The covid-19 pandemic has had a serious impact on the economy of Saudi Arabia. In 2020, GDP fell by 4.1%. Exports decreased year-on-year by 10.8%, imports even by 25.2%. However, a return to economic growth is expected for 2021. Oil prices, currently hovering around $60 per barrel, will make up for last year’s shortfalls on the revenue side of the budget. The private sector has operated with only mild restrictions since around mid-2020, and the number of newly infected people is in the order of hundreds per day.
The inability to travel abroad strengthened the retention of funds and reduced the outflow of funds from the country. Household spending also strengthened. As in many other countries of the world, new opportunities have opened up in the form of providing services through applications. The e-government segment has also moved by leaps and bounds. The rate of introduction of quotas for employment of local citizens has greatly accelerated, on the other hand, broad incentive programs for the establishment of regional headquarters of operations for foreign companies have been introduced.
Even during the pandemic, the Saudi government continued to implement the government’s Vision 2030 strategy, which aims to diversify the economy and reduce the country’s dependence on oil. Even the government’s gigaprojects (Neom’s “city of the future”, tourism projects Amaala and Red Sea Resort, entertainment city Qiddiah) did not stop, although some of their parts were revised or postponed for the sake of savings.
Post-COVID-19 opportunities for foreign exporters
As Saudi Arabia continues to build national manufacturing capacity in line with government strategies, there will continue to be demand for cooperation in technology transfer and production transfer in all sectors. Increased pressure to replace foreign workers with local nationals is also creating opportunities in the areas of vocational training and education.
Mining, mining and oil industry
According to allcountrylist, Saudi Arabia is a country that is usually associated with oil production. However, the country also abounds in considerable reserves of other mineral resources, the extraction of which is to become the third pillar of the economy. In 2020, the government presented a new strategy for the mining industry sector, which enshrines the rules for granting mining licenses to foreign investors, and in particular removes a significant part of the administrative burden.
A new law on mining was also adopted. In connection with the influx of foreign investments, an increased demand for mining technologies and technological transfer can be expected, not only in the field of mining itself, but also in associated logistics. The total value of Saudi Arabia’s mineral wealth is estimated at billion. SAR (CZK 31.57 billion), among other countries, has one of the largest deposits of phosphates and tantalum in the world, and also has significant reserves of bauxite, kaolin, silver, zinc, copper, uranium and magnesite. Saudi Arabia also holds the regional lead in gold mining.
Metalworking industry
Support for mining necessarily goes hand in hand with support for the development of domestic industry in order to deliver the greatest possible added value within the supply chain. In 2020, 515 new factories were opened and almost 900 industrial production licenses were granted. Despite this, Saudi Arabia is the third largest net importer of copper, the fourth largest importer of aluminum products and the fifth largest importer of ceramic products in the world. Iron and steel are also important import items. It cannot be overlooked that the vast majority of mined bauxite is exported by Saudi Arabia for processing in Bahrain.
According to the government investment agency SAGIA, there is room on the market for modern technologies of casting, forging, heat treatment, including additional equipment (turbines, pumps), as well as equipment for cleaning metals, production means for the production of precise casting molds (synergy with national ceramic production ), but also facilities for testing and inspection services. The government is also very interested in Industry 4.0 technologies, i.e. solutions based on robotization and automation.
Defense industry
In the 2021 budget, Saudi Arabia allocated USD 4billion (approx. 6.6% of GDP) to defense. The country is also the second largest importer of military equipment in the world. In 2020, Czech exports of military equipment amounted to USD million. These are mainly components such as ammunition, parts for the final assembly of vehicles and others. The government of Saudi Arabia seeks to transfer technology for the production of weapons, ammunition and military vehicles to Saudi Arabia.
The goal is that by 2030, the armed forces will cover 50% of their needs from local sources. At the same time, the plan is for the government military enterprise SAMI to become one of the 25 largest arms enterprises in the world. Given the situation in the region, it is still possible to assume a steady growth in demand for this material.
In addition to the classic specialty, there is also a demand for solutions from the field of ICT, especially cyber security and associated services, where Czech companies have a good reputation. In connection with the development of unconventional asymmetric threats, Saudi Arabia urgently requests systems for the detection and neutralization of drones of all types, as well as purchasing drone technology itself. There is also great interest in “smart” ammunition. For 2021, the government will focus on strengthening capacities in the field of military research.
Entertainment and leisure
2020 has shifted demand towards home entertainment, such as video games and gaming devices, board games, home exercise equipment, etc. Before the outbreak of the covid-19 pandemic, Saudi Arabia was experiencing an unprecedented increase in the number of cultural and entertainment events. Despite the restrictions, it was possible to organize the Dakar and Formula E races, albeit with a considerably limited audience.
F1 races are also considered. Currently, cultural events are held mostly in the open air, for example the recently held festival of light art installations Noor Riyadh. However, the preparation of festivals should be restarted in the near future, so there will be a renewed demand for organizing cultural events, themed educational exhibitions (space, dinosaurs, etc.), but also entertainment attractions, game rooms with installed group virtual reality, for which Czech companies can supply quality content.
The government is also investing in the development of electronic sports, that is, there will be an outlet for services related to the care of members of professional teams or the management of large gaming events.
The government gigaproject of the Qiddiyah amusement park is also continuing, which, in addition to classic attractions, also includes a number of sports venues, including an arena for electronic sports, an F1 track and a Six Flags amusement park.
In the field of tourism, the construction project of the luxury resorts Red Sea Resort and Amaala continues. These represent an opportunity for supplies, especially in the hotel industry or services in the field of entertainment for guests (content supplies, event management). Companies that are already involved in supplies to international hotel chains have an advantage.
The government also continues to build the domestic entertainment industry, especially film and music. Here is an opportunity to cooperate in training and transfer know-how, for example in the field of animation or special effects, music production, event management and others.
Healthcare and pharmaceutical industry
While virtually every country in the world has increased their healthcare spending due to the covid-19 pandemic, this is a long-term trend in Saudi Arabia. The Saudi population should grow from about 35 million today to 45 million in 2050. By 2050, the average life expectancy should also increase from 7 to 8 years. The burden on the social and health system will increase in accordance with the demographic trend of population aging.
The prevailing way of life has caused a high spread of civilization diseases, especially diabetes and obesity. Healthcare spending is expected to increase from USD 4 billion today to USD 160 billion in 2050. For this reason, Saudi Arabia should invest over USD 66 billion in healthcare by 2030. The plan is also to increase the participation of the private sector in the health system from 40 to 65%.
In addition to building and expanding medical facilities, the government is very focused on the development of the domestic pharmaceutical industry, but also, for example, on the domestic production of implants. By 2023, Saudi Arabia has ambitions to become a regional pharmaceutical hub. In this regard, it will be an interesting option for companies to introduce production, whether pharmaceutical or medical devices, directly in the country, significant government incentives can be expected.
The embassy has also seen demand for specialized rehabilitation services, such as for war veterans. However, there are also a number of attempts to transfer Czech expertise in the field of physiotherapy directly to the country and thus save the costs of traveling to the Czech Republic, especially for clients who require long-term and regular care. In this regard, the training of physiotherapists would be an interesting opportunity.
