Sovereign AEI, a collaboration between leading global corporate services provider Sovereign Group and Saudi market entry consultancy Arabian Enterprise Incubators (AEI), offers a portfolio of services covering everything from mitigating risk to expediting set-up and accelerating success in the Kingdom. Building on Sovereign’s 20-year presence in the Middle East and AEI’s track record of achievement in KSA since 2012, this takes in such specialisms as market entry advice, entity registration, recruitment and local outsourcing,
We speak to Stuart D’Souza, Co-founder and CEO of Arabian Incubators, with further input from Paul Arnold, Managing Director of Sovereign Middle East, to learn more about the opportunities on offer and what the Kingdom holds for those looking to do business there.
SPM: Sovereign AEI helps clients enter, establish and expand their businesses in KSA, but what services does it offer to clients?
Stuart D’Souza: Fundamentally, our service offering is based on our combined experience of supporting foreign businesses to be successful in Saudi. AEI has been operating in the Kingdom since 2012 and has supported over 1,500 companies on their journeys to success in Saudi. Sovereign has a global reach, based on over 20 years of experience in the region and an international network of offices. Together we really can bring the world to Saudi, and our service portfolio is built around making it as easy as possible to enter, establish or expand in the Kingdom.
In most cases, our first engagement with a client is around Corporate Services – this is typically helping clients understand their optimum operating model in the Kingdom from both a legal and physical footprint perspective. Do you need a Saudi registered entity or a partner? How will you employ and deploy expatriates? How to recruit and retain Saudi Nationals? There are so many questions, and the most important point is to seek informed, local advice from professionals on the ground. The Saudi regulatory system is not a ‘cut and paste’ from the UAE or any other jurisdiction – it is unique, often opaque, and constantly changing.
Beyond Corporate Services, our clients also rely on us as a Resource and Support Services Partner. We provide a range of services, such as accommodation, transport, procurement, outsourcing, payroll, and HR services.
SPM: What are Sovereign AEI’s core values? Why?
Stuart D’Souza: Our people, the joint team at Sovereign AEI, are our greatest asset, so treating our employees with respect and dignity is paramount. We are proud to say that we did not cut any salaries or delay payroll during the pandemic or make any redundancies despite the pressures we faced as a business. Writing ‘values’ on a website is easy but living them, as we did in 2020, is difficult, but for us, it is a clear differentiator.
Moreover, the client experience is also extremely important, and through that, we value honesty above all else. Doing business in Saudi can be challenging, so clear, straightforward and honest advice is essential even if it is not necessarily what the client wants to hear and in some cases we have to say ‘we don’t know, but we’ll find out’.
SPM: KSA is transforming itself as one of the world’s most competitive economies, and therefore, one of the most lucrative markets for strategic investment. It has several competitive advantages in many strategic sectors at regional and global levels, yielding significantly higher returns on investment. Can you talk about these?
Stuart D’Souza: Vision 2030 has to be one of the most significant and substantial transformation programs the world has ever seen. Every sector of the economy and actually every aspect of life in the Kingdom is changing. Of course, change is never easy, and transformation in a governmental context is always challenging, but Saudi has a number of advantages that will contribute to the overall success of Vision 2030.
Firstly, ‘resources’ – the Kingdom has the financial wherewithal to see projects through to completion. Of course, there is a place for the private sector, and indeed the whole idea of Public-Private Partnerships is really being championed in the Kingdom for the first time. The bigger projects that are, in part, leading the economic and infrastructure transformation (such as Qiddiya, Red Sea, Diriyah Gate and Al Ula) present unique opportunities for the construction industry.
Secondly, ‘scale’ – the opportunities in the Kingdom are pretty much unique in terms of their scale and ambition. The opportunities for innovation in technology and design have already attracted the world’s attention, particularly around the Neom project. From an investment perspective, the breadth of opportunity in Saudi means there are multiple potential avenues for a strong return on investment.
Thirdly, ‘people’ – the Saudi people, and in particular the youthful population, are fully behind Vision 2030, embracing the changes to their daily lives and appreciating and understanding the goals of Vision 2030. The people ‘get it’; Vision 2030 is about positioning the Kingdom for the post-oil era and beyond.
Fourthly, ‘reform’ – the reforms that have been ushered in since the launch of Vision 2030 are real. These are not just token changes but fundamental reforms as part of a broad transformation agenda. This commitment to delivering against the goals of transformation is at the core of making Saudi an attractive place to do business, invest, and live. There is much to do, but the Saudi of today is entirely different from just a few years ago; reforms in education, justice, Government procurement, entertainment, sport all flow from the principles of Vision 2030.
SPM: KSA is opening up to the world, yet it still seems quite a challenging country to many overseas business owners – what would you say to these people?
Stuart D’Souza: There are indeed challenges – it is called Vision 2030 for a reason, the transformation is to be delivered over a 10-year period, and even then, there will be a constant need for improvement, efficiency and reform just as with other modern economies. For new entrants to the Saudi marketplace, regardless of sector or scale, the best piece of advice is to have a well-researched plan – Saudi is not a place to wander around hoping to pick up a deal! In fact, you will need multiple plans to ensure that you remain compliant with local regulations, understand the investment/funding requirements, understand your obligations under Saudization and ensure that you have a properly qualified pipeline from a Business Development perspective.
Sovereign AEI has the in-house expertise to conduct in-depth market entry analysis across various sectors. We offer practical advice and guidance that can help a business avoid mistakes and pitfalls from the outset. Remember, doing business in Saudi Arabia is different from other parts of the region. Your experience in the UAE or elsewhere may be useful but is no substitute for thorough local knowledge.
