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OPPORTUNITIES IN THE CONSTRUCTION INDUSTRY KINGDOM OF SAUDI ARABIA

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Title: OPPORTUNITIES IN THE CONSTRUCTION INDUSTRY KINGDOM OF SAUDI ARABIA


1
OPPORTUNITIES IN THE CONSTRUCTION
INDUSTRYKINGDOM OF SAUDI ARABIA THE UNITED
ARAB EMIRATES Export Development Canada
Webinar August 21st 2008 130 230 pm
2
Interlocutors
  • EDC - Infrastructure Environment
  • Marie-Claude Erian, Sector Advisor, Ottawa
  • Canadian Construction Association
  • Dee Miller, Vice-President, Administration
    Finance,
  • JJM Group, Vancouver
  • EDC Saudi Arabia United Arab Emirates
  • Klaus Büttner, Regional Vice-President, Africa,
    Europe, and Middle East, Ottawa
  • Jean-François Croft, Chief Representative, GCC
    and Yemen, Abu Dhabi
  • Canadian Trade Commissioner Service
  • Louis-Pierre Emond, Deputy Director, Middle East
    and North Africa, Ottawa

3
Agenda
  • Introduction
  • Overview of the Gulf Cooperation Council (GCC)
    market
  • Construction Opportunities
  • Kingdom of Saudi Arabia (KSA)
  • United Arab Emirates (UAE)
  • Conclusion
  • Question Answer Period

4
Enhancing Global Trade for Companies Supporting
the Canadian Construction Industry
  • In today's world, we compete with Canadian and
    foreign companies in winning new business
  • We are part of a global supply chain even in
    pursuing Canadian opportunities
  • In the long run, successful companies will be
    those who can compete on the Canadian and
    international scene
  • CCA collaboration with EDC is to provide you with
    information on construction opportunities in
    growing markets where Canadians have had
    successes

5
Business Environment - GCC
  • The GCC, a trade bloc involving the six Arab
    states of the Arabic Gulf, has some of the
    fastest growing economies in the world, mostly
    due to a boom in oil and natural gas revenues
    coupled with a building and investment boom
    backed by decades of saved petroleum revenues
  • The GCC has a desire to establish the region as a
    financial and tourism centre and to provide job
    opportunities to the growing young population by
    establishing new industries
  • If a Canadian company is established in Saudi
    Arabia, they will benefit from the governments
    membership with the Gulf Co-operation Council
    (GCC) which will allow them to take advantage of
    the duty-free arrangements in Bahrain, Oman,
    Kuwait, Qatar and the UAE
  • GCC corporate and financial champions are
    becoming international players as they have an
    objective to drive expansion beyond the GCC
    region

6
Business Environment - GCC
  • For 2008-2010, construction projects announced or
    underway for the GCC totals 942 billion, the
    majority of which is UAE 441 billion KSA
    214 billion.
  • Growth exceeds capacity such that pronounced
    bottlenecks are already apparent in many areas of
    the economy. Power, water, real estate,
    logistics are under immense pressure across the
    region.
  • Growth could be constrained by limited labour
    force and short supply of key inputs such as
    steel, glass, and cement.
  • Given demand, there is a strong presence of
    foreign contractors,
  • EPCers, architects and suppliers. This
    sometimes results in low
  • bids in order to acquire market share.
    Thus, Canadian companies
  • have to target where they have a competitive
    advantage.
  • More than 130 Canadian companies are established
    in the
  • region of which approximately 30 or more
    are related to
  • construction activities.

7
Business Environment - GCC
  • Inflation is escalating
  • Real wage gains are being eroded
  • Non-oil goods and services exports may lose
    market share
  • Ability to attract labour will be undermined,
    slowing domestic demand
  • A real estate asset price bubble may be emerging
  • but keep in mind
  • Pace of price growth is not that high
  • Living standards are still rising
  • Competitiveness not yet compromised
  • Balance are still very strong

