SAUDI ARABIA SPECIAL EDITION 2018

 
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Quarterly economy magazine on-line November/January 2018

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Saudi Arabia Special Edition CEO of Vger srl, Mr. Ivan Magon Quarterly magazine on-line, November / January 2018

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Made i ..exclusive jewellery series realized with D co handmade by expert goldsmiths respecting the

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n Italy lor diamonds, e italian tradiction..

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Sommary 10 Saudi Arabia, a country still to be discovered... 18 Saudi Vision 2030: technical details 27 Welcome to NEOM 30 THE PROGRESS TIME Event 32 Electronics and IT, the perfect match... 36 Saudia, welcome to your world! 40 Milan, a city to invest in... 10 30 40 32 18 36 27 THE PROGRESS TIME Quarterly magazine on-line, November/January 2018 Aut.Trib. di Arezzo n. 4/13RS del23/07/2013 Aut. Modifiche dal Tribunale di Arezzo del 02/07/2015 EDITOR Mr. Ivan De Stefano EDITOR IN CHIEF Mrs. Barbara Ganetti GRAPHIC & WEB DESIGNER Mr. Tosi Lucio TRASLATOR Ms. Giulia Ruzzenenti QUESTO NUMERO È STATO FINITO DI IMPAGINARE IL 02/12/2017 CONTATTI editore@theprogresstime.com - redazione@theprogresstime.com

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Editorial by Barbara Ganetti IItalian-Saudi economic ties continue to live an excellent time for our national interests. As a matter of fact, the Kingdom is widely open to intensify the economic relations with Italy. For the diversification path of the economy and to prepare itself to sustain the demand of a growing (in number and in complexity) population, the Kingdom needs a huge quantity of goods and services. The Italian investments in the Kingdom focus on traditional power sectors, petrochemical, infrastructures and defense; the areas with the best growth perspectives and supposing future investments for Italy are certainly healthcare, renewable energies, electronics, chemical and plastic, infrastructures – both in educational and in healthcare fields – defense and the water sector. The Italian know how and the Italian high technology machineries continue to represent a reference point for diverse Saudi industry sectors, but also their exportations are expanding together with the growth of the Saudi economy. In this publication that will close the current year, developed in collaboration with the Embassy of the Kingdom of Saudi Arabia in Italy, we thank H.E. Min. Pl. Faisal Hanef al Kahtani for the kindly concession to answer to our questions, and we would like to give the readers a 360-degrees panorama of the Saudi Kingdom, facing the important economic and cultural changes for which they are preparing. One of these changes is absolutely the new development strategy Saudi Vision 2030, that foresees important investments for the sovereign fund and structural reforms, to encourage foreign investments, to enhance tourism and the enormous geographical and environmental patrimony of the country. We hope you will enjoy the read and we wish you a Merry Christmas and a Happy New Year.

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Saudi Arabia, a country still to be discovered... By Ivan De Stefano After a four-year-period of negative growth for the commercial exchange between Italy and Saudi Arabia (-13,1% in 2013; -9,8% in 2014; -6,0% in 2015 and -20,2% in 2016), the data about the first semester of 2017 show a clear inversion of the tendency, with a growth of 17% (from 3,2 billion euros in the first semester of 2016 to 3,8 billion in the first semester of 2017). H.E. Min. Pl. Faisal Hanef al Kahtani The Kingdom of Saudi Arabia has planned many considerable changes, one of those is undoubtedly the new development strategy “Saudi Vision 2030” that will foresee important investments from the sovereign fund and structural reforms to increase foreign investments; but this is not all. Also under the cultural aspect the changes are significant: we would remind you to the news issued some months ago about the permission for the Saudi women to drive, a decision that marks a great cultural openness of the Saudi Kingdom. For the final updates concerning the regulatory rules of this promulgation we refer to June 2018, the moment in which they will become effective. Moreover, the projects activated by the Kingdom will involve also the tourism, promoting the huge geographic and environmental heritage of the country, rich in archeological patrimony. In this special edition, in collaboration with the Embassy of the Kingdom of Saudi Arabia in Italy, we will analyze in detail the projects and the structural reforms carried out by the Kingdom, the trade opportunities for the foreign companies interested in the Saudi market, with a specific attention to the Italian companies, leaders among the partners countries whose commercial relations are expected as strongly-increased. In order to examine the debated topics, we are glad for the kindly permission of H.E. Min. Pl. Faisal Hanef al Kahtani, Charge’ d’Affairs of the Kingdom of Saudi Arabia to answer to our questions.

