Part of the national drive for economic diversification and raising awareness that there’s more to the industrious kingdom’s than just oil, the Saudi Export Development Authority (Saudi Exports) launched three years ago to develop exporters, promote exports, and facilitate access to international markets. Secretary General Ahmed bin Abdulaziz Alhakbani delves into Saudi Arabia’s entrepreneurial side and its ongoing industrialization, highlighting progress that people overseas may not be aware of.
How would you evaluate the importance of an industrialized and diversified economy for Saudi’s future growth?
Saudi Arabia, since its inception, has realized the importance of diversification and consequently has developed multiple plans over the past 50 years. The kingdom has been successful to a certain extent in terms of diversification; the creation of several entities to promote and develop the industrial sector is a good indicator of it. We are used to the fluctuation of oil prices; it’s not something new. But I think the big difference now is that we are not accepting the cyclicality of oil prices anymore. Therefore, our National Transformation Plan is now being revamped and refocused to push the diversification agenda forward.
Diversification has a different spin now, a different focus and emphasis if I may say. In the past we have seen high growth in the industrial sector, increasing the number of factories from about 4,000 to 7,000 since 2006 – that’s an 80% increase. But that industrial capacity was geared towards serving the economic development of the kingdom and meeting the internal demand.
The difference this time is the overall increase of Saudi exports, around 10% to 12%, witnessed in the past 10 years, and the creation of the Saudi Export Development Authority (Saudi Exports), our entity. We started off three years ago with the mission to develop exporters, promote exports, and facilitate access to international markets beyond our own internal demand and the GCC (Gulf Cooperation Council) countries. Exporting is always one of the most important indicators of the development achieved by a country and will be a pillar and an accelerator for the country’s diversification plans.
Everyone associates the country’s image with oil and petrochemical exports. Does Saudi have more to offer than oil and petrochemicals? How important are non-oil exports for the country’s diversification plan?
Let’s not forget that oil and its derivatives are our strong suit, but we do have a wide variety of exports in many other industrial areas. The food industry and agribusiness are good examples; we export a considerable amount of food products to the region and many countries, such as European and Asian countries. Companies like Savola or Halwani cater to a great part of the total demand in the region, of which we are very proud. These premier companies are very consistent in their quality and their availability on shelves, hence, we have what we call a 10% premium that Saudi products demand in the regional markets. There is also a huge potential in developing and branding our food industry as Halal, which is helping our products to capture a bigger share of the global food market. Our food products are not only confined to the limits of our region but are reaching markets with high Muslim populations, such as the UK and China. I think we need to promote ourselves, market ourselves and package ourselves in such a way that resonates with the audience and our customers.
Building materials have also witnessed high growth in the last 10 years, especially with the construction of new universities, hospitals, schools and expanding cities. There is a big demand for water heaters, air conditioning, tiles, and cables. We still have a minor share of what the Middle East and Africa imports when it comes to building materials, and that’s a big potential for Saudi Arabia. The Middle East and Africa import around 600 billion Saudi Riyal’s worth of building materials. We only capture less than 3% of this market. There’s definitely big potential for Saudi building material products.
Although industrialization is relatively recent in Saudi Arabia, it has witnessed a steady development. One of Saudi Export's strategic themes is to generate opportunities for export-ready businesses promoting Saudi products in international markets. How do you think the Saudi brand is perceived abroad and how competitive are local products in international markets?
When it comes to the petrochemical industry, we are very well known and recognized worldwide. But when it comes to other industries, we lack marketing and promotion. We provide good value for the cost of our products, being able to compare them with the ones produced in more advanced economies, but we haven’t been successful in promoting our goods and products internationally. Within Saudi Arabia, the Saudi brand is totally recognized and respected. Within the region and within the GCC, we are doing relatively well, but when it comes to markets outside the GCC, it’s a different ballgame: the message and the communication strategy has to be customized for the taste of the of the consumers in each country, and that is what we are currently working on.
When it comes to quality, we definitely have above-average quality. We export batteries to the Ukraine; we export tiles to Germany, Italy, and Spain. We are currently exporting shrimps to Japan as well, so we don’t have an issue regarding this matter; we meet all international quality standards. It’s all about shifting the focus of our producers from the Saudi market to international ones. This is the role of Saudi Export.
How challenging is that? How is Saudi Exports managing to do that shift?
We have three strategic themes. We try to build the export capabilities of our companies, we provide and generate business and export opportunities for them, and thirdly we remove impediments to trade for our exporters and customers.
At Saudi Exports we are also working on the development of the Made in Saudi brand; this is key for the mentioned shift to take place. We get in touch with companies and importers at international exhibitions when they pass by the Saudi pavilion, and I must say they are kind of surprised about knowing of the existence of a Saudi industry and that is because we usually don’t go to the end consumer directly. We usually use the channels of mediators and intermediaries and that prevents us from understanding consumer behaviour and changes and trends in product specifications. We believe that our numbers show our export capabilities; we just need to work to build a strong Made in Saudi brand and develop the proper marketing and communication plan to promote our industry.
In Saudi Arabia, SMEs contribute around 33% to GDP and comprise nearly 25% of the labor force. Saudi Exports focuses its activities on this business segment. How would you evaluate the role of SMEs in Saudi’s journey of diversification and growth and how does Saudi Exports support SMEs to tackle international markets?
At Saudi Export, we group our customers into two major segments: the SMEs and the larger corporations. Our service offerings depend on how they’re grouped.
