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As Saudi Arabia sets course to be a tech leader, it has called on London’s fintech to set up in the country with the promise of government support, tailored to meet their needs.
The Middle East country is currently, through its Vision 2030 programme, reinventing itself as a nation with a diverse economy in an attempt to end its reliance on oil. Fintech startups have an opportunity to set up operations there.
Vision 2030 was introduced in 2016 with the aim of moving Saudi Arabia away from being an oil base economy. To this end, it supports small to medium-sized enterprises and entrepreneurship, and aims to develop human capital, improve financial inclusion, and even create a cashless society. If achieved, these will as boost sectors across the Saudi Arabian economy and will lay the foundations for a thriving fintech ecosystem.
Speaking at London Fintech Week, Omar Rebhan, head of UK office at Saudi Arabian general Investment Authority (SAGIA), said the Fintech Saudi initiative from the country’s monetary agency sets out to support the development of financial services technology industry in Saudi Arabia.
“Within the coming years, the aim is to turn Saudi Arabia into an innovative fintech hub by enabling all the aspects of the ecosystem. This includes creating a culture of collaboration, build a broad understanding of fintech in the community and support fintech entrepreneurship.”
The nation wants to attract companies from across the world. “International fintechs are very important to Saudi Arabia because we believe many of the fintechs worldwide have ready-to-go-to-market products and services that Saudi Arabia can benefit from,” he said.
“The knowledge transfer to Saudi Arabia and job creation are also important.” Fintech Saudi will help foreign fintechs find customers, navigate regulations, find investors, connect to service providers and recruit local talent.
Read more about tech in Saudi Arabia
- Saudi Arabia's e-commerce sector is set to explode, and the IT sector in the country will see increased demand as a result.
- In April this year, Saudi Arabia’s crown prince Mohammed Bin Salman visited Silicon Valley in the US to meet with tech giants such as Apple and Amazon.
- Saudi Telecom Company (STC) has partnered with state-owned IT company ELM and the National Information Centre to create the Saudi Cloud Computing Company.
Beyond government incentives Saudi Arabia has the right demographics to prosper in the digital age. There are about 32.5 million people living in Saudi Arabia, with half of them under 30. There is also 88% smartphone penetration. The large, young and connected population offers an opportunity for tech firms offering digital services.
For example, E-commerce sales in Saudi Arabia are expected to surge to $13.9bn by 2021, from about $8.7bn in 2017, according to market research firm BMI. US tech giant Amazon purchased Gulf retailer Souq.com last year, in a bid to spread its reach into the kingdom. Meanwhile, Saudi Arabia’s first homegrown e-tailer, Noon, launched with startup capital of $1bn in late 2017.
Beyond large established companies like Amazon the government in Saudi Arabia is attempting to make it easy for foreign fintechs to set up. Government agencies will help companies navigate regulation, find investors and connect to customers, said Rebhan.
Regulatory changes are perhaps one of the biggest drivers of investment in Saudi Arabia. In the past any business going to Saudi Arabia had to have a local partner by law, but today, 100% foreign ownership is available. “The doors are open and we are trying to change regulations to serve different types of industries,” said Rebham.
Regulations are changed on a weekly basis in Saudi Arabia such is its desire to create the right environment foreign businesses. Changes that have been made recently include the time taken for people to get business visas being reduced from about 30 days to 24 hours.
In fact, government bodies in Saudi Arabia consult businesses on regulation to help them create business-friendly rules. “The country is currently going through a reform journey which involves changing regulations.
“These include improving the ease of doing business and making everything easier. If you are there now, you will be part of that regulatory change because the government is mandated on consulting the private sector before they pass any regulation that will affect them.”
The potential advantages go beyond the fluid regulatory environment, said Rebhan. “In Saudi Arabia, the land is really cheap, there is a young and skilled workforce, quality of life is changing in the right direction and there is a very sound financial sector.”
The Saudi tech strategy comes from the top. In April this year, Saudi Arabia’s crown prince Mohammed Bin Salman visited Silicon Valley in the US to meet with tech giants such as Apple and Amazon as part of efforts to fast-forward the kingdom’s technology capabilities.
But there are challenges. Although Saudi Arabia has a large young population with increasing tech skills, finding the right talent will be a difficult. This is why foreign companies and workers are vital to its fintech sector.
John-David Lovelock, chief forecaster at Gartner, warned that the kingdom will have to “strongly focus” on attracting talent to the country if it is to achieve its ambition of becoming a global tech leader. For example, hubs like California’s Silicon Valley and Bangalore in India are home to a vibrant and cosmopolitan mix of local and global talent. “At a certain point, you have to cultivate indigenous talents who are not transient.”
He said it will take the kingdom four years to nurture indigenous junior tech talent, but developing local IT visionaries could take decades.
Saudi Arabia looks set to become more like its neighbour Bahrain when it comes to attracting foreign businesses. Bahrain is also investing in its IT industry in a bid to emulate its success in the financial services and manufacturing sectors. There is also a growing local IT startup community.