8
Ease of Doing BusinessWorld Bank Rankings1
Investment Grades
SP rates borrowers on a scale from AAA to D.
Intermediate ratings are offered at each level
between AA and CCC (i.e., BBB, BBB and BBB-).
Aa1, Aa2, Aa3 According to Moodys
rating, Aa are judged to be of high quality and
are subject to very low credit risk.
KSAs 10 X 10 Program goal is to place Saudi
Arabia among the top ten competitive investment
destinations by the year 2010
1. www.doingbusiness.org/economyrankings/?directio
nAscsort1
9
Announced Projects 2008-2010
GCC Projects all Sectors ( Millions)
GCC Projects by Country ( Millions)
Industry
Power
MEED Projects August 1/08
10
Announced Projects 2008-2010 in the UAE and the
KSA
UAE Projects all Sectors ( Millions)
KSA Projects all Sectors ( Millions)
MEED Project August 6/2007
11
Why Saudi Arabia?
  • Business Environment
  • Largest economy in the Middle East and North
    Africa (MENA) region holding 25 of the total
    Arab GDP.
  • Construction industry is the largest in the MENA
    region and the largest non-oil economic industry
    in KSA, both in residential and industrial
    building.
  • Government is attempting to promote growth in the
    private sector by privatizing industries such as
    power and telecom.
  • The Saudi Arabian General Investment Authority
    (SAGIA) is undertaking a multi-billion (US)
    dollar development strategy centred around the
    building of greenfield economic cities around the
    country.
  • The economic cities are designed to attract
    foreign and domestic investment into the
    downstream energy, transport, industry and
    knowledge-based sectors.
  • Objective is to create jobs to retain Saudi
    youth expected population growth from 28 to 36 M
    by 2025.
  • Other important information
  • KSA plans to spend a trillion dollars on
    infrastructure and other project investment over
    the next 15 years.
  • The industry growth forecast over 2007-2011
    averages 5.46, with government-led activity in
    infrastructure driving demand.

12
The Economic Cities Saudi Arabia
13
King Abdullah Economic City
  • Project comprises
  • Sea Port
  • Capacity of 10 million twenty-foot equivalent
    Unit (TEU) of containers per year.
  • Industrial district
  • Will cover 63 million m². Will consist of
    industrial and light industries, research and
    development, business office, services,
    hospitality, education and community services.
  • Waterside resort
  • The number of hotel rooms and suites are proposed
    to be 25,000 hotel rooms in more than 120 hotels.
  • Financial island
  • The Central Business District will offer 3.8
    million m² of office space, hotels and mixed-use
    commercial space.
  • Residential district
  • Will include 260,000 apartments and 56,000
    villas. This area include residential, commercial
    and recreational areas.
  • Education and health zone
  • Location 100km north of Jeddah
  • Size 168 km²
  • Cost 100 billion SAR (US 26.6 Billion)
  • Sponsor EMAAR
  • Jobs 500,000
  • Status Phase 1 completed Industrial Zone
  • Phase 2 is next
  • Completion estimated between 2025-2030

14
King Abdullah Economic City
  • List of Companies Awarded
  • Contracts in Phase 1
  • Aseer Trading, Tourism and Manufacturing and
    Contracting Sectors
  • Al-Fozan Co. Manufacturing of construction
    material
  • Al-Muhaidib Wholesaling of Building Material
  • Dallah Al-Baraka Cleaning and Maintenance
    Construction
  • Khayyat Group Construction of a cement project
  • Bin Laden Group Construction conglomerate
    awarded the construction of the residential
    towers
  • Orascom Construction, cement plant
  • AlBabtain Power and Telecommunications
  • Saudi Oger Construction, Printing,
    Telecommunication, Real Estate Development,
    Utilities, IT Services

15
EDC Business in KSA
  • In 2007, EDCs business volume in Saudi Arabia
    equated to 192 million in support of 94
    Canadian companies

16
Why United Arab Emirates?
  • Business Environment
  • Spectacular growth in 2007
  • Oil windfalls are financing mega infrastructure
    and development projects UAE government pushing
    economic diversification such that non-oil
    revenues represent 35 of total GDP in 2007.
  • The construction industry, which as full UAE
    government backing, has contributed strongly to
    the UAEs economic boom, accounting for roughly
    7.5 of total GDP in 2007.
  • Political will to turn Dubai into the regions
    main trade centre, including establishment of
    commercial free zones such as Dubai
    International Financial Centre, Dubai Internet
    City, and Dubai Media City.
  • Logically, should see slowdown in growth of
    residential construction projects (likely by
    2010). However, infrastructure, hospitality and
    commercial projects should grow.
  • In an effort to build a tax base and economic
    foundation before the reserves run out, the UAE's
    investment arms, including Abu Dhabi Investment
    Authority, retain over 900 billion in assets.
  • Other important information
  • The construction industry is forecast to grow by
    7.1 in 2008
  • Announced construction projects in UAE amount to
  • US 300 billion in 2007-2012, concentrated
    mainly in Dubai and Abu Dhabi
  • Abu Dhabi is the centre of the construction boom,
    with huge potential for growth in the coming five
    years as the nations capital is severely
    underdeveloped and the government has clear
    intentions to maximise investment in construction
    as a part of the Abu Dhabi 20-30 Plan

