and investments that will bring in new and modern technology.  But as of now the law does set minimum investment requirements of SR 25 million for agriculture, SR 5 million for industrial, SR 2 million for other investments, and SR 30 million for real estate. SAGIA is confident, however, that we can obtain special clearances for projects that hold great potential and merit.

AS: Presently there are 55 joint ventures in Saudi Arabia and 40 Indo-Saudi ventures in India. In areas of Oil and Gas, Petrochemicals, Fertilizers, Telecommunication, Pharmaceuticals and Healthcare, India could be a major partner in progress of Saudi Arabia in coming years. Is there any move at the governmental level on either side for future investments in those areas?

Prince Abdullah: It’s true that our two countries have a history of close cooperation. During the last few years a number of trade and industry delegations have exchanged visits to explore the opportunities for long-term partnerships and cooperation, including joint ventures, resulting in a growing awareness on both sides of the many potential areas of investment that exist, and a greater capacity for identifying new markets of strategic interest. These delegations typically include members from the government and private sector, and receive strong support from the Council of Saudi Chambers of Commerce & Industry and the Regional Chambers in Riyadh, Jeddah and Dammam. Also, Indian and Saudi companies have been regularly taking part in trade fairs, and lately Indian investors have been receiving even more attention from Saudi businessmen. But beyond India’s attraction as an obvious natural trading partner, the Indian community – presently the largest expatriate community in the Kingdom, numbering well over a million – has earned a well-deserved reputation for high quality work.

AS: India is the leading Software nation in the world today. On the other hand, the Saudi market is enriched with all the characteristics to be one of the best markets for investment in the field of IT. How do you find the prospect of India in the Saudi IT market? What do you expect of Indian IT firms aspiring to put up business in the Kingdom?

Prince Abdullah: We look forward to India’s participation in the IT market. India has earned itself quite a reputation in the IT industry – that you were the first location outside the US selected by Microsoft and Oracle to serve as their software writing bases, is indeed an impressive achievement. As for what we would expect from India, we would hope to see the same kinds of successes here as you have achieved at home. The IT sector is rapidly expanding in the Kingdom to service other growing sectors, and there has been a definite surge of investor interest in new IT-related businesses.  We welcome the Indian IT businesses to come and look at the rapidly emerging opportunities in the Kingdom.

AS: What are the areas where Saudi Arabia would like to take up more and more joint ventures and take investment decisions?

Prince Abdullah: I think that would be a long list, and would likely include just about every imaginable area of business, including agriculture, management and consultancy services, construction projects, telecommunications, information technology, pharmaceuticals, etc. There is presently considerable collaboration between Indian and Saudi companies in the areas of consultancy, financial services and software development. In any case, there is good basis for a constructive, mutually beneficial relationship and we believe the future holds definite promise for stronger Indo-Saudi ties.

AS: So far Indo-Saudi bilateral trade is limited to commodities and agricultural products. Could you please focus on new areas where both countries can expand trade relations?

Prince Abdullah: Bilateral economic relations and trade between India and Saudi Arabia has grown considerably over the years. The Indo-Saudi Joint Commission for economic, trade, scientific, technical and cultural cooperation (JCM) is the official bilateral body pursuing expansion of trade relations.

AS: How do you rate the prospect of India having a long term pact with the Kingdom in the oil front – backed up by a sustainable and reasonable pricing policy – that may lead to greater FDI in the kingdom?

Prince Abdullah: India has been a large and reliable market for our crude oil and petroleum products for years, and Saudi Arabia is India’s largest supplier of crude oil. It will be good for both countries to capitalize on this relationship in whatever way they can. On behalf of SAGIA, I can only say that we wholeheartedly welcome, encourage and support any move that will lead to greater FDI in Saudi Arabia.

AS: How do you rate the prospect of joint Indo-Saudi ventures in third countries, specifically in Iraq in view of the restructuring and rehabilitation programmes being undertaken in the country after the war?

Prince Abdullah: I have seen some reports in the media to that effect, but the prospect of doing joint ventures is not limited to Iraq. This is an agenda for the private sectors of both countries to pursue, but I am confident there is good potential for more Indo-Saudi joint ventures and more Indian investment in Saudi Arabia.