"Is the Middle Eastern market accessible?" This question has been the primary concern for many Chinese business leaders going global this year.

Cliff Chau, managing partner of eWTP Arabia Capital and the head of its Hong Kong office, spoke at a salon gathering organized by CFO Salon and Global Alliance for Chinese Enterprises (GACE) on July 18. He addressed the most pressing questions from CFOs across leading companies in various sectors, such as pharmaceuticals and new energy about the Middle Eastern market.

"Currently, the Middle East offers new opportunities. Chinese entrepreneurs can leverage domestic business models to venture abroad and explore new markets," Chau said at the salon.

Opportunities and challenges

Saudi Arabia, the only G20 country in the Arab world, boasts a per capita GDP of more than $30,000. According to the BRICS Wealth Report, Saudi Arabia's per capita wealth is expected to grow by more than 100 percent in the next decade. The World Bank predicts that Saudi Arabia's GDP growth rate will reach 5.9 percent by 2025.

With a population of 36 million, Saudi Arabia is the most populous country in the Gulf region. The majority of the population is between the ages of 15 and 64, with 51 percent under the age of 30, providing a robust young labor force for the market.

Since the ascension of Crown Prince Salman, the "Saudi Vision 2030" initiative has introduced a series of reforms and innovations, significantly enhancing market vitality.

However, the Saudi market presents challenges alongside opportunities. Firstly, Saudi Arabia is primarily a B2B/B2G market. Local operations typically require a ramp-up period of 1-2 years, involving substantial investments in manpower, materials, and capital. Large companies that survive this period have the chance to secure a certain market share, while companies without substantial resources may struggle to develop. Moreover, the Saudi market has transitioned from a nascent stage, to attracting international giants. Superficial enthusiasm and purposeless exploratory partnerships are no longer suitable. Only through deep understanding and collaboration within local markets and advantageous industries, companies can meet the needs of the next phase.

Favorable policies in Saudi Arabia

The “Saudi Vision 2030” reforms have simplified company registration and operation procedures, relaxed foreign investment restrictions, and provided tax exemptions and customs waivers for companies established in economic and free zones. These measures have increased transparency in the legal environment. New company and labor laws have made the business environment friendlier.

Saudi Arabia also offers financial support and subsidies to foreign enterprises, especially in high-tech, clean energy, and manufacturing sectors. Through institutions like the Saudi Industrial Development Fund, foreign companies can access low-interest loans and financing. Companies in economic and free zones enjoy full foreign ownership, no foreign exchange controls, and flexible employment policies.

Additionally, Saudi Arabia has launched the regional headquarters (RHQ) initiative, encouraging multinational corporations to establish their regional headquarters in the country.

Industry demand in Saudi Arabia

Currently, Saudi Arabia is fully embracing digitalization and high-tech industries, aiming to use technology to drive economic growth. Investments and foreign introductions are primarily focused on high-tech sectors, with significant investments in cloud computing, big data, artificial intelligence, and IoT infrastructure.

The Saudi gaming industry strategy is also noteworthy. With a young population, the government highly values the gaming industry, recognizing its integration of technology, art, and modern achievements. Various incentives have attracted numerous Chinese companies and gaming teams to develop in Saudi Arabia.

In the energy sector, Saudi Arabia offers low electricity prices, making it advantageous for enterprises with significant power costs, such as lithium electrolysis and semiconductor companies.

Furthermore, the high daytime temperatures in Saudi Arabia result in most economic activities occurring indoors, making online business models particularly suitable.

Question: Does Saudi Arabia expect foreign-invested companies to go public locally? Some regions exclude foreign enterprises after they bring in technology and capital. Should Chinese companies be concerned about this risk in Saudi Arabia?

Chau: Saudi Arabia does not have special expectations regarding "local listing". They are more concerned about the tangible presence of industries locally. On one hand, Saudi Arabia’s goal in attracting foreign investment is to work with multinational enterprises to quickly boost their local economy. They believe China has a great deal to offer and that Chinese companies demonstrate respect for others as well as adherence to laws and regulations. On the other hand, given Saudi Arabia's vast market potential, they aim to leverage global resources, capabilities, and talent to achieve national modernization.

Question: What cultural differences exist between the Middle East and China in business cooperation?

Chau: Adapting to local customs is crucial, whether in the Middle East or elsewhere. The Middle East has significant differences in religion, cuisine, and social culture compared to China, requiring respect for their culture. For instance, Muslims pray five times a day, necessitating appropriate time and space for their prayers, which they usually complete in a few minutes without disrupting normal work. Many Saudi business elites have been educated at some of the world's leading universities. As a result, Saudi business talent and culture are well-aligned with global standards. As the "Saudi Vision 2030" progresses, the Saudi business community continues to embrace cultural diversity.

Question: Given Saudi Arabia's high welfare state and relatively relaxed work culture, how can companies address talent issues locally?

Chau: Since the "Saudi Vision 2030" initiative, an increasing number of high-quality talents from all over the world have sought development opportunities in Saudi Arabia. Although the Saudi government has implemented a Saudization policy to increase local employment in the private sector, young Saudis are increasingly inspired by economic development and global work culture, showing great enthusiasm for participating in the workforce and contributing to the national economy. We and our invested companies prioritize recruiting these young talents.