“My private sector experience has positioned me to understand in detail what an investor requires and what they are looking for in business decisions,” he says.
Mr Dabbagh, who holds a Bachelor of Business Administration degree from Saudi Arabia’s King Abdul Aziz University, is only the second person to hold the top job at SAGIA; the authority is, after all, relatively new itself.
Its establishment in April 2000 as a “one-stop shop” for investors came as part of wider economic reforms aimed at stimulating Saudi economic development. Chief among the reforms was a new and liberalised foreign investment law, which strengthened and extended the rights of foreign investors.
According to figures released by SAGIA in mid-2004, it has licensed investments worth $15.33bn since its inception, with more than 80% of the total coming from outside the country. However, Mr Dabbagh points out: “The current statistics show only the licences issued to projects.”
For this reason, SAGIA has initiated a comprehensive survey of FDI in the kingdom, which will result in the first reliable statistical database on FDI in Saudi Arabia.
Whatever the exact figures, Mr Dabbagh clearly believes the authority is capable of doing more to attract investment. “There is a basket of different challenges with which we are faced, and they vary from industry to industry, investor to investor, and from local to international investor,” he says. “We are trying to work out solutions to all these challenges.”
SAGIA must also address the sectoral challenges that investors face. Mr Dabbagh cites, by way of example, the fast-moving consumer goods (FMCG) market. “The FMCG players are facing the challenge of counterfeiting, and we are now developing a plan with the Unilevers of this world to come up with projects and initiatives to eliminate or reduce the negative impact of counterfeited products,” he says.
Many observers might also note the threat of domestic terrorism as a significant obstacle to attracting FDI. Although the frequency of attacks by Islamic extremists has diminished in recent months, dozens of expatriate workers and Saudi citizens have been killed since May 2003.
However, Mr Dabbagh rejects the suggestion that security issues pose a problem for SAGIA. “I would ask investors to examine investor behaviour itself,” he says. “We’ve seen billions of dollars going to the gas sector; we’ve recently seen a $4.5bn investment from the Sumitomo Corporation to downstream industries in Rabigh, and an injection of over $3bn in investment for the second global system for mobile communications (GSM) licence. These are signs of investor confidence.”
In May 2004 Japan’s Sumitomo Chemical Co agreed to develop a refining and petrochemical complex on the Red Sea. Less than six months later, the Ettihad Etisalat consortium (in which the United Arab Emirates’ Etisalat holds a 35% stake) won the bid for the kingdom’s second GSM licence and first third-generation licence.
Furthermore, says Mr Dabbagh: “The way the stock market is mushrooming in terms of value, and the way the private sector is reacting to new placements, shows that investors are not allowing terrorism threats – which exist everywhere – to dull their response to opportunities in Saudi.”
Key to attracting even more capital will be an increase in the range of economic sectors that are open to foreign investors. In recent years, the kingdom has gradually liberalised its economy, and FDI is now allowed in gas, power generation, petrochemicals, water desalination, higher education, telecoms, railroads and mining. However, a number of important sectors – such as upstream oil and financial services – remain on the “negatives list” of those that are closed to foreign investment.
But the SAGIA chairman offers some hope to interested investors: “The negatives list has changed and will continue to change to meet requirements adequate to being competitive in the global economy.” For now, however, the authority is focusing on those sectors that are already open.
In line with research conducted in preparation for the authority’s latest five-year plan, released in October 2004, Mr Dabbagh explains: “Our new strategy has identified three sectors which offer the most in competitive advantages: these are energy, transportation, and information and communications technology.”
But, he adds: “We welcome investment in any sector, and will offer the same comprehensive service package to anyone interested in entering the Saudi economy.”
Ultimately, SAGIA wants to attract investment, regardless of not only sector but also origin.
“Capital is capital; there is no Saudi or non-Saudi, or male or female. That is to say, we have no priorities in terms of whether investment is domestic, regional or international,” he says. “Our objective is to increase capital inflows into the kingdom, and in order to do this we must deliver on services.”
SAGIA’s head links the need for an internationally competitive negatives list with the kingdom’s long-running efforts to join the World Trade Organization (WTO), indicating that the Saudi authorities realise that membership is reliant upon further economic liberalisation. Although he won’t predict a date of entry, Mr Dabbagh reports that “signs for admission are positive”.
And that, in turn, is a positive sign for Saudi Arabia. “WTO membership will bring a wide range of benefits to Saudi Arabia, since the required changes in the Saudi trade regime will provide the foundation for Saudi economic expansion,” he predicts.
“Among other things, accession will require Saudi Arabia to remove whatever protectionist barriers remain, place ceilings on tariffs, open further key service sectors to foreign participation, and improve intellectual property rights protection.
“These changes will result in an open, transparent and rules-based trade regime,” he says. “The resulting enhanced competition will introduce new efficiencies and growth prospects to the economy. Reforms associated with accession will attract capital from both foreign and domestic investors.” WTO membership is clearly in Saudi Arabia’s interests when it comes to increasing foreign investment.
Although he has been in the job for less than a year, Mr Dabbagh already has a clear vision for improving SAGIA’s performance, and by implication, boosting investment in Saudi Arabia.
Despite the many challenges the kingdom faces, hopes are high that SAGIA’s new director will deliver. Only time, and statistics, will tell whether such hopes are well founded.