GDP 167 billion (2007) growth rate 7.3
(2007) Population 4.4 millionPer capita GDP
23,200 (2007)
Inflation 11 (2007)
CANADA UAE TRADE (2007) Canadian Exports to
UAE 995 million Canadian Imports from UAE
30.4 million As a part of the GCC, UAE has
approved duty exemptions covering the import of
more than 400 items. The Council has also
implemented a customs union which has harmonized
customs tariff at 5 of an items value.
17
Key Developers
Source MEED Magazine, MEED Projetcs July 28/08
18
EDC Business in UAE
  • In 2007, EDCs business volume in the UAE equated
    to 582 million supporting 185 Canadian
    companies.

19
Three Tips for Trading with KSA and UAE
  • While complex markets with a different culture
    from Canada, entrepreneurs can be
  • prepared to do business there. Experts in the
    region boil their advice down to three
  • Cs Commitment, Capacity and Contacts.
  • Commitment The first step to success is a triple
    dose of relationship building by investing a long
    term market development. Arab hospitality is
    legendary they place a high value on loyalty and
    respect.
  • Capacity The scale of everything in the region
    is large. Canadian companies need to rethink
    their strategy in the context as purchase orders
    are large compared to what Canadians are
    generally exposed to in North America
  • Contacts You must have a partner or agent to
    navigate this country. Many people in KSA and UAE
    want to be an agent and many want to sign a
    long-term contract. The challenge is to find
    someone who really understands your business and
    your expectations.

20
EDC A Focus on Infrastructure
  • Canadian Clients
  • In 2007, we served over 1,100 clients for 9.3
    billion of business in Engineering
    Construction, Environment, Power and Tourism
    industries.
  • Key Strategy for GCC Matchmaking
  • Goal to match Canadian companies with needs of
    top developers in the KSA and UAE developing
    relationships with key decision makers and
    influencers.
  • EDC local representative, based in Abu Dhabi, to
    manage and grow relationships in the region.
  • Leverage on EDC financial services to facilitate
    trade.

21
Infrastructure Trade Mission
UAE (Dubai and Abu Dhabi) KSA (Riyadh and
Jeddah) November 13 to 25, 2008
  • Presentations on business climate, opportunities,
    construction norms,
  • and legal framework
  • Meetings with key developers, local contractors
    and engineers
  • In each cities, opportunities of café style
    one-on-one meetings with various buyers
  • Canadian panel in each countries addressing their
    experience and opportunities
  • Site visits on projects underway
  • Networking receptions
  • Optional participation at the Big 5 Exhibition,
    Dubai, November 23-27
  • Draft Program available for those interested

To get more information please contact
marketing_at_edc.ca
22
Construction shows
  • Cityscape, Dubai, 6-9 October 2008
  • Attracts regional and international investors,
    property developers, governmental and development
    authorities, leading architects, designers,
    consultants and all senior professionals involved
    in the property industry. It provides an annual
    forum that celebrates the very best in real
    estate, architecture, urban planning and design
    from around the world.
  • http//www.cityscape.ae/index.html/
  • The Big 5 exhibition, Dubai, 23- 27 November 2008
  • The largest trade show for the Construction
    industry in the Arabian Gulf. A unique event,
    combining five major exhibitions under one roof
    (Building Construction Water technologies Air
    conditioning Cleaning Maintenance Glass
    Metal). Featuring more than 2,000 companies from
    67 countries. 50,420 key buyers and
    decision-makers from the public and private
    sector attended the 2007 event, as well as
    architects, engineers and contractors.
  • http//www.thebig5exhibition.com/

