Middle East business expansion specialist HFI Consulting International has launched a new service to help energy and water firms develop joint ventures in the wake of major plans to diversify Saudi Arabia’s economy.
“Companies with origins in the North Sea have an unprecedented opportunity to form local alliances following the unveiling of the In-Kingdom Total Value-Add (IKTVA) programme as a key aspect of the Saudi 2030 Economic Vision and National Transformation Plan,” said Hugh Fraser, founder and managing partner, HFI Consulting International.
IKTVA aims to reduce the country’s reliance on oil revenue while creating high-quality skilled jobs for Saudis – a move which means that international suppliers must employ more local people and increase local spending.
Details of HFI’s IKVTA Solutions service will be unveiled at Offshore Europe in Aberdeen during 5-8 September 2017, where the firm will be part of the Energy Industries Council pavilion.
Fraser has been helping companies with advanced technology development in the Middle East and North Africa (MENA) region for 20 years, and believes the new scheme will be a game-changer for firms looking to expand there.
Fraser added, “Every supplier to Saudi Aramco is now scored on the proportion of the revenue it earns against how much of it goes back into the Saudi economy. The target of 70% is high and presents challenges for those that want to become or to remain a supplier to Saudi Aramco.”
“However, with those challenges come many opportunities for North Sea firms. As well as the prospect of establishing a permanent business entity in Saudi Arabia to meet these new conditions, there are many options for joint ventures and strategic alliances,” observed Fraser.
“For example, a firm with its origins in the North Sea may want to look at collaborating with a partner in Saudi Arabia that has a high percentage of local employees and is committed to investing in furthering the skills of its workforce,” explained Fraser.
“Given that one pillar of the Saudi Arabia 2030 Vision is for the Kingdom’s businesses become more globally competitive, there are numerous local firms that are now interested in working with international partners to achieve that goal,” revealed Fraser.
“Having been based in the region for two decades, we have deep knowledge and experience of business structures to help UK firms leverage the benefits of Saudi’s national transformation plan and expand despite the challenging new requirements,” opined Fraser.
Under the IKTVA system, Saudi Aramco is looking for its suppliers to put 70% of revenue earned into the local economy, scoring across training and development of Saudis and the salaries paid to them, and spend on local goods and services.
It is part of a drive to diversify the kingdom’s economy away from oil and gas, to upskill workers across new technologies and to transform Saudi Aramco from an oil producing company into an industrial powerhouse.
Saudi Arabia is committed to spending $30bn a year on its petroleum industry for the foreseeable future, but the Saudis also want to see innovation and diversification as key pillars of their economic strategy. That is now leading to the emergence of parallel opportunities, including a $30-50bn investment programme in renewables and nuclear power, which was announced in January.
Fraser concluded, “North Sea firms are renowned as innovators with technology and know-how that the rest of the world wants to utilise. I believe there will be even greater demand as Saudi Arabia accelerates the diversification of its economy and reduce its reliance on oil and gas.”
IKTVA solutions service will be provided through collaborative activities with a local law firm in Saudi Arabia and HFI’s team across its Aberdeen, Beirut and Dubai offices.
The Beirut office is the firm’s legal base, while Dubai is the base for consulting services. These combine to provide specialist services for clients with projects in the MENA region while also working closely with the team in Aberdeen, which is focused on North Sea clients.
