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Keeping abreast of tax developments is essential for any business hoping to optimise its financial position. This chapter provides an overview of the business environment in Saudi Arabia, outlining the key areas of investment and growth. This chapter also includes a viewpoint with Bakr Abulkhair, Chairman and Managing Partner, Deloitte & Touche Bakr Abulkhair & Co.

Like many other nations looking to diversify their economies, Saudi Arabia has chosen to take advantage of its natural resources to fuel development. Solar and wind power have both been earmarked by the government as it seeks to reduce its reliance on the hydrocarbons sector. Some $109bn will be spent to produce 41 GWh of solar power and 9 GWh of wind capacity by 2032. Indeed, solar power is already gaining traction as an important tool for tackling water scarcity in the Kingdom. A series of solar-powered desalinisation plants have already been planned for construction by joint venture groups. Meanwhile, government efforts to create stronger regulatory and incentive schemes should lead to increased private investment in green building technology and energy-efficient appliances, potentially translating into improved energy savings.

The tourism industry in the Kingdom has seen good growth in recent years. The number of visitors rose dramatically in 2011, making Saudi Arabia the largest travel market in the Middle East and North Africa. Plans to remove restrictions on the movement within the Kingdom of religious visitors from a number of countries, along with major tourism developments in the pipeline, are set to boost the market further. As demand grows, international hotel chains are expanding their presence, including in the middle and lower end of the market that has traditionally been left to local players. The authorities are also seeking to renovate traditional villages and turn them into tourist attractions, with funding to be generated through the creation of public-private companies. Meanwhile, efforts to develop the meetings, incentives, conferences and events segment are continuing apace.

As the largest telecommunications market in the Gulf, Saudi Arabia also stands out as one of the region’s most competitive markets. Mobile subscription penetration rates are among the highest in the world, standing at close to 200% of the population. Furthermore, smartphone sales grew 154% in 2010, bringing their share of the hardware market to 32%, while rising demand for tablet computers has eaten into sales of traditional PCs. This, in turn, is impacting levels of internet use; the proportion of individuals using the internet in the Kingdom stood at 47.5% in 2011, up from 41% the previous year and from 19.46% five years previously. This is boosting government efforts at addressing concerns over the relative paucity of Arabic-language content on the internet. Looking ahead, internet use, as well as the hardware and IT services market, look set to continue to grow, with state investment likely to drive growth in services in particular. This chapter includes an interview with Ghassan Al Shibl, CEO, Advanced Electronics Company.

Saudi Arabia has a growing population that, combined with increased life expectancy and a rising rate of so-called lifestyle diseases such as diabetes, means demand for health care services is set to continue to grow for the foreseeable future. Yet while the state remains the largest player in the health care industry, providing free treatment to nationals and stepping up spending, the authorities are working to encourage the expansion of the already substantial private health sector. There are indications that progress is being made; growth in the private sector seems to be higher than in the public sector in some areas, with the number of private hospital beds growing by 18% between 2007 and 2011. In addition, a number of large infrastructure projects are under way, including a new medical city in the south of the country and a children’s and maternity hospital in Al Jouf. Private companies are also investing in expansion, while foreign firms are stepping up their commitments within the sector.

Saudi Arabia’s booming export economy and record budget surpluses have provided a golden opportunity to reinvest these profits in the country’s future. The education sector has thus been designated a chief priority. More than half of the Kingdom’s population is under the age of 25, with close to 30% under 15. These numbers make providing a strong education system an even higher priority. As of 2012, unemployment hovered around 10% among Saudi nationals, whereas among expatriates it was just 2%. While demand-side measures may help in the short run, increasing the employment of Saudis in the long term will depend on aligning education with the needs of the job market. Increasing cooperation from the private sector in terms of expanded training programmes and collaborative research and development projects should also assist efforts to create more jobs outside of the oil and gas industry. This chapter includes interviews with Khalid Al Sultan, Rector, King Fahd University for Petroleum and Minerals (KFUPM); and Khaled Al Sabti, Vice-Minister of Education and Chairman, Tatweer Education Holding.