Saudi Arabia is India’s 4^th largest trading partner, with total trade between the two countries at US$ 34 billion during 2018-19. Among the Gulf Cooperation Council (GCC) countries, Saudi Arabia is India’s second-largest trading partner after UAE.

The country’s other natural resources include copper, gold, iron, natural gas, and ore. Saudi Arabia’s manufacturing sector has constantly expanded since 1976 to produce a wide range of products, from fertilisers to rolled steel and plastic products2.

The Saudi government continues to support varied manufacturing businesses, as well as the effort to move away from oil dependence.

Vision 2030

In 2016, Saudi Arabia embarked on an initiative – Vision 2030 – that aims to diversify its economy, and reduce dependence on oil. Vision 2030 consists of three primary themes:

• To build a vibrant society that embraces its cultural heritage.
• A thriving economy with high employment, women in the workforce, foreign direct investment, and stronger non-oil exports.
• An ambitious nation, with stronger non-oil revenues, good household savings and income, and effective government.

Attaining these goals will require greater diversification and privatisation of the economy. Vision 2030 also emphasises development of the Kingdom’s public service sectors in education, healthcare, infrastructure, recreation, and tourism. Indian businesses can look forward to explore these opportunities, particularly in partnership with Saudi companies.

Some key areas include the opening of the Red Sea Luxury Resort – set to open by 2022, this is expected to bring one million tourists a year by 2035.

In 2016, Saudi Arabia issued a General Authority for Entertainment, and is looking to attract billions of dollars of investment into its entertainment sector. The first live music concert in 25 years was held in Riyadh in 2017. Amusement park giant Six Flags is also aiming to open three parks in Saudi Arabia by 2021.

Vision 2030 also aims to stimulate non-oil trade between Saudi Arabia and its partners, in goods and consumer products. The Kingdom plans to increase foreign direct investment from 3.8% of GDP to 5.7%, and to raise non-oil exports from 16% of GDP to 50%.

World’s top oil producer

Saudi Arabia is unquestionably the world’s leading oil producer and largest exporter of petroleum. It produces around 10.5 million barrels (and exporting 7.5 million barrels) of crude oil per day. Oil accounts for about half the country’s GDP, and 70% of its export earnings. The Kingdom holds 18% of the world’s proven petroleum reserves and is a founder and leading voice in the Organisation of Petroleum Exporting Countries (OPEC), giving it further influence on global oil supply.

The state-owned oil company, Saudi Aramco, intends to invest around US$ 302 billion over the next 10 years in upstream oil & gas projects. This will turn the country from a crude oil exporter, to a fully integrated, global energy and chemicals enterprise. This is likely to draw demand for businesses in the oil & gas sector.

According to the Middle East Economic Digest (MEED), Saudi Arabia is the largest projects market in the GCC, with around US$1.4 trillion worth of projects underway. This accounts for almost half of all major projects planned in the GCC, making it an ideal starting point for businesses looking to penetrate the region. The transport sector alone has the biggest pipeline of projects, with about US$ 522 billion worth of projects still in tender or study phase.

Besides the wide availability of projects, Saudi Arabia is also the largest economy by population in the GCC. The median age of the Saudi population is 29.9, with a GDP per capita (based on purchasing power parity) of about US$ 54,500 in 2017. This indicates the presence of a sizeable, affluent and young market.

Major industries

Consumer Market 

Saudi Arabia is attempting to diversify its economy to reduce dependence on oil, and is opening up its consumer goods market.

Since 2000, the Kingdom has allowed 100% foreign ownership in some businesses. This has attracted large multinational retail and wholesale companies into the country.

Education

In the services sector, Saudi Arabia is currently reshaping its education system to improve quality and outcome. The Saudi government has allocated the second largest portion of its fiscal budget towards this sector, and is now the world’s eighth biggest spender on education.

The Kingdom emphasises development in early childhood education, refining of its national curriculum, and training for its teachers and educational leaders. Saudi Arabia plans to build 2,621 new schools to serve over a million new students by 20202, and to relax regulations and introduce private sector innovation.

Food Manufacturing and Services

Saudi Arabia has the largest food & beverage (F&B) market in the Middle East, valued at around US$ 45.2 billion. In 2016, the Kingdom’s food industry accounted for 12% of its GDP, and the industry has a projected growth rate of around 6% per year.

Saudi Arabia is particularly known for its Makkah/Madinah Halal food products. As both holy cities are located in the Kingdom, Saudi Arabia is strongly positioned to lead the global halal food market.

Saudi Arabia has also seen increasing domestic demand for food products, with the average household spending 18% of total expenditure on F&B. In 2015, food imports into Saudi Arabia exceeded US$ 14.6 million, showing ample prospects for import-substitution among local manufacturers.

