Collaboration between the private and public sectors in Saudi Arabia – a lynchpin of crown prince Mohammed bin Salman's Vision 2030 – is improving, according to CEOs operating in the Gulf kingdom.
Oxford Business Group's KSA CEO Survey 2018 showed that senior executives have welcomed signs that change is afoot in Saudi Arabia, although many are also keen for the pace of economic reforms to be accelerated.
The global research and consultancy firm asked over 100 C-suite executives from across Saudi Arabia’s industries a wide-ranging series of questions on a face-to-face basis aimed at gauging business sentiment.
In a key finding, 72 percent of respondents described collaboration between the private and public sectors as either improving or definitely improving.
Business leaders interviewed were also confident about the areas of the economy that they felt would drive non-oil growth in the short to medium term, with tourism and mining top of the list, garnering 14 percent and 12 percent of the share respectively, followed by manufacturing and healthcare.
Sentiment among those interviewed was largely upbeat, with 72 percent describing their expectations for local business conditions in the coming 12 months as positive or very positive, up by two percent on last year’s results.
An even higher share (75 percent) said they were likely or very likely to make a significant capital investment in the next 12 months.
Confidence was especially high among smaller businesses, a segment of the economy which is being primed for development under Vision 2030.
There were also signs that executives would like to see reforms move more quickly, however, with less than half (46 percent) saying they were satisfied or very satisfied with the level of execution achieved so far by national initiatives.
Nevertheless, most business leaders interviewed (83 percent) were confident that the policy reforms earmarked for implementation or already under way would meet their targets over time.
The share of respondents viewing Saudi Arabia’s personal and corporate tax environment as competitive or very competitive on a global scale remained high (84 percent), but was down by 10 percent on last year following the introduction of measures such as the 5 percent VAT and new labour fees.
Asked specifically about the impact of VAT on their business, the largest share of those interviewed (40 percent) said they felt the effect on their industry would be moderate.
Oliver Cornock, OBG’s editor-in-chief and managing editor for the Middle East, said the findings indicated that it was taking time for policy changes, particularly those directed towards the private sector, to have an effect.
“Some elements of the national development plan, such as the Saudi Aramco initial public offering, are still works in progress,” he noted. “However, as our results show, respondents are confident in the prospects of sectors targeted by the plans.”
Cornock said the message from many CEOs interviewed was that they were willing to manage the immediate pain of VAT provided the reforms expected to bring long-term gain are speeded up.
“Businesspeople are content to put up with short-term challenges, such as new levels of taxation, recognising them for what they are: reflections of a maturing and sustainable economic model,” he said. “However, they will want to see, sooner rather than later, the fruits of the various changes to the long-established status quo.”For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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