saudi arabia a land of eastern promise

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Saudi Arabia

A land of Eastern Promise

Patrick Moynagh

Saudi Arabian

Monetary Agency

Enterprise Ireland

April 2013

April 2013

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• A tribal jurisdiction, unified under Kig Abdulaziz Al Saud in 1932

• Only nation to carry the name of a ruling family in its title

• Command economy, presided over by an absolute monarch

• HH King Abdullah, 5th son of King Abdulaziz to rule the Kingdom

• Petroleum Economy (counter cyclical but not immune)

• Traditionally the worlds largest oil exporter

• 2011 – became the worlds largest oil producer (overtaking Russia)

• Approximately 260bn barrels of oil reserves – 20% of the worlds known oil sources

April 2013

Saudi Economic Fundamentals

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• Oil production and derivatives dominate the economy:

• 75% of budget earnings emanate from oil Industry

• 90% of export earnings

• 45% of GDP is oil based

• GDP SAR 2,239bn (US$ 597bn)

• Inflation (CPI) 5%

• Current A/c surplus SAR 594bn (US$ 158bn)

• Exchange rate fixed to the US dollar

• Narrow float range within the GCC

April 2013

Saudi Economic Fundamentals

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• 32% population growth in 10 years

• Population doubled in last 20 years (15.2m in 1990)

• Average annual growth at 2.7% p/a compared with world population growth of 1.5%

• Over 600,000 births in 2011

• Improvements in health, economic & social conditions• Economic investment contributed to growth in non nationals within Kingdom• 32% of population are non-Saudi

April 2013

Population Dynamics

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• Population polarized in the Major City areas of Riyadh, Meccah, Dammam

• 82.3% of the population live in urban centres (world average 51%)

• Expected to continue, creating demand for housing and services

April 2013

Population Dynamics

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• Continued growth in GDP per capita• 55% growth over 6 years• Over twice the Arab country average and double the world average• 63% of OECD average (from 46% in 2005)

April 2013

Period SaudiArabia

ArabStates

Developing Countries

OECD World

2005 13,517 6,716 5,282 29,197 9,543

2010 16,541 4,774 4,952 40,976 9,120

2011 21,046 8,554 6,147 33,352 10,082

Purchasing Power

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SPAN Pricing : Supporting Cash Reduction

April 2013

• Heavy cash oriented society

• 9% of broad money (M3) is cash in circulation outside banking system

• Reduced from a recorded peak 24% in 1990

• Compares with 4% in UK, 6% in EU

Driving economic efficiency into the National Payments Systems

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Retail Spending Profile

Card Transactions continue to grow in Saudi Arabia, but, over 90% of Retail Transactions remain in cash

• ATM Transaction volumes have grown strongly in Saudi Arabia with a typical 21% annual growth since 2000

• PoS transaction growth is healthy (36% year to date) and 16% of Card transaction value.

April 2013

Tx per annum(m

)

Tx per annum(m

)

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Card Transactions: International Comparisons

April 2013

Mean – 798 ATM’s per M

49%ATM’s installe

d per million population

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April 2013

Adjusted Mean – 1,001 ATM’s per M

85%

ATM’s installe

d per million Banked population

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April 2013

Cards Issued per million population

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April 2013

Typical number of cash withdrawals effected by each cardholder during 2011. KSA at 34 cash withdrawals per cardholder per year (1 every 10 days) during 2011

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April 2013

Typical number of cash withdrawals effected on each ATM per annum (2011 data based on year end ATM transactions and average reported National ATM numbers during 2011

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April 2013

Debit Cards per Capita

Average card-holding per capita in 2011 (based on active cards and total population)

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April 2013

Total number of PoS term

inals active in the country, per millioninhabitants

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April 2013

Typical number of PoS transactions per card per year

Typically, only 11 transactions per year per cardholder (less than 1 per month) are effected by SPAN cardholders in KSA. This compares with over 13 per month per card in Australia

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Getting the paper process complete – The Ministry of Commerce & Industry (MOCI)

1.Reserve a company name – confirm availability and print a confirmation

2.Submit documents to MOCI and Unified Centre office, including:1. Company Articles of Association aligned to MOCI template (CD copy)2. Confirmation of Company Name (availability)3. ID of Company Directors4. Formal Application form (UC) x 25. Cover Letter (and sponsorship if appropriate)6. Letter of Undertaking

3.Pay the Registration and AOA Publication fees – SAR 1,850 (Eur 400)

4.Submit documents to Legal Dept (Notary) for approval (up to two weeks)

5.Open a Bank Account (up to 4 days)

6.Pay Chamber of Commerce Fees SAR 1,200 (Eur 240)

7.Register with GOSI (for Occupational Health Fund and Pensions) – 20% of salary

8.Register with Dept of Zakat (religious tax – 2.5% flat on income)

April 2013

How to get a business started

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A dozen do’s and don’ts

1.Saudi life is governed by Islam. Business discussions will refer to the Creator and his Prophet All business dealing should facilitate religious observance

2.All events are Divinely directed. This creates a degree of fatalism - Inchallah

3.Many features of Saudi society, including business, are fundamentally family concerns. Be aware of the relationships of the company seniorsFFfamily membership is key

4.Age is honoured F it may be worth considering ‘maturity’ in your delegation to Saudi

5.Like the state, business is effected through instruction/direction. To get done, it should be requestedFand followed-up.

6.Initial meetings can be very time consuming and may appear to lack tangible progress. Time is also very flexible!!

April 2013

Doing Business in the Kingdom

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7. Bad news is not easily conveyed by Saudi’s. This can create difficulty in understanding where your business relationship stands. Saudi’s are generous in their flow of compliments. This is also expected.

8. Loud discourse in meetings denotes engagement and interest. Audio levels in meetings are a positive

9. Eye contact reflects trust and sincerity. Initiate or reciprocate this.

10. Left hand down. Touching, pointing or handing something with your left hand should be avoided

11. Women play a significant family role in Saudi Society, but very limited business roles

12. Dress conservativelyFbut smartly. First impressions are important

Politics is not material to your business engagement – Avoid it

April 2013


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Business is about people

Respect the culture

Long term relationships can be successfully formed

April 2013


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saudi arabia a land of eastern promise

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