OVERVIEW

THERE is good basis for a constructive, mutually beneficial relationship and we believe the future holds definite promise for stronger Indo-Saudi ties", says the Chairman of the Saudi Arabian General Investment Authority (SAGIA), Prince Abdullah bin Faisal bin Turki Al-Saud. "Relations between the two countries are passing through a very exciting phase and the future of these relations is very bright indeed", asserts the Indian Ambassador to the Kingdom, Mr. Kamaluddin Ahmed. Both the messages are forthright, unambiguous and carry the same spirit, the spirit of camaraderie architectured over a period of half-a-century. The visit of King Saud in 1955 followed by India's first Prime Minister, Jawharlal Nehru in 1956  have set the ball rolling which had been punctuated by occasional slow-down for variety of reasons but it never gathered moss and today both the countries are in best of relations. There is a growing awareness on both sides of the many potential areas of investment, underlines Prince Abdullah. India today ranks sixth among top ten foreign investors in the Kingdom reflecting India's undisputed credibility in the eyes of the Saudi government. Today, Saudi Arabia accounts for the  largest share of India's imported crude oil from the Gulf region. The relationship is not only strengthening but expanding too.

Since mid-2000 so far, SAGIA has granted 58 lincences to Indian companies to set up joint ventures or 100 percent wholly owned subsidiary. These projects together are expected to bring in investment into the Kingdom to the tune of around U$ 358.04 million. Of this, 43 JVs have already been set up in different sectors including telecom, pharmaceuticals, IT and construction. One of the major arguments India has been harping on is the restricted entry of Indian pharma products. When Indian pharma products are allowed entry into most advanced countries like the USA, the Saudirestriction is considered as a major hurdle India is facing to step up exports the Kingdom. The Saudi Ambassador in India, Mr. Salah M Al Ghamdi has recently assured the Indian government to look into the matter. Trade relations apart the Kingdom's geo-strategic position is of utmost importance to India. "In fact the Kingdom's geo-strategic location in the Arabian Peninsula, makes it an integral part of India's extended neighbourhood. Saudi Arabia occupies a privileged position in the Arab and Islamic worlds, having considerable influence on issues pertaining to regional and international peace and security of great interest to India", says Mr. Ahmed.

Saudi Arabia is the 14th largest market for India and accounts for over 7 percent of India's total exports. On the other hand, India is the fifth largest market for Saudi Arabia accounting for about 4.5 percent of its total exports. India ranks 10th in terms of imports by Saudi Arabia accounting for 2.8 percent of its total imports. Indian commodities that can enjoy bigger share in the Saudi market include basmati/non-basmati rice; tea; man-made yarn and cotton yarn. On tehe other hand India can step up imports of crude oil; iron; pyrites; non-ferrous metals; ores; metal scarps and dates.

Indo-Saudi bilateral trade today is over US$ 5 billion of which import of crude oil from the Kingdom alone accounts for over US$ 4 bn. Crude imports from Saudi Arabia jumped by 41.2% to 18.816 million tonnes in fiscal 2002-03 compared with 13.321 million tonnes in the he previous fiscal. India's exports to Saudi in 2002-03 stood at US$ 941 million compared with US$ 742 mn in 1999-20. India's trade deficit with the Kingdom has widened to US$ 2.7 bn. On the trade front India has to explore opportunities to add more and more items to its export basket. Currently India's export to Saudi Arabia mainly constitutes of cereals, man-made filament, apparels & clothing, iron and steel. The country has to focus more and more on valued added industrial products and services. Saudi Arabia today is moving steadily towards a free market economy with gradual decontrolling of many an important sectors of the economy. Structural changes are being effected to ensure a smooth transition in the economy keeping in view the changing international economic environment. The Service sector that offers potential of greater employment opportunities has been identified as one of the major focus areas. This offers an excellent opportunity to Indian industry to forge partnership with its counterpart in the Kingdom to build a stronger and more vibrant Saudi economy.

Total Finance for Licensed Projects

The potential sectors for business in Saudi Arabia, identified by the Confederation of Indian Industry (CII), include Information Technology; Hydrocarbons- Oil & Gas, Process Plant Equipment for Oil Refineries; Petrochemicals; Fertilizers and Chemicals; Water Treatment Plants; Seweage Treatment and Waste Water Plants; EPC Contracts- Oil & Gas, Power, Infrastructure, Telecom, Chemical and Industrial Plants, water & Effluent Treatment; Infrastructure/Construction; Machine & Handtools; Pumps, Valves; Diesel Engines; Auto Components; Electrical Equipments; Spares and Cables; General Engineering Products; Pharmaceuticals and Chemicals; Engineering Consultancy and Specialized Engineering Services; Industrial & Professional Training including Health Care Sector etc.

The Saudi IT sector offers to Indian firms vast scope to tap the market in the Kingdom. Riyadh is being planned to develop as a Middle East hub for IT. Saudi Arabia accounts for 40 percent of IT sales in the Gulf region. The Riyadh Chamber of Commerce and Industry chairman, Abdul Rahman Al-Jeraisy expects a 20 percent annual growth in the telecommunication, personal computers and Internet sector. "The IT sector of Saudi Arabia holds great deal of promise for partnerships with Indian companies as a large number of Saudi companies are making large investments in adopting information technology in their business processes", says Mr. Ahmed.

With the opening up of the market and economic reforms already initiated, Saudi Arabia expects about US$ 900 billion foreign investment in the Kingdom within 20 years. Of the expected FDI, housing and services for Riyadh would be the prime attraction, the investment being estimated at around US$ 293 bn followed by infrastructure that is likely to lure an investment amounting to US$ 138.6 bn. Electricity (US$ 114.6 bn), petrochemicals (US$ 92 bn), gas sector (US$ 50 bn including US$ 25 bn Gas Initiative), water sector (US$ 88 bn), telecommunication (US$ 58.6 bn), technology and information (US$ 10.6) and railways (US$ 8 bn).  In terms of foreign investment in the Kingdom, India ranks sixth in the first ten countries. The list is led by US followed by Japan, France, UK, Syria. India is followed by Germany, Jordan, Sweden and Palestine. The sector wise analysis of investments okayed by the SAGIA authorities revealed that the industrial sector attracted  highest foreign investment at SR 28.55 bn involving 825 projects although in terms of number projects, service sector topped the list with 1170 projects entailing proposed foreign investment of the order of SR 23.93 bn. As far as Indian investment is concerned "the sincerity of the Indian investors has been recognised and appreciated by the Kingdom", as stated by Mr. Ahmed. Almost all sectors of the Saudi economy offer vast scope for Indian companies to invest. The promising sectors include water, power, mining, education, railways, roads, telecommunications, IT & It-enabled services and tourism and textiles.

Updated on October 20, 2003

HOME | Trade Partners | Overview | Composition of Export | Composition of Import | Export to GCC Countries | Trade with Saudi Arabia