Can Saudi Arabia become one of the largest centers of entrepreneurship in the world in the near future?

Can Saudi Arabia become one of the largest centers of entrepreneurship in the world in the near future?

Amr Selim

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The Kingdom of Saudi Arabia has seen an unprecedented boom in entrepreneurship and the acceleration of the growth of local start-ups, and perhaps the most prominent evidence is that emerging companies based in the Kingdom of Saudi Arabia have received investments during 2021 worth $ 647 million, through a 138 A financing agreement, where many efforts – especially during the last decade – were combined to make the Kingdom one of the largest attractive markets for emerging companies, as well as to attract venture capital to national to invest in emerging projects and to encourage their growth in a way that the country has not experienced before. To name a few, the Technical Venture Capital Fund is looking forward to it. (STV) In the Kingdom of Saudi Arabia, it raised $ 1 billion to promote and support the establishment of more billionaire companies in the region, and the Saudi Foodics Company raised $ 170 million in funding during a category-class investment round. Cduring the current month of April, as well as the new investment law and the investment opportunities it holds to attract foreign companies to the country. Despite this, there are a number of challenges that may stand in the way of the growth and development of the entrepreneurship sector in the Kingdom in the way everyone waits.

wide mark

Saudi Arabia is one of the largest growing markets in the Middle East and North Africa to attract investment and establish local start-ups, to the extent that it is now competing strongly to attract foreign start-ups. As one of the largest consumer markets in the region, 97% of its population owns smartphones, in addition to high internet speeds, 43% of its residents are between 18 and 34 years old, and 72% have a bank account, and there are the largest companies to capitalize on bold money in regions such as the Global 500, STVWadi Makkah and Wa’ed.

About the reasons for the rapid growth of the start-up and entrepreneurship ecosystem in Saudi Arabia over the past year, Amal Dukhan, partner at 500 WorldwideWe are now at a stage where governments are realizing the importance of building and enabling a start-up ecosystem as an economic pillar, so there are government programs to support emerging technology companies and entrepreneurship, whether in terms of facilitation of the ecosystem, regulatory reforms to facilitate work, or structuring financing solutions.

Over the past ten years, Saudi Arabia has tended to diversify its non-oil economy, shift to attract global economic institutions, and open the door for innovative entrepreneurs to create their own projects, as the World Bank declares, which stated that the latest official data indicates that the Saudi-not-oil economy is growing by 5.1 percent. % in 2021, due to the opening of the door for private sector investments and emerging projects in the local market, which contributed to a decrease in the unemployment rate by 9 points, so that the current account in turn a surplus of 5.2% of GDP during the past year, which exceeded the deficit seen during the year 2020, which amounted to 2.3% of GDP.

Ahmed Al-Zayni, CEO and co-founder of Foodics, based in Saudi Arabia, says: “Government support in the Kingdom contributes to the provision of new opportunities in various sectors, such as the recent openness to the tourism sector, and the Kingdom’s vision to increase the contribution of small and medium-sized enterprises to the economy to reach 35% of GDP by 2030, given the large market size and the maturity and stability of consumers.There are many opportunities available at various levels and sectors, from the consumer sector to the corporate sector, and the government is working to support the start-up ecosystem through groundbreaking initiatives, such as e.g. such as the introduction of business incubators and the simplification of the requirements for obtaining licenses. ”

The Endeavor report, entitled “The Map of Technology Companies in Riyadh”, released this year, indicates that entrepreneurship is a growing part of the Saudi economy. participate, increased. from 13.7% to 22.4% between 2016 and 2020, in addition to a significant growth in the rate of private investment in entrepreneurial companies, as the amount of venture capital financing for start-ups in the Kingdom before 2016 amounted to $ 6 million annually, which rose in 2020. Reaching $ 152 million with an average annual growth rate of 35%, Saudi Arabia was also able to attract foreign companies to the local market, as by late 2021, more than 40 foreign companies had signed licenses to establish regional centers in the Kingdom, and the Kingdom aims to attract more than 400 other companies by 2030.

