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Special feature: Investor confidence in Saudi business surging in 2019

Investor confidence in Saudi is at an all-time high, with plenty of growth, projects and legal climate to build trust with the Kingdom.

Hilton Hotels & Resorts revealed planning 35 new hotels in the kingdom Country to announce very large initiatives for the private sector within the framework of the National Industries and Logistics Program 2019 is expected to witness healthy real estate activity after largest ever expansionary budget

2019 is shaping up to be a promising year for Saudi, convincingly luring investments and building trust in various business sectors.

Want proof?

Revenue growth

A decline in confidence in the region’s growth potential was witnessed in this year’s edition of PwC’s 22nd CEO Survey, launched at the World Economic Forum in Davos, DailynewsEgypt reports.

Only 28% of Middle East CEOs were “very confident” of revenue growth over the next 12 months compared to 33% last year, but Saudi is firmly on the minds of CEOs, cited by a third of respondents as the most important country for growth, followed by Egypt with 15%.

Hotel growth

Hilton Hotels & Resorts revealed planning 35 new hotels in the kingdom, as reported by the Saudi Gazette and Trade Arabia following a recent Saudi Hotel Investment Conference.

Carlos Khneisser, vice president of development, Mena, said: “…35 new hotels under development… will add over 10,000 new rooms in the coming 3-5 years. This represents our largest pipeline in the Middle East and the confidence we have in the strength of the market with increasing demand for business, leisure, and religious tourism.”

Religious tourism attracts over 2 million visitors annually. Reports by the Saudi Tourism Information and Research Center (MAS) said tourism revenues rose from$15.2 billion in 2004 to an estimated $57bn in 2018.

 Attractions include Formula E racing, European tour golf tournament in KAEC, concerts, cinemas, WWF events, and others.


 Debt reduction, business growth

At the World Economic Forum in Davos, Saudi Minister of Finance Mohammed Al-Jadaan told daily Asharq Al-Awsat that Saudi witnessed “great achievements, mainly curbing the deficit significantly from 12% in 2016 to 9% in 2017, and to 4.6% in 2018” and hoped the deficit would not exceed 5% percent in 2019.

 The minister said that the country would soon witness the announcement of very large initiatives for the private sector within the framework of the National Industries and Logistics Program.

He added that one of the objectives of Vision 2030 was to transform the Kingdom into a logistics hub connecting continents, through advanced infrastructure, digitization, and multi-polar services and cooperation.

Confidence growth
Saudi Minister of Finance Mohammed Al-Jadaan stressed that investors became “aware that work in Saudi is sustainable, institutional, and built on clear foundations that enable rapid implementation and continuous communication with the private sector.”

“Our first concern is the local investor. There is continuous communication between the government and the Saudi investors,” he affirmed. “We hear their views to determine the list of obstacles they face, and we work with the private sector to solve them.”

Al-Jadaan noted that recent Saudi issuances have demonstrated “a very big trust of foreign investors” in the Kingdom’s financial system.

“Bonds worth $7 billion, and a range of projects have been launched over the past four months; most of them by foreign investors… in the sectors of health, electricity, water, and sanitation,” he said.

The Kingdom managed to turn the shrinking economy of about 0.7% in 2017 to a growth rate of 2.3% at end of 2018.

 French oil company Total was engaging in a $5bn refining and petrochemical investment in Saudi Arabia and would also soon announce a new venture for petrol stations, it was announced at Davos.   

Saudi Arabia will announce five public-private partnerships projects in the next four months, Al Jadaan said.

 Saudi energy minister Khalid Al Falih recently said the country will tender at least 12 projects across the renewable value chain in 2019 alone.

"International investors looking at the market admire the scope of the vision and common sense of becoming a modern society if it is truly going to be a centre of financial markets in the region," chief executive of Morgan Stanley James Gorman said.

The government hopes to generate about $11 billion (Dh40.39 billion) by 2020 through its privatisation programme, which includes the sale of stakes in utilities, soccer clubs, flour mills and medical facilities.

Real Estate growth

Increased government spending and major project launches to stimulate real estate market in Saudi Arabia, says Jones Lang Lassalle (JLL) Feb 4, 2019.

2019 is expected to witness ongoing activity on the back of the Kingdom’s largest ever expansionary budget (SAR1 trillion in spending), according to JLL. 

Saudi hospitality and entertainment industries witnessed several major development announcements such as Al Qiddiya in Riyadh and Amaala, the luxury wellness destination forming part of a giga-projects investment portfolio launched by The Public Investment Fund (PIF). 

“These milestone projects are key drivers of Saudi Arabia’s non-oil economic growth and are expected to trigger other large scale real estate development activity.”  Dana Salbak, Associate, JLL MENA said.  

KSA led equity returns in January, as it did in 2018, and ended the month up 9.5% according to Emirates NBD CIO-Office Weekly, Feb 4th, 2019.

End to graft 

Saudi authorities said they’ve recovered about $107 billion from people implicated in a crackdown on graft, Bloomberg reports.

“An anti-corruption commission headed by Crown Prince Mohammed Bin Salman said the funds received from 87 individuals came in cash, real estate, companies and securities. The commission referred more than 60 people to prosecution, according to a royal court statement carried by state media,” reports Bloomberg.

“I think the intention is to signal that the purge is over and the private sector can go back to business as usual,” Steffen Hertog, a Gulf specialist at the London School of Economics, told Bloomberg.

The commission said on Wednesday that 56 people who were referred to prosecution had “other criminal cases against them.” Eight other people “refused to settle despite the existence of evidence against them, and they were referred to the public prosecutor.”

Saudi officials have said the arrests were necessary to level the playing field among investors and curb rampant corruption.