OPPORTUNITIES IN THE CONSTRUCTION INDUSTRY KINGDOM OF SAUDI ARABIA

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OPPORTUNITIES IN THE CONSTRUCTION
INDUSTRYKINGDOM OF SAUDI ARABIA THE UNITED
ARAB EMIRATES Export Development Canada
Webinar August 21st 2008 130 230 pm
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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

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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

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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

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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

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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.

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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

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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
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Announced Projects 2008-2010
GCC Projects all Sectors ( Millions)
GCC Projects by Country ( Millions)
Industry
Power
MEED Projects August 1/08
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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
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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.

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The Economic Cities Saudi Arabia
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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

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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

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EDC Business in KSA

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

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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.
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Key Developers
Source MEED Magazine, MEED Projetcs July 28/08
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EDC Business in UAE

• In 2007, EDCs business volume in the UAE equated
  to 582 million supporting 185 Canadian
  companies.

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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.

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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.

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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
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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/

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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

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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

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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

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Thank You / Merci

• Klaus Büttner, Regional Vice-President
• International Business Development Group
  Africa, Europe Middle East
• Tel [phone]/ Fax [phone]
• Email middleeast_at_edc.ca
• Marie-Claude Erian, Sector Advisor
• Infrastructure Environment
• Tel [phone]/ Fax [phone]
• Email inf-env_at_edc.ca
• Jean-Francois Croft, Chief Representative GCC
  Yemen
• based in Abu Dhabi, UAE
• Tel [phone] Fax [phone]
• Email gcc_at_edc.ca

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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.