SPM: What would you say are the major opportunities for overseas businesses in KSA at this time? What is the Kingdom seeking in terms of expertise?
Stuart D’Souza: The major opportunities all flow from Vision 2030. Hence, there is very little point in seeking to offer something into the Saudi marketplace that is not aligned to Vision 2030. Most people will be aware of the giga-projects in the Kingdom, and most of these, particularly the headline-grabbing projects, are orientated towards tourism, entertainment and hospitality. These are predominantly ‘new’ sectors of the Saudi economy with limited, albeit growing, local supply chain, so inevitably, there are opportunities for overseas businesses here.
It is also important to remember the opportunities that extend beyond the construction component of a project – for example, training which presents vast potential for foreign expertise.
However, it is undoubtedly infrastructure and construction that features heavily in pretty much every project in the Kingdom, from a new city in Neom to the largest expansion in housing in modern times and some of the most significant public transport initiatives in the world.
Indeed, the breadth and scale of opportunities in the Kingdom can often overwhelm a company’s Business Development pipeline, so it is really important to remember the basics and qualify each opportunity. Particularly important is to understand the client’s route to market, how they are actually going to engage a supplier, where their funding is coming from, and the competitor landscape.
SPM: Despite the challenges of 2020, Sovereign AEI recorded a 300% increase in corporate services sales – what do you put this down to?
Stuart D’Souza: We often say that we have been ‘flying the flag’ for Saudi as a great place to do business for eight years and that now, finally, the rest of the world agrees with us! That growth is simply driven by the opportunities that foreign businesses are now identifying in the Saudi marketplace.
It is also driven by a tightening of the regulatory environment; it is now clearer than ever that if you want to do business in Saudi, you need to be registered in Saudi.
The fact that we were able to realise such growth during the pandemic, despite the challenges of no flights, closed airspace and no visas, just shows the strength of interest and opportunity that there is here in Saudi.
We did find that our clients were relying on us for other things. For instance, in the first lockdown, there was so little information about what was going on, so much uncertainty, we found ourselves in the position of being something of a hub for information sharing and discussion. That being said, this wasn’t the source of the increase in sales as sharing information is what we do and what people rely on us for. Indeed, we are not interested in charging people who want to know how to book a repatriation flight or something like that.
SPM: Some people feel that the Saudization program may pose a challenge for foreign investors and business owners. It is reported that some companies in Saudi have found difficulties in finding enough qualified Saudis to fill certain positions. Therefore, they need to spend more money to train them. How would you allay fears about this?
Stuart D’Souza: The first thing to say about Saudisation is that companies need to embrace it and accept it as a reality faced by all businesses operating in the Kingdom.
However, you must plan appropriately to proactively manage your obligations under the Saudization Regulations, and this is not only about recruiting Saudi nationals but also retaining them. It is a challenge, and the lure of a Government job is still very attractive to young Saudi job seekers.
The other challenge is the scale of the company’s footprint in the Kingdom; it is easy to talk about graduate programs or apprenticeships, but such commitments are unrealistic for the SME community.
Training and development are key, and most young Saudis are keen to develop their academic credentials alongside their workplace experience. These could be accredited courses to develop their professional competencies or broader skills in English language training or leadership development for example.
Understanding your obligations is crucial, and this can be difficult as the rules do change regularly and often with limited advanced notice. At the moment, the focus is on encouraging employers to take on Saudis based on particular professions, such as engineering, IT or accounting and finance. We will undoubtedly see more of these requirements in 2021, and we are expecting a significant refresh of Saudisation regulations going into 2022.
Once you understand your obligations, you can ensure that your operating model for your Saudi business is optimised to meet the requirement of Saudisation whilst delivering the required returns.
SPM: In some ways, the Saudi Arabian system has an inherent vibrance, based on the oil wealth that has historically kept society affluent. With all the challenges faced due to fossil fuels, the Saudis are now experts in finding alternative solutions. This business environment and philosophy must be a major plus for potential investors? It’s similar to how people traditionally talk about the United States.
Stuart D’Souza: There is a vibrance to Saudi Arabia. I think there always has been, but it has been kept behind closed doors to a certain extent, with very few foreign businesses truly exploring the Saudi marketplace, particularly when compared to somewhere like the UAE, for example.
Now more than ever, Saudi is a place of vast opportunity across almost every sector, and these opportunities tend to be quite unique in terms of scale and ambition. That is what is driving the positive business environment currently, particularly post-Covid; there is simply no other marketplace like Saudi.
SPM: What are you most proud of at Sovereign AEI? Also, what has your biggest challenge been?
Paul Arnold: We seek to be experts in Saudi success, and to date, we have helped over 1,500 foreign businesses with their journeys in the Kingdom. We’re pretty unique in that regard, and we are very proud of that.
We also take great pride in the joint team across Sovereign AEI. We work collaboratively using a global network of offices to bring the world to Saudi. By doing that, we are playing our small part in delivering and furthering Vision 2030.
The challenge for us now is maintaining our high standards when we have so many companies looking to enter, establish or expand in Saudi and guard against being overwhelmed. We are investing in our people, expanding our teams and improving knowledge sharing across the Sovereign AEI community.
SPM: Whatare Sovereign AEI main objectives over the next three years?
Paul Arnold: As a business, we are seeking growth, and we came very close to hitting our target of SAR 100 million in sales in the Kingdom in 2020, so we are certainly looking at achieving that and sustaining that over the next three years.
Our people are our top priority, so we will continue investing in them and recruiting new talent to join the Sovereign AEI family.
And finally, we will continue to ‘fly the flag’ for Saudi as a great place to do business and in-so-doing play our part in furthering Vision 2030.