The economy of Saudi Arabia recorded a 3.9% increase (on an annual basis) in the first quarter of 2023 (Gastat data). This figure is surprising as it is driven by non-oil activities, which increased by 5.8% in the first quarter compared to the previous year.
As indicated in the “National Transformation Program,” “Saudi Vision 2030” aims not only to diversify the economy but also to strengthen the private sector through initiatives such as the development of renewable energies and the improvement of the transportation system. These are sectors (renewables and transportation) where Italian companies are renowned abroad for their expertise and technological capabilities. Not to forget Neom, the mega-city worth 500 billion dollars.
Italian exports to Saudi Arabia increased by 22.4% in 2022, reaching 4.1 billion euros annually. Machinery and equipment remain the most exported products (30%), followed by food and chemical products. This highlights the growing strategic relevance that our products are gaining compared to other European partners. Italy ranks second among European suppliers, with a market share of 2.8%, behind Germany (4.2%) but ahead of France (2.4%), the United Kingdom (2.2%), and Spain (1.5%). Compared to all international suppliers, Italy ranks ninth, following, in order, China, the United States, the United Arab Emirates, India, Germany, Japan, Egypt, and South Korea.
Why Invest in Saudi Arabia
Saudi Vision 2030:
The new development strategy of the kingdom is based on three pillars:
- Promoting the physical, psychological, and social well-being of Saudi citizens,
- Becoming a global investment powerhouse,
- Becoming a global hub connecting Asia, Europe, and Africa, thanks to the strategic position of Saudi Arabia.
Membership in the G20: Saudi Arabia is the leading country in the Gulf, the only G20 member. Within the Group, it boasts an aggregated growth rate of 8.5%, one of the highest.
Business Environment: The Ministry of Investments (MISA) promotes Saudi Arabia as the “top global destination for foreign direct investment” in support of the Vision 2030 strategy.Incentive packages, assistance, and consultancy for businesses of all sizes, along with facilitation for joint ventures and localization of activities in the Kingdom.
Favorable tax regime for businesses and investments:
Absence of personal income taxation, a 20% corporate income tax rate, and 15% VAT make foreign investments attractive. The country has signed agreements with Italy to avoid double taxation. No import duties for materials, equipment, and technologies needed for starting a new productive investment. Favorable Taxation for Businesses and Investments:
Support for the private sector and privatization:
The sovereign fund, Public Investment Fund, invests $40 billion USD annually to promote the development of strategic sectors such as renewable energy, infrastructure, transportation, manufacturing, healthcare, agriculture, and aerospace.
Strong support for private entrepreneurship and startups through specific lines of credit.
- ‘Tourism Pioneers’ launched by the National Tourism Development to enhance tourism.
- Financial Technology Strategy aimed at increasing the number of fintech companies in the kingdom to 525 by 2030 and digital transactions to 80%.
- Strategic plan to achieve:
- Cumulative investment NIS of over 12.4 billion SAR in the Kingdom by 2030,
- Increase in GFCF to 30% of GDP,
- FDI flows to 5.7% of GDP.
- NEOM Smart City (with an expected completion date by 2030).
- The Red Sea project.
- Green Riyadh.
- Riyadh Art.
- King Salman Park.
Approximately fifty Italian companies operate in Saudi Arabia, primarily in sectors such as Oil and Gas, Luxury, Chemicals, Infrastructure and Transportation, and Aerospace. The Saudi appreciation for Italian technology is evidenced by the significant share held by machinery, transport vehicles, electrical and medical equipment, and household appliances (almost 50% of the basket). In addition to stimulating traditional exports of machinery and equipment while meeting consumers’ demand for luxury goods, it is essential to offer our know-how in sectors targeted for privatization: chemical/pharmaceutical, construction, renewable energy, and aerospace. Positively highlighted are measures supporting start-ups and initiatives aimed at promoting public-private partnerships and encouraging the development of special economic zones (Economic Cities and Special Economic Zones, for which a specific governmental authority – ECZA – has been established). The chemical sector is expected to double by 2030 due to the growing demand for basic, intermediate, and specialty chemical products.
Competitive Advantages Offered in Saudi Arabia:
- Low cost of raw materials and exemptions from customs duties
- Electricity prices are nearly 50% lower than the global average
- 10% cost advantage for naphtha compared to US and European markets.
- Secure access to an abundant supply of raw materials, as it hosts over 25% of the world’s proven oil reserves
Construction Sector Target 2030: 1.5 million homes to be built, 1.2 billion square meters of developable area Competitive Advantages Offered in Saudi Arabia:
- Rapid population growth estimated at 6 million by 2030
- Strong increase in demand in the real estate market driven by equally strong government support.
- In line with Vision 2030, it is expected that by 2025, approximately 400,000 units (including residential, commercial, and industrial) will be built using modern methods of construction (MMC).
Saudi Arabia has announced its intention to become the hub for renewable energies in the region by 2030.
Competitive Advantages Offered in Saudi Arabia:
- 6th worldwide for solar energy potential
- 13th worldwide for onshore wind energy potential
- Unlimited supply of solar and wind energy
- Large underserved regional market.
Source: infomercati esteri