London, Asharq Al-Awsat—At a time when the global economy is struggling to maintain growth, the Saudi economy is expected to attain growth rates of above 4 percent in 2015 and 2016. While it remains the world’s top exporter of oil, the Kingdom has enacted numerous structural changes to its economy over the past decade in a bid to diversify sources of income and reduce its reliance on revenues from the sale of hydrocarbons. The country is currently gearing up to open up its stock market—the largest and most diversified in the Middle East—to global investors, and has the sixth fastest growing economy among the G20 countries.
Britain remains one of Saudi Arabia’s most prominent trading partners, with British exports to the Kingdom jumping 29 percent in 2013 to reach a total of 4.2 billion British pounds (6.6 billion US dollars). Britain is also the second-biggest foreign investor in the Saudi economy, with total investments currently valued at 11.5 billion pounds (18 billion dollars), and both kingdoms share historical, economic and strategic links harking back to the founding of Saudi Arabia at the start of the last century.
Currently serving as Prime Minister David Cameron’s trade envoy to Saudi Arabia, Thomas King, Lord King of Bridgewater, was also Britain’s defense secretary during the first Gulf War and the liberation of Kuwait, and subsequently appointed by former prime minister Tony Blair as the first chairman of the Parliamentary Intelligence and Security Committee. He has made several visits to the Gulf, and Saudi Arabia in particular, and continues to take a keen interest in developments in the region.
Asharq Al-Awsat spoke to Lord King in London about the UK’s role in Saudi Arabia’s efforts to diversify its economy, ways to encourage UK businesses to operate in the Kingdom, and avenues to further boost cooperation and trade between the two countries.
Asharq Al-Awsat: What can both governments do to boost UK direct investment in the Saudi economy?
Lord King: There are already a growing number of ways to help UK investment into Saudi Arabia, including the new accelerated company registration process announced by SAGIA [The Saudi Arabian General Investment Authority] earlier this year. The rules for inward investment into Saudi Arabia are being tightened up and clarified, but I see this as a real opportunity for UK businesses who are serious about entering the Saudi market. The Saudi economy is diversifying and more and more firms outside of the traditional oil and gas sectors are recognizing the huge potential in Saudi Arabia. Saudi Arabia is the 6th fastest growing economy in the G20 and growth is expected to continue at over 4 percent for the next couple of years. And of course Saudi Arabia is investing billions into its healthcare, education, construction and transport sectors. UK firms have a justified reputation for delivering quality goods and services in Saudi Arabia, and I believe we should be looking at increasing the number of investments, joint ventures and other business activities that will benefit both our economies. Part of my role as the prime minister’s trade envoy to Saudi Arabia is to encourage firms to explore the market, understand its potential, and promote the role of the UK Trade and Investment team in helping them take those first steps into what we hope will develop into long term partnerships.
Q: In which sectors do you see the most promising potential for increased bilateral cooperation?
UK firms have expertise over a wide range of sectors relevant to the Saudi market. We have, of course, already been heavily involved in the oil and gas sector for a long time. But we are now becoming increasingly involved in areas that are benefitting from the huge amount of new investment. For example, UK companies are well placed to benefit from the 60-billion-pound [94-billion-dollar] investment in healthcare development. We have already seen major successes with the 1 billion pounds’ [1.6 billion dollars’] worth of contracts awarded to UK education providers as part of the Saudi Colleges of Excellence Programme. Transportation, both urban and countrywide, is also an area of massive potential for UK firms. I recently led a large rail trade delegation to Saudi Arabia and we were all struck by the amount of investment that is being put into this sector, through the major metro projects and the expansion of the national rail network. Some of the UK firms that accompanied me have already experienced success here. I encouraged those who were new to the market to look seriously at doing business in a country where building relationships, establishing a presence and showing a commitment to stay for the long term can provide strong foundations in enjoying success here.
Q: What can be done further to increase and facilitate the entry of UK small and medium sized businesses into Saudi Arabia?