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H.E. could you explain us the new development strategy, named Saudi Vision 2030, adopted by your country? Saudi Vision 2030, masterminded by Crown Prince HRH Prince Mohammed bin Salman, is the blueprint for the Kingdom’s ambitious transformation plan, based on three pillars that represent the Kingdom’s unique competitive advantages, namely the KSA’s role as heart of Arab and Islamic worlds, the Kingdom’s investment power, and the Saudi Arabia’s strategic location to became a driver of international trade connecting three continents: Africa, Asia and Europe. Vision 2030 is built around three related themes which embrace all sectors of Saudi society: a vibrant society, a thriving economy and an ambitious nation. This first theme refers to the Kingdom firm belief that the real wealth of Saudi Arabia lies in its people and in the potential of its younger generation. Within this theme, can be framed all the Vision 2030’s strategic goals aimed to promote and reinvigorate social development, improving the quality of life of our citizens and build the Kingdom’s future on our strong Islamic faith and national unity. In this regard, I can mention the goal of increasing household spending on cultural and entertainment from the current level of 2.9% to 6% by 2030 as the aim of increasing the average life expectancy from 74 years to 80 years or the goal of developing our capacity to welcome Umrah visitors from 8 million to 30 million every year. A practical example of recent steps adopted by the Kingdom in line with this Vision 2030’s theme for a vibrant and inclusive society, is the landmark decision that will be allow Saudi women for the first time into major sports stadiums in its three main cities as of early next year, that follows King Salman’s recent historic announcement that women will be allowed to drive from June 2018. This decision will empower Saudi women to play a great role in the Saudi economy, in line with the Vision’s strategic goal which aim to increase women’s participation in the workforce in Saudi Arabia from 22% to 30% by 2030. Women empowerment is also critical to reach the strategic objectives under the second the-

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me of Vision 2030, a thriving economy, which includes strategic goals set by the Kingdom to provide opportunities for all, such as developing an education system aligned with market needs and creating economic opportunities for the entrepreneurs, the small enterprises as well as the large corporations. Therefore, KSA is developing investment tools to unlock our promising economic sectors and diversify its economy. Saudi Arabia aimed at raising the share of non-oil exports in non-oil GDP to 50%. We are also investing to create job opportunities and to lower the rate of unemployment from 11.6% to 7%. The Kingdom is acting to grow its economy and improve the quality of services, by privatizing some government services and increasing the private sector’s contribution, which is supposed to increase up to the 65% of GDP by 2030. We are also improving the business environment, attracting the finest talent and the best investments globally, and leveraging our unique strategic location in connecting three continents. Vision’s third theme, an ambitious nation, is built on an effective, transparent, accountable, enabling and high-performing government. Among the goals set under this theme is the Raising of the Kingdom’s ranking on the EGovernment Survey Index from our current position of 36 to be among the top five nations as well as the aim of rally one million volunteers per year. In order to enable an effective implementation, Vision was cascaded into 96 strategic objectives. New entities, such as the Council for Economic Development (CEDA), have been created while existing entities have been merged and/or restructured. In addition, on April 2017, CEDA identified a list of 12 programs, called Vision Realization Programs (VRP’s), to implement the Vision. Among them: The Housing Program, Lifestyle Improvement Program, National Transformation Program and the Public Investment Fund’s Program, which was recently launched during the Future Investment Initiatives (FFI) which took place in Riyadh in October 2017. In these scenarios, what is the role of Public Investment Fund – PIF – for Saudi economy? Public Investment Fund (PIF) plays a key role in achieving a post-oil scenario. Over the past two years, the PIF Board – chaired by HRH Prince Mohammad bin Salman Al Saud, Crown Prince, Deputy Prime Minister, and Chairman of The Council of Economic and Development Affairs (CEDA) – has undertaken a wide range of actions to drive forward the transformation of PIF as it develops into one of the world’s leading and most impactful sovereign wealth funds. These activities include developing expertise, whilst undertaking major reforms to the Fund’s investment, governance, legal, risk and compliance and finance functions. As mentioned before, during the FII has been launched the PIF Program (2018-2020), one of the Vision Realization Programs (VRPs). The four key objectives underpinning the Program include: growing and maximizing PIF assets; launching new sectors; localizing advanced technologies and knowledge and building strategic economic partnerships. The newly-launched PIF Program outlines how the Fund aims to complement private sector development in the Kingdom through its new domestic investment pools, split between the Fund’s Saudi Holdings, Saudi Sector Development, Saudi Real Estate & Infrastructure Development, and Saudi Giga-Projects pools. The scale of ambition attached to the Fund’s domestic pools is evidenced by the announcement of the NEOM Project, the Red Sea Project, the Al Qidiya Project, as well as the establishment of nine companies focused on launching promising new sectors in the Kingdom, including the Saudi Arabian Military Industries company (SAMI), the Fund of Funds, and the Saudi Real Estate Refinancing Company. The PIF Program, which is underpinned by 30 separate initiatives, will see the Fund’s Asset Under Management (AUM) increase to SAR 1.5 trillion (over $400 billion) by 2020,

