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Wed 19 Dec 2018 11:07 AM

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Opinion: Building Saudi Arabia's economy on trust despite challenges

92 percent of the CEOs in Saudi Arabia expressed their trust in the growth of their companies and of the industries in which they operate, over the next three years:, according to a KPMG survey

Opinion: Building Saudi Arabia's economy on trust despite challenges
Abdullah Al-Fozan is Chairman of KPMG Saudi Arabia

Despite the numerous challenges that will be dealt with by chief executive officers (CEOs) in the Kingdom of Saudi Arabia over the coming three years, their trust level in the growth of their companies and the sectors within which they operate has not been dented. Further, the future challenges have not altered their optimistic view on the growth prospects of the Saudi economy, thanks to the multiple initiatives and the economic diversification plans unveiled by the government to limit its reliance on oil, in line with the Kingdom's 2030 Vision and the programs developed to achieve such vision.

In spite of the concerns about instability and uncertainty in global markets, an unstable geopolitical environment and a slowdown in the private sector, KPMG International's survey of 1,300 global CEOs, which included 50 CEOs from Saudi Arabia, found that the latest economic reforms implemented by the government have boosted confidence of the CEOs on the prospects of their businesses in comparison to their global peers.

In this year's report, 92 percent of the CEOs in Saudi Arabia expressed their trust in the growth of their companies and of the industries in which they operate over the next three years. In comparison, the last year's survey showed that 98 percent of the CEOs had kept their trust with regards to the future growth of their companies, while 90 percent were confident about the growth of the industry or the sector in which they work.

Such tailor-made surveys are essential since the CEOs value the extent of their trust and optimism of the current and future businesses and activities. It further reveals any impact on the level of confidence of the CEOs who face constant pressures as a result of regional geopolitical events and current economic challenges.

The optimistic view of the CEOs' on the future horizons of the Saudi economy's growth proves the strength of the growth drivers. It even shows the effectiveness and the positive impact of the economic reforms. Additionally, the conclusions reached by the survey are very significant with regards to the long-term vision, particularly with the important changes that have taken place in the economy over the past few years. This emphasizes the Kingdom's orientation towards transformation to a knowledge-based economy that aims to enhance growth and development through the expansion of non-oil sectors.

There is no doubt that we have noticed differences between CEOs' expectations in the Kingdom on several issues related to economic growth. However, such differences show that it is not just the economic issues that are of concern for these CEOs. Despite the increased degree of optimism towards both the Saudi and the global economy, there are still huge challenges related to the changes in the economy, regulations and technology.

Yet, the Kingdom's CEOs are generally positive towards growth, taking economic diversification and reducing dependence on oil into consideration since such diversification and reduction are expected to support real growth in the field of services and manufacturing. In addition, the moderate recovery in oil production levels and the rise of public expenditure support the positive macro-economic prospects.

Although the Saudi economy, as well as most of the regional economies, face challenges due to oil price fluctuation, there is still a positive view that the government would launch several programs and initiatives to diversify the economy and reduce oil dependence. Such optimism - though somewhat wary - emphasizes that Saudi Arabia is currently the most growing, competitive and diversified economy in the region, given the continuous efforts exerted for economic diversification and reduction of the size of activities related to the oil sector.

Consequently, it is important in this phase to continue the execution of reforms without being hesitant after the improvement in oil prices in certain specific periods and to work upon making the most precise use of savings and human resources. The future will witness conflicts for solicitation of creative human resources which will require a change in the employment strategies, particularly within the technology-based sectors such as cybersecurity, data analysis, artificial intelligence and emergent technologies, without neglecting the risks carried by such sectors.

Furthermore, companies that have not entered transformation paths yet will have to be swift in adapting to changes. Transformation becomes an inevitable necessity that would lead many of the businesses that do not have transformation plans to exit the markets. In this stage, the focus shall not be on returns on investments but on linking those investments with long-term plans.

Finally, we are optimistic that the Kingdom's economy will continue to gain momentum thanks to the latest strategic procedures and decisions that aim to stimulate economic activity, facilitate investment procedures and reduce business cost in a way that would contribute to an increase in trust levels of the national economy.

Abdullah Al-Fozan is Chairman of KPMG Saudi Arabia.

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