Attempts and obstacles

The Kingdom has made tremendous efforts to attract foreign companies and develop local emerging projects based on technical fields, particularly e-commerce and financial technology, such as allocating $ 1.2 billion to launch a range of digital skills initiatives improve, and draw up an ambitious plan to become one of every 100 Saudi citizens as a programmer, and support entrepreneurs Local authorities through the Public Procurement Act of 2019, which required government agencies to purchase certain products from local suppliers, while other products from outside the Kingdom are subject to an estimated 10% interest, in order to encourage and develop opportunities for emerging companies and open the door to local competition more easily and quickly.

Al-Zaini reiterates that despite the impact of the Russo-Ukrainian war on the global supply chain system, the Kingdom has achieved self-sufficiency in energy and resources, as it owns about 25% of the world’s oil reserves, and is one of the largest energy exporters, and although it will affect all countries to varying degrees, we believe that the repercussions of these economic conditions on the Kingdom will not be so severe, and it is possible that we will experience problems and obstacles in the supply chain of food and other materials coming from the two conflict countries, but we are confident in the government’s ability to extend a helping hand to help us mitigate the impact of this crisis. global growth and the promotion of growth also did before during the COVID-19 crisis. ”

Despite these efforts, we can not overlook some of the obstacles that entrepreneurs and emerging companies face in the Kingdom. The Endeavor study has shown that many entrepreneurs have shifted some of their projects outside the Kingdom due to some challenges such as the lack of technical talent that hinders them when expanding their companies, Since more than 90% of the founders interviewed already have technical teams in other countries, 84% of the founders explained that attracting talent for management positions is a major or serious obstacle, while 63% of respondents answered that the availability of technical talent was a major or serious obstacle, government regulations and legislation posed significant challenges to almost half of the entrepreneurs interviewed conducted, and 38% of the entrepreneurs who participated in the study considered it to be a large or dangerous challenge for them to find capital, in addition to 24% of them describe poor trust Potential customers in local technology companies present a major challenge due to their belief that the quality of the foreign product is better than its local counterpart.

In turn, Dukhan explains, “Despite the official support and encouragement for entrepreneurs, regulations are still being developed, and regulatory reforms can also attract investors and pave the way for beginners to work wider.”

Vision for the future

Expect a group reportSovereign entitled “A new investment law that treats Saudi and foreign investors equally,” and which was issued last April, that the new investment law – recently announced by the Saudi Ministry of Investment – increases the attractiveness of investments and foreign companies by 50% increase, as it treats domestic and foreign investment equally, the law will give foreign investors the freedom to manage their economic projects, in addition to owning any necessary real estate to ensure smooth business operations, and it will enable entrepreneurs to trade contracts with the full support of all competent authorities, in addition to subjecting both local and foreign investors to the same requirements for approval of licenses and registration, as well as for approvals or permits for certain economic activities or special economic zones.

And what more realistically demonstrates the extent of the growing demand for investment planning in the Kingdom, especially on the part of beginners and entrepreneurs, the Kingdom’s participation in “Exo Dubai 2020” has shed light on Saudi Vision 2030, and the ambitious economic growth- agenda that depends on young investors, entrepreneurs and projects emerging from within and outside the Kingdom, where the Saudi pavilion was able to attract nearly five million visitors out of the total number of participants, equivalent to 25% of attending the international event which was recently held in the UAE, indicating the growing desire to know the investment conditions and the establishment of companies and projects in Saudi Arabia on the part of investors and Arab and foreign youth, so we will not be surprised if we know that almost 97% of the founders of technology companies participating in the Endeavor study confirmed that they have a view that varies between positive and b aie positive towards the technology entrepreneurship community in Riyadh during the present and the future.

Saudi Arabia has had tremendous success in attracting foreign investment and opening the door for entrepreneurs to establish their local start-ups and projects, as well as to support the e-commerce and financial technology sector. This has allowed it to compete widely with many countries in the region, but despite some obstacles that still need to be addressed, such as the existence of a number of routine regulations, and the lack of administrative, technical and organizational expertise , but if the pace of reforms is accelerated more broadly, the Kingdom could become one of the largest centers of entrepreneurship around the world in the near future.

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