powerpoint presentation€¦ · •help with document processing, approvals and building permits....
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Saudi Aramco: Public
2017KSA Advantage
Saudi Aramco: Public
Your company can benefit from “the KSA advantage”
KSA is the largest Middle East market and one of the top 20 world economies
4World-class
logistics1Funding
incentives
5Government
support
2Affordable
land & utilities
3Skilled labor
The KSA advantage
Source: Saudi Aramco analysis
Saudi Aramco: Public
There are a range of funding initiatives available to companies wishing to operate inside Saudi Arabia
1. Funding Incentives
• Saudi Aramco has a dedicated entity named Wa’ed to provide financial support and business development to SMEs in KSA
• 3 funding options:
1.Loan Financing (Non-collateralized)
2.Venture Capital Fund
3.Seed Fund (granted up to SAR 100,000)
• Wa’ed has approved funding for 75 companies with a commitment of SAR 277 MM
• Aspires to create 200 innovative companies and 450,000 jobs in non-government sector by 2020.
• Issued over 1.8bn SAR in loans to SMEs in 2015 –11% increase from 2014
• KAFALH works with 11 banks to provide loans of 50% - 75% of the investment with a maturity term of 15 to 20 years
• Evaluation to promote industrial diversification and to spread investment across the Kingdom
• Financing with rates as low as 2% from entities such as SIDF, P.I.F., KACST grants, Arab Fund for Economic Development, Arab Monetary Fund and Islamic Development Bank.
KAFALAH1 program
Additional KSA funding programs
Saudi Aramco funding
Saudi Aramco can assist potential investors with data and information to support the preparation of the business case needed to apply for direct financing
1. KAFALH is the SME Loan Guarantee Program backed by SIDF
Source: Saudi Aramco, http://www.sidf.gov.sa/en/Achievements/Pages/SmallandMediumEnterprises.aspx
Saudi Aramco: Public
Beyond direct financing, KSA offers additional incentive programs
- The gateway to local opportunities
- Pre-investment assistance (one-stop-shop)
• SAGIA – Saudi Arabia General Investment Authority
• Enable investors and help them facilitate their process, queries or concerns in coordination with all governmental entities throughout the investor journey from the exploration phase, the execution and actual operation.
• Help with document processing, approvals and building permits. Assistance in business registration, issue of commercial and industrial licenses and compliance with environmental guidelines
Exception fromimport tariffs
• MoF - Saudi Customs
• Exemption of the 5% to 12% import tariff in:
– Imported raw materials for manufacturing
– Machinery & Equipment
– Spare parts for machinery and equipment
Tax incentives for underdeveloped regions
• MoF – Department of zakat and income tax
• Tax deductions for underdeveloped regions:– 50% of cost of training of Saudis employees– 50% of annual wages paid to Saudis– Tax credit carried forward 10 years up to 15% of the capital
Incentives for Saudi workforce development
• Human Resources Development Fund – HRDF
• Training support of SAR500/month plus 75% of the salary up to SAR1,500 /month per student
• Post-training support of 50% of the student salary up to SAR2,000/month (12 months)
1. Funding Incentives
Incentive
Source: Government websites, Saudi Aramco analysis
Entity Description/eligibility
Saudi Aramco: Public
KSA has a nationwide program to develop custom economic and industrial clusters
RCJY - Royal
Commission of
Jubail and Yanbu
• Plans, develops and manages petrochemicals and energy intensive industrial cities
• 2 existing cities + 1 Ras Al-Khair“Minerals Industrial City”
•Petrochemicals•Mining•Process industries
MODON – Saudi
Industrial
Property
Authority
• Develops and supervises industrial land in KSA
• 18 existing, 4 planned, 9 promising, 6 private and 2 technology cities