We and our Saudi partners are already exploring a number ways to encourage SMEs into the Kingdom, as they underpin so much of the major business activity within our markets. One of the key plans in place is to amplify the work of the Saudi British Joint Business Council and support their efforts in establishing a formal presence in both the UK and Saudi Arabia in order to provide a direct business route for enquiries, advice and introductions. UK Trade and Investment will also continue to support UK SMEs considering market entry, through their offices in the UK and via their services based at the British Embassy in Riyadh and Consulate General in Jeddah. There has also been an increase in SME support activity through our colleagues at the Scottish Development International and Invest Northern Ireland, both of whom have representation in Saudi Arabia and which is further evidence of how seriously we take our business relationship in this high growth market.
Q: You were recently visiting the Jeddah Chamber of Commerce and Industry. What are some of the main joint investment opportunities discussed?
The Chamber is an important partner for the UK and recognizes that we can offer skills and expertise in many areas. I spoke with members of the Chamber in particular about opportunities for rail and metro projects, where the UK has significant experience over many years. I added that I had brought a rail delegation with me from the UK to talk to, among others, Makkah Metro, Medina Metro and Metro Jeddah. The delegation included a number of companies providing a wide range of goods and services. Some of them had previous experience in the Kingdom and others are looking to build new partnerships. Of course I have very good memories of Jeddah from my visits here to meet members of the Royal Family and other Saudi friends and colleagues during the first Gulf War.
Q: Saudi Arabia is currently working towards diversifying its economy, how do British businesses in the Kingdom enhance and help these efforts?
Saudi Arabia is rightly diversifying away from hydrocarbons and investing hugely towards private sector growth. The Saudi economy of the future will be one where the focus is on creating real jobs for Saudis, increasing their employability through massive investment in education, vocational training and knowledge transfer. UK firms are aware of this and I have already mentioned the wonderful success seen by the UK education providers who will be operating 16 of 37 Colleges of Excellence that have been established so far. We are also encouraging deeper links between Saudi and British universities and more than 15,000 Saudi students are currently studying in the UK under the King Abdullah Scholarships Program. I always make it a point when speaking to UK firms looking to enter the Saudi market that doing business in a way that matches Saudi diversification and employment policy will provide a real bonus and have your activities taken seriously.
Q: Saudi Arabia is the biggest trade partner of the UK in the Middle-East . . . Can you give us an overview of the evolution of British investments in Saudi and Saudi investments in the UK over the past few years?
The Saudi market is a very important one to us. Not just because of the opportunities available in both markets, but also because our deep historical links, continued high level engagement and mutual respect. Saudi Arabia is among the UK’s largest trade partners in the Middle East, but the UK is also the second largest cumulative investor in the Kingdom as well, an excellent example of our long-term commitment to doing business here. And investment is growing on both sides, with the UK long considered one of the most viable and worthwhile investment locations in the world due to our open attitude to business, proximity to major markets, skilled workforce, and as a center for global trading. The Saudi government is pushing for more investment with a number of incentives including the Saudi Industrial Development Fund and the Public Investment Fund. Dependent on certain criteria, UK businesses may be able to access UK export financing as well, as a number of UK firms in the Kingdom have already done successfully.
Q: Is there a joint strategy to boost trade and investment relations between the two kingdoms in the future?
Yes, one of the most important strategies has been the reinvigoration of the Saudi–UK Joint Ministerial Council [JMC], which covers a wide range of bilateral trade and investment issues and meets at least once a year. The JMC’s role is to explore any areas that may benefit and increase mutual cooperation between our two countries, covering a wide range of topics and sectors, and involving senior decision makers on both sides. This work is complimented by the activity undertaken by the Saudi British Joint Business Council, who meet more regularly and work to a more specific business-to-business agenda, focusing on a wide range of areas including healthcare, education and training and SMEs. And I should of course highlight my own role as the UK prime minister’s trade envoy to Saudi Arabia, which was created to further strengthen the excellent ties between our two countries, exploring more ways to improve our overall business relationship and offer guidance and support to any UK businesses looking to enter or increase their activity in the Saudi market. It is a role that I take very seriously and I was most encouraged by the warm and generous welcome that I was given by my Saudi hosts last month. UK businesses have an excellent reputation in Saudi Arabia and I am keen to encourage more to come here, create new partnerships and hopefully enjoy mutual success for many years to come.