Alex Nicholls, Director of Expansion at AstroLabs, discussed the key insights of their latest Saudi Market Entry Report in an interview with My Startup World.

What were the most significant insights or trends revealed in the AstroLabs 2023 Saudi Market Entry Report?
The report analysed and collected insight from 660 high-growth companies from a total of 50+ countries around the globe and across 37 sectors. In terms of participant profiles, respondents to the survey are categorised into two main groups: companies exploring the Saudi market and companies with an established presence in the country. The key insights included:

• Four-fold increase in the decision-making cycle for companies entering Saudi Arabia, decreasing the time taken from 8-12 months in 2018 to less than 2 months in 2024.
• The number of companies entering the Kingdom has doubled, and IT and software, construction, and business consultancy round up the top three sectors with the highest number of companies with a vested interest in growing their footprint in the Saudi market.
• Among those exploring their expansion to the Saudi market, 48% of prospective entrants plan to register their businesses within the next 3 to 6 months.
• Out of those businesses that are already operating, both from the survey and AstroLabs expansion companies, 91% have hired Saudi nationals within a timeframe of 2-4 months.
• Given Saudi Arabia’s rise as a global business capital, half of the respondents exploring their expansion to the Saudi market are based outside the MENA region, with Asia, Europe, and the US constituting 43% of this total share.

How does the report assess the overall potential of the Saudi market for new entrants in 2023?
The overall potential for high-growth businesses entering the Kingdom’s market is multifold. On the one hand, the Saudi government has been accelerating its support by rolling out initiatives for businesses to expand and grow under its Vision 2030 roadmap. The Saudi market presents a once-in-a-lifetime opportunity for companies to engage in transformative projects such as the Riyadh Metro, Riyadh Expo 2030, and the 2034 Saudi FIFA World Cup. These initiatives, alongside growing sectors like tourism, sustainability, and construction, are pivotal to the Kingdom’s future.

Advancing on the innovation front, Saudi Arabia’s digital-first approach is evident in the growing activity across sectors such as climate tech, proptech, e-commerce, and insurtech. This progress is steering the nation towards disrupting traditional business practices and supporting goals such as increasing non-cash transactions by 70% by 2030.

Can you provide an overview of the industries or sectors covered in the report? Which sectors show the most promise for growth?
The largest number of responses from the category of companies that are exploring their market entry to Saudi Arabia came from the technology sector (27.6%), followed by consultancy (15.4%) and construction (9.6%). Together, these three sectors made up half of the respondents.

The findings revealed a surging interest among both local and global companies in Saudi Arabia, particularly within the technology, consulting, construction & manufacturing sectors, to bridge crucial innovation gaps essential for fulfilling giga-projects and achieving Saudi Vision 2030 objectives. This surge also underscores the Kingdom’s emergence as a global testbed for innovation, supported by substantial investments and a strong commitment to fostering innovation and creativity.

Under the category of companies that have already established operations, the largest contribution came from the IT and Software sector, accounting for 30.4% of the participating companies. This was followed by the construction and manufacturing industry, at 12.8%, and the consulting industry, at 10.7%.

The growing influx of companies in these verticals signals untapped opportunities, given the government’s commitment to increasing the digital economy’s contribution to GDP to 19.2% by 2025.

How does the report address the regulatory environment in Saudi Arabia? Are there any recent changes that could impact market entry strategies?
Saudi Arabia has been increasingly doubling on building and fostering a favourable business environment. The recently launched special economic zones offer attractive incentives for companies considering a presence in the country. The establishment of these zones is tailored to specific industries, offering benefits such as reduced corporate tax rates and flexible Saudization quotas, further enhancing this environment.

Just five years ago, the allowance for 100% foreign ownership of companies was virtually unthinkable. These changes reflect the Kingdom’s commitment to creating a more open and flexible environment for global businesses.

The introduction of the RHQ scheme has been a game-changer for international companies, offering incentives that extend beyond the 30-year tax exemption, including strategic advantages like easier access to regional markets.

What are the primary opportunities identified for businesses looking to enter the Saudi market? Conversely, what are the main challenges they may face?
Companies looking at Saudi Arabia as their next leg of expansion are motivated by the sheer size of the market, a supportive business environment, and economic stability; more than half of respondents cite at least one of the three factors as their main reason behind their decision to enter the Saudi market.

Companies in Saudi Arabia face difficulties opening a bank account, clearly understanding the expansion steps, and finding residential real estate for the team. Enhancing banking guidance services for companies and facilitating access to real estate resources can further streamline the entry process for companies into the Kingdom.

Streamlining the family relocation process is crucial for attracting expanding businesses, with 65% requiring third-party assistance. Prioritising suitable living arrangements, especially residential real estate for teams, is key to unlocking business expansion in the Kingdom.

Based on the findings, what are the recommended strategies for companies planning to enter the Saudi market in 2023?
Based on the support factors analysed by the report, 78% identified finding a business setup partner as their top priority when expanding into the Saudi market. As the business landscape in Saudi expands and opens doors to a plethora of untapped opportunities, having a local market entry partner can help streamline the process of expansion and setup.

Companies in our expansion network have benefited from a local on-ground team to handle their pre-setup journey and beyond setting up, helping with their compliance needs, such as post-incorporation and HR services. Apart from this, businesses entering Saudi Arabia have highlighted the importance of joining a network, such as the AstroLabs Network, that bridges local & regional companies in the Kingdom with leaders and experts.

Expanding to an entirely new market might seem complex as it comes at the same time as starting your business in that geography – and the expansion journey might not be the simplest process to grasp fully. Therefore, the last thing business leaders would want is to worry about the technicalities – having an expansion business platform or a market entry partner enables them to completely focus on strengthening their business footprint while leaving the process of expansion with the local market experts.

What are the projections for the Saudi market based on the insights provided in the report? Are there any anticipated shifts or disruptions?
The upcoming growth leg in Saudi Arabia promises unparalleled transformation and development, on which international and regional companies should capitalise.

With the massive futuristic projects underway, construction, IT, and tourism have emerged as the top drivers of economic growth in the Kingdom.

The demand for innovative solutions is anticipated to increase as Saudi Arabia hosts mega events such as the 2030 Riyadh Expo and the FIFA World Cup 2034. Our report found that the speed at which companies are entering Saudi Arabia has increased by fourfold from 2018 to 2023. As the Kingdom nears the end of the decade, we can only anticipate an even higher rate of market entry for the upcoming years.

Tourism has shown rapid development in Saudi Arabia. The growth in this sector has led to the Kingdom reaching its initial target of welcoming 100 million visitors in 2030, seven years early, as 106 million tourists visited Saudi Arabia in 2023.

The companies that have expanded and settled into Saudi Arabia’s economy have witnessed tremendous growth opportunities, pushing them to become leaders in the Kingdom by capitalizing on their first-mover advantage. Businesses that are yet to enter need to make their move to one of the world’s leading economies to become pivotal drivers of growth in their sectors in Saudi Arabia.