For small and medium-sized enterprises, we focus on building their skill sets and capabilities. We organize training sessions, provide market reports and import summary guides to reduce the barriers for them to enter these markets. Individuals now find it much easier to set up a new company, therefore a lot of people are initiating start-ups. We have multiple entrepreneurs who actually participate in our B2B just to understand the market trends; we see their numbers increasing month after month and that is vital for a healthy economy.
Our government understands the importance of the SME segment and has recently created the Small and Medium Enterprise Authority, which focuses on improving the environment for entrepreneurs. There’s a lot of demand from entrepreneurs and small companies to the Saudi government to relieve some of the issues and bureaucracies that they face. Here at Saudi Export, one of our hiring criteria is to bring people from the private sector; we want people who are capable to understand the mentality of the private sector and the needs of the business world. Our staff has a customer-centric mentality and service orientation that allows them to provide the best counsel and support to clients.
For 2016, Saudi Exports has already planned several events and business missions in countries such as South Africa, Kenya, Nigeria, South Africa, Malaysia and Indonesia. What are the most attractive markets and products for Saudi exports?
We’ve developed what we call the national export strategy, which allows us to have a vision of what initiatives would increase non-oil exports. One of those initiatives is the definition of potential target markets. In order to do so, we consider two dimensions: the export potential index and the market attractiveness index. Afterwards we do some introspection and evaluate which are the products that would have a relative competitive advantage in those markets.
Through this process we have identified nine industries that could be highly competitive internationally, and taking into account the market attractiveness index we have also identified 35 countries with a very positive outlook for our exports. Most of them are in developing economies since there is a huge potential for Saudi industry. It is important as well to take into consideration our location, which would provide an advantage to our industries in regions such as Africa, North Africa, and South Asia.
In parallel, we’re also looking at the Made in Saudi brand to increase our consumers’ willingness to pay and to be able to penetrate high-value markets as well.
Last year Saudi Exports sponsored the UK’s biggest international food fair in London (IFE). During the event you defined the “British market being one of your most significant and strategic markets”. Taking into account also that Britain’s Muslim population is expected to reach 4.9 million by 2021, what opportunities does Britain offer the Made in Saudi brand? Which Saudi sectors have you identified with the most potential for growth there?
The UK market in particular and the European market in general are important markets for our food products. European customers appreciate quality and Saudi food products are considered of high quality in addition to the fact that you have mentioned the Muslim population growth in Europe is also an important factor.
Moreover, the UK is definitely a market for our petrochemicals products. We see new companies flourishing in this sector, like Sadara, which recently started operations and is serving the European market with high quality downstream petrochemicals. Minerals are also products with great potential for growth in the UK and Europe, and our national mining company Maaden is tackling those markets.
Our focus at Saudi Exports is to support and guide Saudi exporters, therefore we consider markets like the UK and some parts of Europe as opportunistic. We already have existing companies exporting there and we provide support. We focus on Africa and Southeast Asia as target markets. We participated in international exhibitions in Europe because of the sheer amount of people who visit these events from everywhere; it’s a perfect networking environment. If there’s an opportunity to export to the UK, we don’t shy away from that of course since we have products that are competitive in Europe as well. But for the majority of our exports, we will be targeting these 35 countries I mentioned earlier
How would you evaluate the perception about Saudi Arabia abroad and do you think it can affect international business relations?
As a Saudi citizen, I think there’s a lot of misconception about us. I saw that even during my studies abroad; people in my classroom were talking about whether our country is all about oil, camels, and sand. That’s the biggest stereotype we need to change, it’s completely misleading. I think Saudi Arabia can definitely improve on its international communication; we’re not doing enough regarding this matter.
In the past year we’ve seen a lot of emphasis on reaching out to the international media, giving them facts about Saudi Arabia and encouraging them to visit Saudi Arabia more often. We are experiencing a tremendous period of transformation; things change from one month to another in Saudi Arabia. If you asked me in 2000 or 2003, I wouldn’t have expected that we’d be in a government entity where we have females as managers and directors. So things are changing here in Saudi Arabia and it needs to be communicated; we need to do our homework better and communicate what Saudi Arabia is really about.
I see definitely a changing trend, we are conscious of the importance of communication now and through initiatives such as our Made in Saudi brand and other country branding strategies at national scale I expect an improvement of the perception of our kingdom abroad in the midterm
Saudi Exports is a young institution, created in 2013, but with a very important and strategic role to develop. What is your personal vision for the institution in the years to come?
We started mid-2013 and we’ve grown from one employee to about 50 employees. What we’ve accomplished in the past two years is something that makes me very proud. The average age of our employees is around 27 or 28 years old; that is a very good indicator of how much energy we have in this organization. Our KPI, when it comes to customer satisfaction, is around 90%, which is exceptional. We’re very proud of that, but we believe we’re still just scratching the surface. Again, I must reiterate that we’ve only started to serve our customers. What the government provided to exporters four years ago was scattered. With Saudi Export, we have a much more organized service offering to our customers.
In the coming five years I hope to increase the development and value of the non-oil exports and the number of exporting entities in Saudi Arabia. There are other KPIs, like the product mix that we will push. I think if we focus on these two we’ll be in very good shape. The national transformation program has announced very ambitious targets for non-oil exports and at Saudi Exports we will do our utmost to achieve them and play a pivotal role in the progress of our country.