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creating 20,000 direct domestic jobs, more than half of which are high-skilled roles, and 256,000 construction jobs, which will increase PIF’s contribution to real GDP from 4.4% to 6.3%, and increase the share of local content to SAR 50 billion (over $13 billion). At home, the PIF Program will unlock value in the domestic portfolio and drive forward strategic and sustainable diversification by creating opportunities in a range of different industries. Internationally, the Fund has begun to invest in some of the world’s most innovative companies and formed partnerships that will support long-term income diversification and ensure Saudi Arabia at the forefront of emerging trends. Your Government has undertaken some actions to attract foreign investments and to simplify the authorization and the administration procedures, what are the investment opportunities for Italian entrepreneurs? The latest data confirm a clear recovery of the trade between Italy and your country, with a raise of 17%; what are the new opportunities for Italian companies interested in the Saudi market? More spe- cifically, what are the more requested sectors? The Kingdom is launching important measures to facilitate the attraction of international investments. There are many reasons for investing in the strategic sectors where Saudi Arabia has great comparative advantages. Foreign–owned companies, for example, enjoy all the benefits, incentives, guarantees, and support offered to Saudi-owned companies. These include: 20% tax on corporate profits, with any losses carried forward indefinitely to offset future taxes; no personal income tax, no value added tax, no sales tax, no land tax and no property tax; full repatriation of capital, profit, and dividends allowed, subject to a 5% withholding tax; minimal restrictions on currency conversion, exchanges and transfers; tax exemption on earnings from exports; tax credits on R&D investments; the government also grants significant training and employment-related tax concessions, up to 50% of either training cost or payroll, to companies operating in any of the six less developed regions: Hail, Jizan, Najran, Al Baha, Al Jouf, and the Northern Region. In line with the Vision 2030 initiatives to revitalize the business

