OPPORTUNITIES IN THE CONSTRUCTION INDUSTRY KINGDOM OF SAUDI ARABIA

1
OPPORTUNITIES IN THE CONSTRUCTION
INDUSTRYKINGDOM OF SAUDI ARABIA THE UNITED
ARAB EMIRATES
March, 2009
2
Agenda

• Introduction
• Overview of the Gulf Cooperation Council (GCC)
  market
• Construction Opportunities
• Kingdom of Saudi Arabia (KSA)
• United Arab Emirates (UAE)

3
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 booms in oil and natural gas revenues
  coupled with building and investment booms 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

4
GCC AN OVERVIEW

• The 6 GCC countries are all rated investment
  grades by Moodys
• Ease of doing business in the GCC ranks better
  than India, China and Russia (IFC World Bank
  ranking)
• IFM outlook of 3.5 growth, down from previous
  forecast
• Lower price of oil
• Increased financial risk due to limited external
  access
• Global recession impact on tourism and physical
  trade flow
• Total foreign assets of the GCC region - US 1.3
  trillion
• Fitch Ratings recently estimated Dubais total
  non-bank external debt to be around USD69
  billion, or about 85.4 of Dubais 2008 GDP

EASE OF DOING BUSINESS
5
EDC Facilitating Canadian Trade

• EDC is Canadas official export credit agency
  (ECA) offering financial solutions to help
  Canadian exporters and investors expand their
  international business
• We work in partnership with the public and
  private sectors to enhance the visibility of
  Canadian companies abroad
• EDCs financial services include financing,
  insurance and guarantees
• EDCs combined financing and insurance volumes
  reached 85.8 billion in 2008 (23 increased
  over 2007) while serving 8,312 Canadian companies
  (11 increase)

6
EDC How We Add Value

• EDC PRODUCTS
• Accounts Receivable Insurance
• Protects Exporters accounts receivables against
  non-payment by their buyers
• Contract Insurance Bonding
• Guarantee of Exporters bid and performance bonds
  or any advances (ie. Down payments) received

7
EDC How We Add Value, Contd

• MORE EDC PRODUCTS
• Financing
• Flexible, medium- or long-term financing for
  buyers of Canadian capital goods and services
  including Structured Finance (Project Finance)
• Canadian foreign investment financing can also be
  considered
• Political Risk Insurance
• Provided for Canadian companies investments or
  assets in a foreign country, as well as
  protecting project loans from political risks

8
Bad News Projects Cancelled or Postponed

• Estimates vary from
• 75 billion according to a HSBC
• report issued early February to up to
• 260 billion worth of property being
• delayed or cancelled according to
• Morgan Stanley

9
Announced Projects 2009-2011
GCC Projects by Country ( Millions)
GCC Projects by Sector ( Millions)
Industry
Power
MEED Projects March 2008
10
Announced Projects 2009-2011 in the UAE and the
KSA
UAE Projects all Sectors ( Millions)
KSA Projects all Sectors ( Millions)
MEED Project March 2008
11
Why Saudi Arabia?

• Saudi Arabia During the Downturn
• KSA plans to spend a trillion dollars on
  infrastructure investment over the next 15 years
  but officials say spending is contingent on oil
  prices of 50/barrel
• Despite downturn, public infrastructure projects
  are largely secure and will be an important
  stimulus tool for the Saudi government

• 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.

GDP 600 billion (2008)
Annual
growth rate 4.2 (2008) Population 28.1
millionPer capita GDP 21,300 (2008)

Inflation 10.3 (2008) CANADA SAUDI
ARABIA TRADE (2008) Canadian Exports to Saudi
Arabia 969 million Canadian Imports from Saudi
Arabia 2.3 billion As a part of the GCC, KSA
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.
Source IMF, StatsCan
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 2008, EDCs business volume in Saudi Arabia
  equated to 323 million in support of 102
  Canadian companies

16
Why United Arab Emirates?

• UAE During the Downturn
• Dubai has been hit particularly badly with a
  floundering real estate market and no oil
  revenues to fall back on but the federal
  government is stepping in to aid the emirate
• Major government investment will continue to
  serve as a stimulus tool, with talks of
  mega-projects particularly in Abu Dhabi

• Business Environment
• 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.
• 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 2030 Plan

GDP 187 billion (2008) Annual growth rate
8.5 (2008) Population 4.6 million (2008)Per
capita GDP 40,400 (2008)

Inflation 14.4 (2008) CANADA UAE TRADE
(2008) Canadian Exports to UAE 1.3
billion Canadian Imports from UAE 330
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.
Source IMF, StatsCan
17
Abu Dhabi Emirate Top Contribution to UAE GDP 2008
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Abu Dhabi Master Plan 2030

• Master Plan would quadrupling its size, spreading
  out extensively to both the mainland and
  neighboring islands, including Saadiyat Island
  and Al Reem Island
• Reduced reliance on the oil sector as a source of
  economic activity over time
• Focus on knowledge-based industries
• Sustainable development
• Larry Beasley (retired Director of Planning for
  the City of Vancouver) Special Advisor on City
  Planning to the government of Abu Dhabi
• Pearl Building Rating system aimed to cut the
  use of water by 30 and energy by 20
  (substitute to LEED in N.A.)
• http//business.abudhabi.ae

Buildings with a sustainability level of 35 per
cent will receive one pearl, 45 per cent will
earn two pearls, 55 per cent will get three
pearls, 65 per cent will receive four pearls and
75 per cent will earn five pearls.
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Abu Dhabi Growth Chart (2007-2030)
Courtesy Abu Dhabi Government
20
Key Players for Master Plan

• The Mubadala Development Company (Mubadala) is a
  wholly owned investment vehicle of the Government
  of the Emirate of Abu Dhabi
• Mandate to move the Emirate from a single-sector
  economy into a multi-sector global (healthcare,
  technology, aerospace, energy, infrastructure and
  real estate)
• Abu Dhabi Future Energy Company (ADFEC) is the
  government-owned organization mandated to develop
  and execute Masda Initiative a zero-waste,
  zero-carbon, car-less city in the desert
• Aldar Properties (Aldar) was established in
  October 2004 as a real estate developer of
  retail, residential, commercial, entertainment
  and hospitality properties. Carries a number of
  strategic project of the Emirate
• Yas Island project, Al Raha Beach development
• Other developers Sorough, Al Quadra, Burooj,
  Tameer,

21
EDC Business in UAE

• In 2008, EDCs business volume in the UAE equated
  to 737 million supporting 203 Canadian
  companies.

22
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.

23
Construction shows

• Cityscape, Dubai, 5-8 October 2009
• 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.
• www.cityscape.ae
• The Big 5 exhibition, Dubai, 23- 26 November 2009
• 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 3,200 companies from
  53 countries. 58,040 visitors the public and
  private sectors attended the 2008 event,
  including key buyers, architects, engineers and
  contractors.
• 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

25
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

• Rizwan Haider, Chief Representative Middle East
  Africa
• International Business Development Group
• 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
• Visit our website at www.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.