By Oliver Oehms, Delegate of German Industry and Commerce at the German-Saudi Arabian Liaison Office for Economic Affairs (AHK Saudi-Arabien), Riyadh
In April 2016, the Saudi government submitted "Saudi Vision 2030", a reform plan unprecedented in this form until now. At the same time, it announced the "National Transformation Program 2020". This multi-billion US-dollar program details dozens of measures which the government wishes to implement during the first phase, which is to last until 2020. German companies will gain new business opportunities through these reforms.
Increasing domestic value creation
The main long-term goals are to become independent of oil revenues and to increase value creation within the country through local workers. Among the long-term goals is a plan to establish and develop industrial production. Saudi corporate customers, most of whom are still state entities, are therefore urging their international suppliers to invest in the country (localization of supplies). The government is also promoting a shift to regenerative energies, and it wishes to make use of all natural resources in future to advance the establishment and development of the mining industry.
At the same time, the government is planning to privatize many business sectors. Special priority is given to high-tech start-ups, the health sector as well as the tourism and entertainment industries. Saudi Arabia also wishes to extend its leading role in the petrochemical industry by making further investments in the downstream sector. These changes will also precipitate social change in this conservative Islamic country.
Saudi Vision 2030 is preparing the ground for a new, open Saudi Arabia in which even medium-sized German companies will feel at home. The government is already working on numerous regulatory changes for this purpose. This market, which has proved to be challenging for German companies in recent years, will soon present no significant differences from other countries.
Knowledge transfer needed
German companies have the opportunity of developing their existing business links. There will also be new market opportunities. Such developments can also be expected in industrial sectors that were hardly relevant in Saudi Arabia thus far. The country is very reliant on technical support and knowledge transfer in various sectors, such as the chemical industry, mechanical and plant engineering sector and especially in mining, logistics and renewable energies. This is where Saudi Arabia wishes to establish new value chains and to develop existing ones. The government is hoping for the support of German industry, such as in setting up a dual education system. The aim is to successively train the Saudi workforce required by the various industries. Over 800 German companies are already active in Saudi Arabia. For several years now, Germany has been the third most important supplier, more important than all other European and most Asian countries. Saudi Arabia is thus hoping that German companies will reward the improvements brought about by the reforms and will invest in this market for reaping the economic benefits of change.
VDMA Foreign Trade | VDMAimpulse 06-2017: "Gulf States on the verge of change" | VDMAimpulse 06-2017: "Challenges to production in Saudi Arabia - Using local opportunities" | VDMAimpulse 05-2016: "Low oil price forces Arab countries to reform" | Saudi Vision 2030