23
Useful Links and Contacts
  • Saudi Arabia
  • Riyadh Chamber of Commerce and Industry
  • www.riyadhchamber.com
  • Jeddah Chamber of Commerce and Industry
  • www.jcci.org.sa/JCCI/EN
  • United Arab Emirates
  • Abu Dhabi Chamber of Commerce and Industry
  • www.abudhabichamber.ae
  • services_at_adcci.gov.ae
  • Canadian Business Council Dubai
  • www.cbc-dubai.com
  • Developers
  • Emmar Properties www.emaar.com
  • Nakheel www.nakheel.com
  • Dubai Properties www.dubai-properties.ae
  • Aldar Properties www.aldar.com

24
TCS Services
  • The Canadian Trade Commissioner Service (TCS)
    helps Canadian companies and organizations do
    business abroad by increasing revenues and
    lowering the costs of global business through
    four key services
  • 1. Prepare for International Markets
  • Determine if you are internationally
    competitive Decide on a target market Collect
    market and industry information Improve your
    international business strategy
  • Find Qualified Contacts
  • Potential buyers and partners, Professionals in
    financial and legal institutions, Technology
    sources, Agents, Manufacturers' representatives,
    Foreign regulatory authorities, Foreign
    investment promotion agencies
  • 3. Assess Market Potential
  • Market intelligence Advice on improving your
    market strategy
  • 4. Resolve Problems
  • Customs clearance and shipping, unfair business
    treatment, contract bidding, storage and
    warehousing, insurance coverage and claims,
    overdue accounts receivable, and more

25
TCS At Home and Abroad
  • 13 regional offices across Canada
  • Vancouver, Calgary, Edmonton, Regina, Saskatoon,
    Winnipeg, Toronto, Montreal, Quebec City,
    Halifax, Moncton, Charlottetown, St Johns
  • Canadian Consulate in Dubai, United Arab
    Emirates
  • John Burbridge, Head of Consulate and Senior
    Trade Commissioner,
  • dubai-td_at_international.gc.ca
  • Canadian Embassy in Abu Dhabi, United Arab
    Emirates
  • Michael Lazaruk, Senior Trade Commissioner
  • Imad Arafat, Locally-engaged Trade Commissioner
  • Abdbi-td_at_international.gc.ca
  • Canadian Embassy in Riyadh, Saudi Arabia
  • Jeff Blackstock, Senior Trade Commissioner
  • Joe Fakhri, Locally-engaged Trade Commissioner
  • Ryadh-td_at_international.gc.ca

26
Thank You / Merci
  • Klaus Büttner, Regional Vice-President
  • International Business Development Group
    Africa, Europe Middle East
  • Tel (613) 598-2760/ Fax (613) 598-2503
  • Email middleeast_at_edc.ca
  • Marie-Claude Erian, Sector Advisor
  • Infrastructure Environment
  • Tel (613) 598-2969/ Fax (613) 597-8667
  • Email inf-env_at_edc.ca
  • Jean-Francois Croft, Chief Representative GCC
    Yemen
  • based in Abu Dhabi, UAE
  • Tel (613) 597-7882 Fax (613) 598-2503
  • Email gcc_at_edc.ca

27
Trade Regime in UAE
Appendix 1
  • Imports into UAE can only be undertaken by
    importers who have appropriate trade license
    issued by the respective Department of Economics/
    Municipality of each Emirate.
  • The UAE practices a liberal trade policy with no
    protective tariff or non-tariff barriers on
    imports. All goods imported into the UAE are
    subjected to 5 import duty (only tobacco
    attracts 100 import duty) on c.i.f. value at any
    point in the UAE. C.i.f. value is normally
    calculated with reference to commercial invoices
    covering the relative shipment of the goods.
    However, the Customs Department of the UAE is not
    bound to accept the value as in the invoices. In
    such cases, an estimation of value by the customs
    will be used for calculation of import duty. At
    present the Federal government is discussing the
    possibility to drop the custom tax of 5 and to
    replace it by a VAT (3 to 5).
  • Trade practices in Dubai are in line with normal
    international standards. All correspondence
    should be in English or Arabic. As a
    sophisticated market, full technical
    specifications should be provided with CIF Local
    prices with Middle East references.
  • Payments are normally effected by letter of
    credit.
  • There is no corporate tax in the UAE. The only
    exceptions are oil producing companies and
    branches of foreign banks. There is also no sales
    tax or personal tax.
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