•Diverse focus •Emphasis on medium and light industries
ECA - Economic
Cities Authority
• Develops and oversees economic cities encouraging foreign investment
• 4 economic cities
•Diverse focus•Emphasis in line with KSA’s diversification strategy
SPARK - King
Salman Energy
Park
• Development in two phases, with first phase to be completed in 2021
•Drilling•Exploration and production services (E&P)
•Pipe manufacturing
Economic Cities (ECA)
Industrial Cities (ECA)
Jubail / Yanbu / Ras AI-Khair (RCJY)
SPARK – King Salman Energy Park
Dammam
RiyadhJeddah
3. Land & utilities
Economic and industrial clusters
Sources: Saudi Aramco analysis, RCJY, MODON, ECA
Entities behind the cities Industry focus
Saudi Aramco: Public
• Rent-free periods
• Lower rates for facilities committed to environmental and
safety requirements
• Packaged services to create a pro-business environment
(e.g., licensing, leasing, facilities management and
transportation)
• Purpose-built logistics to allow multi-modal access to
domestic and international markets
• Integration with complimentary facilities such as staff
accommodation, retail and leisure
Industrial land rates in the KSA are very competitive
0.270.270.270.270.270.270.540.540.540.810.810.811.081.081.081.081.081.081.201.351.351.35
2.30RCJY - Reserved Land
UAE
Al-Ahsa 2nd.
Hafr Al-Batin
Shaqraa
Jazan
Najran
Tabuk
Qassim 2nd.
Al-Kharj
Sudair
Makkah AlMukarama
Jeddah 2nd.
Assir
Ha’il
Al-Ahsa 1st.
Qassim 1st.
Dammam 2nd.
Riyadh 2nd.
RCJY - New Industries
Dammam 1st.
Jeddah 1st.
Riyadh 1st.
15.00USA 64.00
EU 70.00
Dammam 3rd.
2. Land & utilities
Industrial land rates pricing (USD per m2)1 Additional incentives
Source: Saudi Aramco analysis, MODON, JAFZA, C&W, Colliers, YANBU Industrial City Q3’16 Economic Review
Saudi Aramco: Public
7.2
8.0
11.2
12.0
14.0
4.8KSA
USA
UAE
India
China
EU
2. Land & utilities
Low utility rates will further support the financial attractiveness of your business case
Electricity (US ₵ per kWh)
Source: SEC, MODON, ADDC, EIA, Houston TX, EC Europa, Wessex Water, SZ Invest, Mahadis, IGU Wholesale Gas Price Survey 2016
Water (USD per m3)
0.5
1.1
1.9
2.1
2.1
0.6
USA
India
KSA
China
UAE
EU
Natural Gas (USD per mmbtu)
2.50
1.20
7.90
9.70
7.50
1.25KSA
USA
UAE
India
China
EU
Methane price
Saudi Aramco: Public
Kuwait 31,3
KSA 22,6
UAE 34,6
Russia 14,5
Singapore 30,3
China 18,8
Turkey 10,7
GCC 26,0
Japan 35,1
EU 26,3
USA 30,9 • KSA is committed to invest heavily to improve the
competitiveness of Saudi’s labor market, as part of Vision
2030
• The country will offer support to employers to create
sustainable jobs through flexible staffing regimes, subsidies
and minimization of the cost of employing women
• KSA will invest on skills development of the Saudi workforce
through vocational trainings in partnership with the
educational sector, company subsidies and career specific
trainings for the youth
• Other objectives are labor market balance between
nationals and expatriates, improvement of labor protection
and inclusion, provision of efficient mechanisms and
policies, social harmony and cohesion…
Saudi labor rates are regionally and globally competitive
3. Skilled labor
Average labor rates (USD per hour1) Additional incentives
1. Rates are a composite of average hourly compensation costs for a range of 30 different job roles relevant to energy, manufact uring and supporting industries
Source: Salary Explorer, Saudi Aramco analysis
Saudi Aramco: Public
520
1,570
2,190
2,715
Public Sector (Saudi)
Public Sector (non-Saudi)
Private Sector (Saudi)
Private Sector (Non-Saudi)
Saudi is investing in building a skilled and flexible workforce
3. Skilled labor
National labor rates (USD per month1) Education
Source: Ministry of Labor and Social Development, Labor Market Report, July 2016
• Targeting to increase the proportion of white collar jobs from current level (18%)
