Saudi Arabia is attempting to diversify its economy to reduce dependence on oil, and is opening up its consumer goods market.
Since 2000, the Kingdom has allowed 100% foreign ownership in some businesses1. This has attracted large multinational retail and wholesale companies into the country. Consumer goods businesses in Singapore can find a well-regulated, business-friendly environment in Saudi Arabia.
In the services sector, Saudi Arabia is currently reshaping its education system to improve quality and outcome. The Saudi government has allocated the second largest portion of its fiscal budget towards this sector, and is now the world’s eighth biggest spender on education.
The Kingdom emphasises development in early childhood education, refining of its national curriculum, and training for its teachers and educational leaders. Saudi Arabia plans to build a slate of new schools to serve over a million new students , and to relax regulations and introduce private sector innovation. The first phase of Saudi Arabia’s schools public-private-partnership (PPP) programme started in 2021, and involved the design and construction of 50 new schools in Jeddah & Makkah. The PPP program has a planned a roll-out of up to 4,000 schools2.
Singapore, which has a strong education services sector, has businesses that are well positioned to meet the market demand. From offering enrichment programmes in Science and Mathematics to skills upgrading and vocational training, there are plenty of opportunities for your education firm.
Saudi Arabia has the largest food & beverage (F&B) market in the Middle East, valued at around S$61.0 billion. In 2018, the Kingdom’s food industry accounted for 10% of its GDP, and the industry has a projected growth rate of around 6% per year.
Saudi Arabia is particularly known for its Makkah/Madinah Halal food products. As both holy cities are located in the Kingdom, Saudi Arabia is strongly positioned to lead the global halal food market3.
Saudi Arabia has also seen increasing domestic demand for food products, with the average household spending 18% of total expenditure on F&B. In 2019, food imports into Saudi Arabia exceeded S$9.5 million, showing ample prospects for import-substitution among local manufacturers. This represents a significant opportunity for Singapore food companies which are looking to expand into a growing market.
1 “Saudi Arabia opens retail and wholesale sectors to 100% foreign direct investment”, EY, 26 June 2016
2 “Projects: Saudi Arabia starts construction of new schools under public-private-partnership programme”, Zawya.com, 05 January 2021
3 “Industrial and manufacturing overview”, Saudi Arabia General Investment Authority
Saudi Arabia is a founding member of Organisation of Petroleum Exporting Countries (OPEC), and currently possesses around 17% of the entire world’s proven petroleum resources. The Kingdom is the world’s largest exporter of petroleum, with the oil & gas sector accounting for around half of its GDP, and 70% of export earnings. Petroleum in Saudi Arabia is both abundant and close to the earth’s surface, making it easier and cheaper to extract oil there compared to almost any other country.
Saudi Arabia’s state-owned oil company, Aramco, plans to invest around S$459 billion in oil, gas, and petrochemical projects between 2016 and 2025. This will be directed toward new oil and gas plants to meet growing energy demand, and to increase petrochemical production. The company will also invest in infrastructure, maintenance, power plants, drilling projects, and the development of unconventional resources such as shale oil.
Key initiatives include raising refining capacity from 2.9 million barrels to 3.3 million barrels per day by 2020, maintaining peak oil production at 12.5 million barrels per day, and developing efficient clean fuel production. This will require significant quantities of high-end oil & gas industry related products, and supplies.
Singapore companies that can provide the right equipment – from drilling machinery to gas compressors, will find business opportunities opening up for them in Saudi Arabia.
The Saudi government invests heavily in airports, railways, and roads. The Kingdom has 28 airports (four international and 24 domestic airports)4 and nine ports5, handling 12 million tons of cargo by air6 in 2015, and 532 million tons by sea in 20207.
Most European countries are around seven hours flight away, and Asian countries are about a four-hour flight. Half the world’s population lives within a five-hour flight to Saudi Arabia, making it a connecting point for 3.5 billion potential customers across three continents.
The Saudi government has plans for five new airports to add to the existing network. Extensions are also planned for existing airports – King Abdulaziz International Airport in Jeddah aims to host 43 million passengers by 2025, and 80 million passengers by 2035.
King Khaled International Airport is currently undergoing expansion to accommodate 25 million passengers per year. Singapore businesses, as well as investors in the aviation industry, can find several opportunities here.
As most Saudis rely primarily on air and road travel, rail networks are less extensive. The Kingdom now aims to rectify this, with greater investment in rail transport. The Saudi government is investing around S$34.3 billion into three separate rail projects, totalling 3,900km of rail expansion.
The largest of the projects is the North-South Rail, which will connect the capital of Riyadh to Al Haditha, on the Jordanian border. The 2,400-km railroad is expected to carry four million tons of commodities and two million passengers annually. The project costs upward of around S$4.8 billion.
Saudi Arabia’s seaports are also upgrading their infrastructure and capacity. The Saudi government has earmarked around S$10.9 billion for the relevant projects, with about S$365.5 million worth of projects still to be awarded. Singapore’s maritime businesses should keep a close watch on upcoming opportunities.
4 General Authority for Civil Aviation
5 Mawani (Saudi Ports Authority)
6 Ministry of Investment Saudi Arabia
7 Mawani (Saudi Ports Authority)
Saudi Arabia also has a high rate of electricity consumption, at around 9,333 KwH per capita in 2016. Electricity consumption in Saudi Arabia has doubled over the last 15 years, and is expected to double again by 2030 due to economic expansion and urbanisation.
The Kingdom now aims to lower wastage, in moves that include retrofitting older public facilities, and developing energy efficiency solutions. In the interim, Saudi Arabia needs to invest an estimated S$27.4 billion by 2020 to meet short-term energy needs.
Singapore businesses that can provide expertise in energy efficiency or upgrade the ageing power infrastructure, will find many opportunities in Saudi Arabia.
Saudi Arabia is the global leader in desalination, the GCC’s largest market for water reuse and a pioneer in water technology innovation, scale and research. It produces around four million cubic metres of desalinated water per day8. The Saudi government aims to increase this to 8.5 million cubic metres per day, by 2025. The Kingdom operates 28 desalination plants – the highest number in any country.
The Kingdom’s water sector shows continued annual growth of 8% per annum, and is currently valued at around S$17 billion. A further S$109 billion is expected to be invested in further desalination projects, over the course of the next 10 years.
Saudi Arabia has one of the highest rates of water consumption in the world, with per capita consumption at around 300 litres per day. This is more than double the rate in Singapore (about 143 litres per capita in 20179). To cope with demand, the government has announced over 60 water projects worth US$9.33 billion (S$13 billion) in March 2022. It aims to triple the country’s desalination capacity to 7.5 million cubic metres of water per day by 2027, from 2.54 cubic metres per day in 2021.10
This presents opportunities to Singapore businesses in water related services, as well as growth opportunities for investors.
8 Energy and Water overview, Saudi Arabia General Investment Authority
9 PUB10 “Saudi Arabia announces 60 water projects worth US$9.33 billion”, Smart Water Magazine, 2022