Oil & Gas 

Saudi Arabia is a founding member of Organisation of Petroleum Exporting Countries (OPEC), and currently possesses around 18% of the entire world’s proven petroleum resources. The Kingdom is the world’s largest exporter of petroleum, with the oil & gas sector accounting for around half of its GDP, and 70% of export earnings. Petroleum in Saudi Arabia is both abundant and close to the earth’s surface, making it easier and cheaper to extract oil there compared to almost any other country.

Saudi Arabia’s state-owned oil company, Aramco, plans to invest around US$ 336 billion in oil, gas, and petrochemical projects between 2016 and 2025. This will be directed toward new oil and gas plants to meet growing energy demand, and to increase petrochemical production. The company will also invest in infrastructure, maintenance, power plants, drilling projects, and the development of unconventional resources such as shale oil.

Key initiatives include raising refining capacity from 2.9 million barrels to 3.3 million barrels per day by 2020, maintaining peak oil production at 12.5 million barrels per day, and developing efficient clean fuel production. This will require significant quantities of high-end oil & gas industry related products, and supplies.

Transport

The Saudi government invests heavily in airports, railways, and roads. The Kingdom has 27 airports and six container ports, handling 12 million tons of cargo by air in 2015, and 240 million tons by sea in 2017.

Most European countries are around seven hours flight away, and Asian countries are about a four-hour flight. Half the world’s population lives within a five-hour flight to Saudi Arabia, making it a connecting point for 3.5 billion potential customers across three continents.

New and Upgrading of Airports

The Saudi government has plans for five new airports to add to the existing network. Extensions are also planned for existing airports – King Abdulaziz International Airport in Jeddah aims to host 43 million passengers by 2025, and 80 million passengers by 2035.

King Khaled International Airport is currently undergoing expansion to accommodate 25 million passengers per year.

Investments in Rail Network

As most Saudis rely primarily on air and road travel, rail networks are less extensive. The Kingdom now aims to rectify this, with greater investment in rail transport. The Saudi government is investing around US$ 25.13 billion into three separate rail projects, totalling 3,900km of rail expansion.

The largest of the projects is the North-South Rail, which will connect the capital of Riyadh to Al Haditha, on the Jordanian border. The 2,400-km railroad is expected to carry four million tons of commodities and two million passengers annually. The project costs upward of around US$ 3.52 billion.

Upgrading of Ports

Saudi Arabia’s seaports are also upgrading their infrastructure and capacity. The Saudi government has earmarked around US$ 8 billion for the relevant projects, with about US$ 268 million worth of projects still to be awarded.

Urban Solutions

Electricity

Saudi Arabia also has a high rate of electricity consumption, at around 9,333 KwH per capita in 2016. Electricity consumption in Saudi Arabia has doubled over the last 15 years, and is expected to double again by 2030 due to economic expansion and urbanisation.

The Kingdom now aims to lower wastage, in moves that include retrofitting older public facilities, and developing energy efficiency solutions. In the interim, Saudi Arabia needs to invest an estimated US$ 20million by 2020 to meet short-term energy needs.

Businesses that can provide expertise in energy efficiency or upgrade the ageing power infrastructure, will find many opportunities in Saudi Arabia.

Water

Saudi Arabia is the largest desalination market in the world, and produces around four million cubic metres of desalinated water per day. The Saudi government aims to increase this to 8.5 million cubic metres per day, by 2025. The Kingdom operates 28 desalination plants – the highest number in any country.

The Kingdom’s water sector shows continued annual growth of 8% per annum, and is currently valued at around US$ 12.45 billion. A further US$ 79.9 billion is expected to be invested in further desalination projects, over the course of the next 10 years.

Saudi Arabia has one of the highest rates of water consumption in the world, with per capita consumption at around 300 litres per day. To cope with demand, total investments into water production are set to exceed US$ 50.33 billion by 2020.

India-Saudi Arabia business relations:

Saudi Arabia is a major source of energy as India imports around 17% of its crude oil requirement from the Kingdom.

Saudi Arabia is the 15th largest market in the world for Indian exports and is destination to 1.85% (2017-18) of India’s global exports. On the other hand, Saudi Arabia is the 3rd largest source (4.74% in 2017-18) of India’s global imports. For Saudi Arabia, as per 2017 data, India is the 4th largest market for its exports, accounting for 8.88% of its global exports. In terms of imports by Saudi Arabia, India ranks 7th and is source of around 4.13 % of Saudi Arabia’s total imports.

Main Indian exports and imports

Major Indian exports to Saudi Arabia include mineral fuels, oils and products thereof, agricultural products, electric machines and equipment, iron and steel, organic chemicals, spacecraft parts, articles of apparel and clothing accessories etc. India’s major imports include mineral fuels, mineral oils and its products, organic and inorganic chemicals, plastic and its products, fertilizers etc.

