Asia-to-Saudi: Why Are Asian Companies Expanding to Saudi?
Saudi Arabia is increasingly viewed as a favorite destination for expansion among Asian companies.
Saudi Arabia’s rising influence on the global economy map is driving Asian companies to expand to the country and leverage boundless business opportunities in the $1.1 trillion market.
The fulcrum of this is Saudi Vision 2030 and the country’s increased focus on strengthening cross-border collaborations as part of its strategy to diversify its revenues beyond hydrocarbons.
This has prompted governments, investors, and a growing influx of high-growth Asian firms to forge mutually beneficial partnerships with their Saudi counterparts and dent Saudi strategic industries.
This article shines a light on the increasing economic ties between Saudi Arabia and key Asian markets and provides examples of notable Asian companies operating in the Kingdom and contributing to the ongoing development of its key sectors.
China
China has consistently remained the largest trading partner for Saudi Arabia since 2001. In 2023, the bilateral trade volume between Saudi Arabia and China will reach $107.23 billion.
This has largely propelled companies on both ends of the corridor to intensify bilateral collaboration, with Chinese companies increasingly making significant inroads into Saudi Arabia to catalyze growth in sectors like construction.
For example, China State Construction Engineering Corporation (CSCEC) recently secured a contract worth over $2 billion to build a new mixed-use district north of the $62.2 billion Diriyah Gate Giga project.
The financial sector has its share of mutually rewarding partnerships. Earlier this month, the Public Investment Fund (PIF) signed six Memoranda of Understanding (MoUs) worth $50 billion with leading Chinese financial institutions. This partnership aims to boost two-way new financial flows and support Saudi Vision 2030's goal of becoming a leading financial center.
Japan
Not only are Chinese companies rapidly growing their footprint in the Kingdom, but according to recent market reports, there are around 110 Japanese companies already operating in the country.
This figure is only bound to grow following the Saudi-Japan Vision 2030 business forum, held earlier this year in Tokyo. The forum concluded with the signing of more than 30 MOUs spanning energy and manufacturing, among other sectors.
In a broader sense, the joint projects undertaken by companies from both countries have recently tripled from 30 to 100, marking a significant phase of increased synergies and industrial expansion.
The net-zero transition remains a huge catalyst for business activities between both nations. As a result, there's an uptick in green investments flowing into the Kingdom, which aligns with its ambition to reach carbon neutrality by 2060 and become a global leader in clean hydrogen technology and its adoption as a clean energy source.
A shining example of this is Maurebeni, which just secured a deal with the Saudi Power Procurement Company (SPPC) to establish two major wind energy projects in Saudi Arabia.
Singapore
Considering Saudi Arabia as its main trading partner in the Middle East, Singapore saw its trade volume in the Kingdom rise almost by 50% in 2022 compared to 2021.
This underscores a pivotal juncture in the cooperation between the two countries in strategic sectors such as aviation. Key partnerships in this area include a recently signed agreement between Riyadh Airlines and Singapore Airlines as both airlines explore interline connectivity in each other's services.
Such a deeper collaboration forms a key step enabling Riyadh Airlines to fully fulfill its mission of connecting Saudi Arabia to 100 destinations around the globe during its first year of operations.
Another notable showcase of increased synergies between the two countries is the recent launch of the Saudi Arabia-Singapore Business Council.
Singaporean companies are rapidly making their presence felt in several areas, including fintech.
This is evident in the case of Payermax, which plays a transformative role in shaping the fintech landscape in the country. Payermax is the first Asian fintech to ever benefit from the Regional Headquarters (RHQ) program.
Within fintech, the global leader offers tailored payment solutions geared towards gamers, providing services like in-app purchases, game webshop top-ups, and micro incentives.
Its value proposition has become starkly clear during the ongoing e-sports World Cup currently taking place in Riyadh.
Payermax is among an increasing number of companies looking to clinch bigger market opportunities in sectors including logistics, transportation, green energy, and food security.
South Korea
The recent South Korean President Yoon Suk-yeol's visit to Riyadh culminated in the signing of 51 deals and MOUs, amounting to a total of $15.6 billion.
Key among them is PIF's cooperation agreement with Hyundai Motor Company to invest $400 million in constructing an assembly plant in Saudi Arabia.
Highlighting shared commitment toward clean energy transition, Korea Electric Power Corp., POSCO Holdings, and Lotte Chemical have signed agreements with Saudi Arabia's Aramco to produce blue ammonia at a total cost of $15.5 billion.
In addition to the clean energy and automotive sectors, the Saudi construction industry remains a magnet for Korean companies. Over 330 Korean companies have already acquired contracts for more than 1,860 Saudi projects, cumulatively worth $166 billion.
This accounts for 17.2% of construction projects undertaken by South Korean companies worldwide. As a substantive part of the construction boom in Saudi Arabia, the giga projects are attracting a large number of South Korean companies.
This includes Samsung C&T Corp., the construction and trading arm of South Korea’s Samsung Group, which works to build modular homes in the $500 billion giga project, NEOM.
India
India is Saudi Arabia’s second-largest trading partner, while Saudi Arabia is the country's fourth-largest trading partner. The value of bilateral trade totaled around $52.75 billion in the 2022-2023.
As such, the number of Indian companies operating in the Kingdom has leapfrogged from 400 in 2019 to about 2,900 in 2023. Examples include companies like L&T, TATA, Wipro, TCS, TCIL, and Lenskart.
The latter remains at the forefront of eyewear market transformation. Lenskart is among a global company that recently made a foray into the Kingdom to capitalize on its growing e-commerce sector.
Besides e-commerce, Indian companies are rapidly setting sights on critical sectors in Saudi Arabia like tourism, renewable energy, housing, health, and entertainment.
Hong Kong
Saudi Arabia has long maintained fruitful relationships with Hong Kong, opening the door for collaboration in areas such as tourism and financial services.
The Kingdom, accordingly, has been a target market for expansion for Hong Kong financial institutions, and leading tech companies such as Animoca Brands.
The metaverse and gaming venture capital firm company has maintained a leading market position by partnering up with key institutions such as King Abdulaziz City for Science and Technology (KACST) and NEOM to drive the advancement of the Saudi Web3 space.
On the tourism front, Regal Hotels Group and Cosmopolitan International Group, major hotel chains in Hong Kong, are set to build about 30 hotels in Saudi Arabia. It is worth noting that the PIF has invested $500 million in the Hong Kong Chaoshang Group.
The path towards economic progress is marked by the increased collaborations between Saudi Arabia and Asian companies. Across diverse Saudi sectors, Asian companies strategically establish themselves as key integrations in the Saudi economic landscape and key participants in Saudi Vision 2030-led transformation.
