Trade Around the World: Building the Kingdom of Saudi Arabia for New Growth in Global Trade

Much like the vast sand storms of the Arabian Desert, the economic winds of Saudi Arabia are shifting. Once viewed as strictly an oil-producing nation, the Kingdom is in the process of transforming itself for a new future. Under the vision and sponsorship of Crown Prince Mohammed bin Salman, Saudi Arabia launched an ambitious roadmap for greater economic diversification in early 2016 with the introduction of its Saudi Vision 2030 plan.

Yusuf Ali Khan, Head of Trade, Middle East, North Africa, Pakistan & Turkey, Citi

Saudi Vision 2030 is looking to create greater investment opportunities in the country, especially in non-

oil related areas and foster greater economic growth. This major development program aims to harness

the economic potential of Saudi Arabia, reducing the country’s dependence on the oil sector. Beyond

simply crude oil, Saudi Arabia is increasingly leveraging its exploration capabilities and expanding

into refining, as they look to diversify the entire energy supply chain. The kingdom is also looking to

expand exploration of substantial untapped mineral resources, such as gold, uranium and copper. This

diversification effort will also focus on developing and investing in areas such as healthcare, education,

infrastructure, recreation and tourism.

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32 Treasury and Trade Solutions Building the Kingdom of Saudi Arabia for New Growth in Global Trade

Ultimately, Saudi Arabia hopes to become an economic hub that would play a pivotal role in connecting and intermediating trade flows amoung Asia, Europe and Africa. In this regard, Saudi Arabia and Pakistan have recently signed investment agreements worth USD 20 billion across the oil and gas sector and power sector in Pakistan for projects that would be complementary to the China Pakistan Economic Corridor (CPEC), and ultimately link Saudi Arabia with the larger Belt and Road Initiative (BRI). Partnerships such as this will be instrumental in achieving the goals of Saudi Vision 2030.

The three major pillars for growth Saudi Vision 2030 is made up of three major initiatives. The first is a national transformation program, which has set a series of goals to be met over the next two years including various IPOs and infrastructure projects that support economic activity and job creation. The second is the creation of a 34,000 square kilometer luxury resort project on the Red Sea designed to foster upmarket tourism. Unique to this project, the resort is anticipated not to be governed by Saudi laws, but instead by international laws opening up cross-cultural collaboration and potential global trade opportunities. The third aspect of Saudi Vision 2030 will be the development of the entertainment sector including investment in theme parks, sports stadiums and cinemas.

Making the private sector more appealing One of the bigger challenges facing Saudi Arabia will be the inclusion of the local population in private sector jobs. The public sector is often prized for its higher pay and more accommodating work hours. Private sector jobs are however often also dominated by expats and these jobs are seen as transient. In order to help make Saudi Vision 2030 a reality and build the workforce capacity necessary to realize its ambitious goals, the Kingdom is looking into new ways to help engage the local population to embrace the private sector as viable work. It is also considering how to help attract Saudi talent from abroad, whether it be students or expat professionals, and encourage them to deploy their skills back in their home country.

The push to fill private sector jobs in the coming years may necessitate reforms in the labor force and societal shifts, which are already taking place in helping open up of greater employment opportunities for women and granting them the right to drive for the first time in the Kingdom. Reforms such as these are important for moving Saudi Arabia towards greater modernization.

A significant opportunity for trade and multinationalsWith the advent of economic reforms in Saudi Arabia also come multiple business opportunities for multinationals. As the country diversifies, sectors such as automotive, Fast-Moving Consumer Goods (FMCG) and power generation are opening up critical investment opportunities for corporates looking to support the expected growth in the coming decade.

Currently, dozens of banks are licensed to operate in Saudi Arabia with many more hoping to expand their services beyond specialized licenses. Banks will play an important role in supporting these opportunities, serving an active role in advising corporates, providing solutions for the movement of cash, providing short- and long-term financing solutions in foreign currency. Additionally, international banks with their wealth of experience and global networks will be uniquely placed to collaborate with the Kingdom in providing structured financing solutions, address deficiencies in the supply chain and intermediate investment flows into the country.

Citi is amongst the handful of banks working to expand services in Saudi Arabia, having acquired an investment banking license in 2018. As one of the leading trade and cash management banks, Citi brings its global network and deep knowledge of the Middle East to help support growing business opportunities in Saudi Arabia. Citi offers tremendous advantages to multinationals looking to do business in Saudi Arabia and local corporates looking to expand outside the Kingdom. Citi’s global presence in more than 100 countries with world-class products and emerging market experience can make for an ideal partner in this regard.

In recent times, Citi has worked closely with large local corporates in the private and public sector in raising long-term capital supported by ECAs, while at the same time providing solutions to clients who wish to create working capital efficiencies. All in all, Saudi Arabia has tremendous ambitions for the future of the country and is aggressively pursuing its plans for continued growth over the next decade and beyond. With this growth will come potential real opportunities for multinationals as well as local corporates and international banks like Citi while helping support the Kingdom in aiming to achieve Saudi Vision 2030.

ULTIMATELY, SAUDI ARABIA HOPES TO BECOME AN

ECONOMIC HUB THAT WOULD PLAY A PIVOTAL

ROLE IN CONNECTING AND INTERMEDIATING TRADE

FLOWS AMOUNG ASIA, EUROPE AND AFRICA.

Saudi Vision 2030Three Key Initiatives:

1 National transformation project to support infrastructure investment, increased economic activity, IPOs and job creation

2 Building a 34,000 square kilometer luxury resort on the Red Sea to foster upmarket tourism and will be governed by international laws

3 Developing the entertainment sector including investment in theme parks, sports stadiums and cinemas

4 Treasury and Trade Solutions

These materials are provided for educational and illustrative purposes only and not as a solicitation by Citi for any particular product or service. Furthermore, although the information contained herein is believed to be reliable, it does not constitute legal, investment or accounting advice and Citi makes no representation or warranty as to the accuracy or completeness of any information contained herein or otherwise provided by it.

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