Bilateral Engagements

The bilateral dialogue mechanism currently in place includes India-Saudi Arabia Joint Commission at the level of Finance Minister, India-Saudi Arabia Energy Dialogue at the level of Petroleum Ministers.

4th India-GCC Industrial Conference was inaugurated by H.E. Mr. Tawfiq Al-Rabiah, the then Saudi Minister of Commerce and Industry on November 18, 2015 at Jeddah. The two-day Forum highlighted the paramount significance of strategic partnership between India and the GCC.

Saudi Arabia has constituted the ‘Saudi Centre for International Strategic Partnership’ (SCISP) in Nov, 2017 and has identified India as one of the 8 countries with which the Kingdom is keen to elevate the existing partnership to a comprehensive strategic partnership level. USA, UK, Germany, France, China, Japan, South Korea are the other countries. Saudi Arabia has proposed to establish a ‘Strategic Partnership Council’ with India focusing on four aspects namely Political, Security, Economic and Socio-Cultural.

Initial discussions have already taken place in July 2018 in New Delhi between the NITI Aayog and the SCISP. While NITI Aayog is looking after the Economic part, MEA could be overarching body as it involves political and security component. The initial NITI-Aayog-SCISP workshop took place in February, 2019. NITI Aayog led a strong delegation, comprising Senior Govt officials and representatives from Indian Public & Private enterprises to the NITI Aayog-SCISP workshop in Riyadh, which identified more than 40 investment opportunities for cooperation and collaboration.

The 12th Joint Commission Meeting was held in Riyadh in February 2018. The then Finance Minister Shri Arun Jaitley paid a two-day visit (February 18-19, 2018) to Riyadh to co-chair the JCM with the Saudi Minister of Commerce & Investment Dr. Majed Al Qasabi. Both sides held detailed discussions on furtherance of bilateral cooperation in diverse fields in line with the Saudi “Vision 2030”.

Bilateral Investments

According to Saudi Arabian General Investment Authority (SAGIA) report of December 2017, there are 322 Indian companies as joint ventures/100% owned entities in Saudi Arabia with a total investment of US$ 1.4 billion. Saudi investment in India has so far been relatively modest at US$ 228.3 million only from April 2000 to May, 2019 (Source: DPIIT).

Major Indian Companies such as L&T, TATAs, Wipro, TCS, TCIL, Shapoorji & Pallonji, EPIL etc. have established strong presence in Saudi Arabia. Tata Consultancy Services (TCS) opened the first all-female Business Process Outsourcing (BPO) service centre, in Saudi Arabia in 2014, aiming to provide employment opportunities to up to 3,000 women in three years.

In May 2016, Wipro Arabia Limited, a subsidiary of Wipro Limited, Saudi Aramco and Princess Nourah University (PNU), Riyadh signed an agreement and inaugurated Kingdom’s first Women Business Park (WBP). The project is expected to create nearly 21,000 jobs for Saudi women in ten years. The WBP is a joint venture between PNU, the largest women’s university in the world and Wipro Arabia Ltd. Saudi Aramco is the strategic advisor and anchor to this initiative. Dedicated to working women, this business park is a first project of its kind aimed at providing knowledge-based employment for women in the Kingdom of Saudi Arabia.

The Indian Hotels Co. Ltd. (IHCL) announced (April 17, 2018) its foray into the Holy City of Makkah, Saudi Arabia for opening a luxury hotel in collaboration with Umm Al-Qura Development and Construction Co. The Indian Hospitality start-up OYO Hotels has ventured into the Saudi market to boost the domestic hospitality sector and concluded an Agreement with the Hajj Ministry in the auditing of rooms for Hajj pilgrims.

The Indian Oil Middle East is planning investments of Rs. 1,000 crore in the Kingdom’s fuel outlets and retail sector, along with the Saudi Partner Al jeritranportation, preferably in 2019. Bharat Forges based out of Pune has entered into an agreement with Indian Company ERAM based out of Dammam. Larsen & Toubro Hydrocarbon Engineering (LTHE) and Subsea 7 won an engineering, procurement, construction, and installation (EPCI) order from Saudi Aramco in January 2019, the consortium’s fifth contract from the state-owned oil giant.

Saudi Aramco signed an MoU with the Indian Consortium (IOC, BPCL and HPCL) to jointly develop the USD 44 billion Ratnagiri Refinery and Petrochemical Project Limited (RRPL) on 50: 50 basis. Later, UAE’s ADNOC also agreed to participate in the joint development of RRPL. The Saudi Al-Fanar is setting up a 300 MW power project in Kutch of worth USD 300 million since June 2018 and the project is expected to be completed by 2020. They have also invested US$ 700 million through their Spanish subsidiary.