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environment, fuel investments and accelerate economic development in the Kingdom, the Saudi Justice Ministry has officially launched the commercial courts last October, almost a month after they began operations in the country’s three major cities – Riyadh, Jeddah and Dammam. These specialized commercial courts will achieve a quantum shift in the speed of adjudication of commercial disputes and the quality of the judicial output. Justice Ministry’s initiatives to digitize its operations and services, will cut bureaucratic procedures by some 45% and shortened the period for execution of judicial orders from two months to 72 hours by activating the electronic linking system that connects all entities involved in that procedure. Let me also remark that Saudi Arabia is now regularly highlighted as one of the best places in the world to do business. The World Bank Group’s recent report on the Kingdom showed unprecedented progresses in indicators of the ease of doing business, after the implementation of many reforms and procedures that have contributed to improving the business and investment environment, as well as investors confidence. The report also referred to the Kingdom’s ranking among the top 20 reformist countries in the world, and the second among the best high-income countries and G20 countries in terms of implementing reforms to improve the business environment. The Saudi Government will continue taking a proactive approach in encouraging foreign investments and in facilitating access to trading and investing in the stock markets and to welcome foreign technology. With regards to bilateral relations, Saudi-Italian economic ties continue to go through a favorable time and the reform process implemented by the Saudi government is bound to have particularly positive consequences for Italy’s national interests. Italy is one of the major commercial partners of the Kingdom. Italy is the 3rd European partner country for imports to the Kingdom, and the 5th European partner country for exports, ranking among the first 11 commercial partners of the King- dom. The bilateral trade reached € 6.7 billion in 2016. With regards to Italian investments in Saudi Arabia, they are so far concentrated in the traditional petrochemical, infrastructure and defense sectors. In the country, there are currently about 70 companies operating directly or through joint ventures with Saudi partners, in particular in the petrochemical, industrial plant building, infrastructure and construction sectors, where they have been assigned with primary contracts in the infrastructure development process (railways, underground, etc.). In addition to these, promising sectors in the Kingdom with high growth prospects and which can offer interesting opportunities for Italian investors are the health sector, the renewable energies (especially for wind and solar projects), the mining and the tourism sectors. Regarding the petrochemical, the government is fostering different productions and growth of this sector through greater investments, less restrictive regulations, incentives scheme (energy and low-priced raw materials and advanced industrial infrastructures) with the aim of making the sector more attractive for international investors. The infrastructures and constructions sector is, as well, a central sector of the Saudi economy. Saudi Arabia has the largest construction market in the Middle East and has recorded an average growth of 5-7% per annum in recent years. In 2016, the Saudi government allocated € 10.3 billion for the construction of new bridges, the expansion of ports and airports and the construction of new railway lines (including the Saudi Landbridge Project, which will connect the cities of Jeddah - RiadDammam) and metropolitan (in the cities of Jeddah, Mecca, Medina and Riad). The capital’s subway will have six lines and 85 stations for a total length of 177 kilometers; among the consortium of companies that is working on the construction of line 3 of the subway, there are the Italian companies Ansaldo STS and Salini Impregilo. In the budget 2017, the Government allocated € 13 billion for the im-

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provement of roads, ports, railways, airports and postal services and the development of Jubail, Yanbu and Razmic industrial cities. The government intends to privatize the country’s 27 airports by 2020, with a view to improving their management and efficiency, and to provide them with ever-higher standard service providers. As a first step, in view of the privatization of the individual companies, the competent authorities intend to transfer the ownership of all the stakes to the Public Investment Fund. The government intends to surrender control through a single transaction of the Saudi-based airline and the low-cost carrier Flyadeal. In order to encourage the participation of foreign companies in the privatization of the sector, the Saudi authorities have established that local investors may hold a maximum of 25% in the mainstream of the country and have introduced the possibility for foreign investors to invest in new airport companies even without the support of local partners. With regards to the investment opportuni- ties offered by health sector, the Saudi government, in addition to the resources already made available by the State to develop the sector, is presenting a series of initiatives to encourage private investments in the health sector. Among the most important projects the construction of various medical cities, including the largest King Abdullah Medical City in Dammam; the King Abdullah Medical City in the province of Makkah; the King Faisal Medical City in the city of Abha, opening in 2021. The privatization of health services remains at the top of government interventions aimed at reducing public spending and introducing international best practices with the aim of increasing private sector contributions, from 25% in 2015 to 35% by 2020, with the number of authorized medical clinics ranging from 40 to 100. A new growing sector in the Kingdom is the renewable energy, which is expected to expand until the new renewable energy program (NREP) can reach its target of 9.5 GW of renewable energy by 2023. Saudi Arabia’s rene-

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