• Focus on Saudi nationals who have completed secondary school but not reached tertiary education – approximately 20% of the workforce (1.4 million people)
• Selected investment in tertiary institutions:
− King Fahd University of Petroleum and Minerals is the top science and engineering university in KSA
− King Faisal University, with an enrollment of ~26,000, is the top University in the Eastern Province
− King Faisal University Community College,a new college that will receive an investment of USD 8.2mn
− King Abdullah University of Science and Technology, one of the fastest growing research institutions in the world
Saudi Aramco: Public
A world-class logistics network links international supply markets with regions and industrial hubs
• 221,372 km of existing road network
• USD 2.4bn investment in Makkah ring road
• 6 international, 8 regional and 13 domestic airports
• USD 7.2bn investment allocated to the King Abdulaziz International
airport redevelopment
• Saudi Arabia’s 9 seaports compose the key port network in the Middle
East
• Establishment of Ras Al Khair port under the 9th Development Plan
• Railway network of 1,380 km with 2 main lines
• Land Bridge Project, a 950 km rail link between Jeddah-Dammam
Damman
Jubail
RiyadhMadinah
Jeddah
Ras Al Khair
Jizan
Yanbu
Dhiba
Key
Seaport
Airport
Major Road
Planned GCC road
4. Logistics
Saudi Arabia’s strategic location – Intersecting Europe / Africa and Asia – uniquely positions it as a logistics hub with access to two billion consumers
Source: Saudi Aramco analysis, Rail Journal, Arabian Business, Thomson-Reuters, The Big 5 Hub, SAGIA, Ports Finance International, MCL, The National, NY Times, Zawya
Saudi Aramco: Public
This logistics network benefits from preferential duties and customs, and low domestic freight costs
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201720162013 20152014
AsiaEuropeUSAKSA
• Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world
• Saudi Arabia is part of the GCC1 and applies GCC common external tariff of 5%
• The Saudi government also applies a 12% tariff on 207 products, in some cases to support local industries
• Customs duty exemption is available on all authorized imports for industrial establishments, equipment, machinery, tools, spare parts, raw materials or packaging materials if
− Local supply does not exist or
− The local supply is not up to the specifications of the manufacturers
• Import duties on the majority of other products is 12%
4. Logistics
Import duties and customs
Source: Saudi Aramco analysis, Rail Journal, Arabian Business, Thomson-Reuters, The Big 5 Hub, SAGIA, Ports Finance International, MCL, The National, NY Times, Zawya, CMA-CGA, energy.gov, Trading Economics, iContainers, Marketline reports
Road freight costs(USD, per 1000 miles, per ton)
Saudi Aramco: Public
Saudi Arabian General Investment Authority –oversight of investment affairs in the KSA
Saudi Industrial Property Authority –development of industrial cities
Royal Commission of Jubail and Yanbu –development of Jubail and Yanbu industrial cities
National Industrial Clusters Development Program – investors to industrial clusters connection
Ministry of Finance – monitoring of loan policies for the KSA Government
Public Investment Fund – SME investment on behalf of KSA
Small and Medium Enterprises Authority –improvement of regulations and promote SMEs
MERAS – Unified electronic platform to facilitate business start-ups
Human Resources Development Fund –implementation of HR practices
Saudi Export Development Authority –enablement of export opportunities for SMEs
Certificate of Conformity – provision of confirmation certificates for KSA imports
Saudi Industrial Development Fund – provision of finance and advisory services
Saudi Aramco
Localization is supported by a comprehensive ecosystem of government stakeholders
5. Government support
Source: Saudi Aramco analysis