Also, Saudi Aramco signed a MoU with the Mumbai based GumPro for setting up a drilling fluids facility on the sidelines of 2nd edition of Future Investment Initiative in Oct, 2018. SABIC, which has a huge presence in India through its US$ 100 million worth R&D centre in Bengaluru has also got facilities in Gurugram, Chennai and Vadodra. Also, SABIC is in talks with M/s Deepak Fertilisers for acquisition.

Saudi Arabian Monetary Authority (SAMA) manages huge government reserves estimated to be around USD 517 billion (June 2018). The Saudi direct investment in India is not at par with the true potential of our economies. However, according to SAMA sources, its exposure to Indian economy is very huge through regular funds (and not hedge funds). The Embassy has been proactively projecting investment opportunities in India, including under “Make in India”, through regular interaction with private and government sector companies.

An important initiative to realise the potential of Saudi investments in India has been a proposal to set Saudi-India Investment Fund between Public Investment Fund (PIF) of Kingdom of Saudi Arabia and Department of Economic Affairs, Ministry of Finance, Government of India, Establishment of the same is pending for a long time due to difficulties in resolving the issue of tax exemption on capital gains on the investments made under the fund. The formulation proposed by Indian side (during follow up to 11th JCM) in December 2015 is pending for long with the Saudi side for comments.

Bilateral trade

Total trade between India and Saudi Arabia was recorded at US$ 33.86 billion in 2018, but this was overwhelmingly dominated by the latter. Saudi Arabia’s exports to India stood at US$ 28.4 billion, while India’s exports were at just US$ 5.5 billion. Oil accounted for around 85.6% of Saudi Arabia’s exports to India at US$ 24.3 billion followed by organic chemicals (US$ 1.2 billion) and fertilisers (US$ 887.3 million). India’s exports on the other hand were led by cerealsUS$ 1 billion, organic chemicals (US$ 561.3 million) and mineral fuels (US$ 491.8 million).

Untapped potential for Indian exports to Saudi Arabia

Embassy of India in Riyadh

Address : B-1, Diplomatic Quarter,

PO Box 94387, Riyadh 11693

Tel. Nos: 00-966-11-4884144; 00-966-11- 4884691

Fax No. : 00-966-11-4884750

Website: http://www.indianembassy.org.sa/

E-mail: pol.riyadh@mea.gov.in

Kingdom of Saudi Arabia

Department of Zakat and Income Tax

P.O. Box 6898, Riyadh 11187

Telephone: 9661 404-4375

Fax: 9661 404-4387

Website: www.dzit.gov.sa/en

General Directorate for Industrial Property

King Abdulaziz City for Science and Technology Kingdom of Saudi Arabia, P.O Box 6086, Riyadh 11442

Telephone: (9661) 481 4342

Fax: (9661) 481 3830

Website: www.kacst.edu.sa/en/about/directorates/Pages/ip.aspx

E-mail: patents@kacst.edu.sa (Patents)

Ministry of Commerce and Industry

Riyadh 11162

Telephone: (+966)14012222

Website: www.mci.gov.sa/en

E-mail: PublicRelations@mci.gov.sa

Ministry of Culture and Information

Nasseriya Street, Riyadh 11161

Telephone: 9661 401 4440

Fax: 966 1 402 3570

Website: www.saudinf.com/main/c6e.htm

Ministry of Foreign Affairs

P.O. Box 55937, Nasseriya Street, Riyadh 11544

Telephone: 966 1 406 7777

Fax: 966 1 403 0645

Website: www.mofa.gov.sa/sites/mofaen/Pages/Default.aspx

Ministry of Interior

Prince Fahed Street, Riyadh 11134

Telephone: 966 1-401-1111

Fax: 966 1-403-3125

Website: www.moi.gov.sa

Saudi Arabia General Investment Authority (SAGIA)

Imam Saud Bin Abdulaziz Road (university road), P.O. Box 5927, Riyadh 11432, Kingdom of Saudi Arabia

Telephone: 966 1 203 5555

Fax: 966 1 263 2894

Website: www.sagia.gov.sa/en

E-mail: info@sagia.gov.sa

Saudi Customs

P.O Box : 3483 Riyadh 11197

Telephone: 9661 – 4013334

Fax: 9661 4043412

Website: www.customs.gov.sa/sites/sc/en

E-mail: webmaster@customs.gov.sa

Sources:

https://www.enterprisesg.gov.sg/overseas-markets/middle-east/saudi-arabia/market-profile

http://www.indianembassy.org.sa/

https://exportpotential.intracen.org/#/products/gap-chart?fromMarker=i&exporter=699&toMarker=j&market=682