Creating and Managing Economic Competitiveness: The Saudi Arabia General Investment Authority Harvard Case Solution & Analysis

Chapter No.1

Introduction to the Case Study

Background of the study

            Arm Al Dabbagh, Saudi businessman was joined as a head of the Saudi Arabia General Investment Authority (SAGIA) in April 2004. The agency was recognized by the Foreign Investment Law of 2000. SAGIA had several agendas and objectives such as, enhance the country’s business environment and boost foreign investment in the Kingdom of Saudi Arabia. One of the main advantages for the Kingdom of Saudi Arabia was the oil that kept them interested in order to boost the economy and provides more employment opportunities within the region. There were various macro-environmental threats SAGIA faced, especially 9/11 terrorist attack on the United States badly affected the image of the Saudi Arabia. In these circumstances, foreign investment in the country seemed to be ignored, but there was cooperation required to overcome these issues for the betterment of the Saudi Arabia.

            After Prince Abdullah left the organization in 2004, it brought additional responsibility to the Al Dabbagh to promote the SAGIA’s mission in the long run. Al Dabbagh had huge industry experience and technical expertise in the world of business industry, but he lacked in the area of dealing with issues related to government. He believed in innovation and idea generation and always brought changes in the procedures to raise the performance standards. Saudi Arabia was clearly having a competitive advantage over other countries as far as natural resources are concerned, especially oil. Their economy was heavily depended on oil and contributes a major portion in the country’ GDP. Saudi Arabia named the world’s largest petroleum exporter in 2000, it facilitated in promoting foreign trade activities in the region. It was named as the 20th largest exporter and 39th larger importer in the world because of the massive contribution of oil in the exports. During the twentieth century there were several external factors that affected the country such as heavy dependence on the oil.

The government encouraged the health care investment opportunities at the start of the 1970’s, resulted in a rapid increase in the population of the Saudi Arabia. Mortality of lower infants with socio-cultural preferences for the large families had resulted to an annual growth of 3.8 percent, which was much higher than the average of 2.5 percent in the Middle East and 1.5 percent at global level. The entire population of the Saudi Arabia increased significantly from nine million to twenty million between 1980’s and 2004. During the era, revenues of oil exports had declined drastically in the economy and GDP of the country by more than 40 percent. Meanwhile, the Saudi government faced various burdens in particularly debt crisis. The Debt was around $175 billion had incurred in funding activities in the 1991 Gulf War. The other factor was the cost associated with the social programs, social education and welfare, health care, end of service benefits, had massively increased subject to the rise in the population. These were the challenges for the upcoming generation to overcome in order to consider for future prospect.

The Council of Ministers sanctioned the Foreign Investment Law (FIL) in the year 2000 in Saudi Arabia. The Supreme Economic Council and the Majlis Al-Shura or Consultative Council played a vital role in the approval of the law. The law encourages the foreign investment in a significant manner and allowed 100% ownership of a project in the areas including real estate for home based financing. The new law also facilitated the foreign firms and provide equal investment opportunities and incentives as compared to the local investor. According to the law, the foreign companies were allowed to get more than one license of different kind of businesses. Visa sponsorship legislations supported the firms and allow a license not only to the sponsor itself, but also for the non-Saudi employees. Foreign firms and investors can be able to explore the opportunities in several industries and able to invest as per their desire in the Saudi Arabia. The only restriction was the industries that lie in the “Negative List” because it creates a negative impact on the economy. The government believed that it could play a vital role in the success of the Saudi Arabia General Investment Authority (SAGIA).

Statement of the problem

            The Saudi Arabia General Investment Authority (SAGIA) is an institution founded in 2000 in order to strengthen the business environment and boost foreign investment in the Saudi Arabia. SAGIA was established by the Saudi Arabia’s landmark Foreign Investment Law of 2000 in order to spread the economy and encourage employment for the upcoming youth in the country. SAGIA was established to examine the aid and funds of other governments and institutions to reduce the barriers in the investment division including “Saudization” policy. Though, the law that created SAGIA, gave some tools and mechanisms to work with. There was a need to find a path..............

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Saudi Arabia General Investment Authority (SAGIA) is an institution created in 2000 to improve the business environment and attract foreign investment in the Kingdom of Saudi Arabia. This agency was created for attracting foreign investment law of the Kingdom in 2000 with a mandate to diversify the economy and create jobs for the growing youth population. Young Agency, is expected to win the support of other ministries and agencies to reduce barriers to investment, including politically sensitive "Saudization" policy, which gave employment preference to Saudi Arabia for foreign workers and in the marketing of Saudi Arabia as a welcoming place for foreign investors . But the law, which was formed SAGIA, gave it some tools to work with. Thus, he had to find a way to cooperate with the rest of the government to implement the changes. The first governor of SAGIA, King Abdullah, he retired in 2004, and it would be the task of his successor, Amr Al-Dabbagh, SAGIA mission to promote the author. It remains to be seen whether al-Dabbagh, a successful businessman, could overcome the problems that still deadlock young agency. Case should be used for class discussion several important themes: the difficulty of co-operation between the state bureaucracy with little authority or resources to bring about change in a hostile political environment - both external and internal, the development of human capital with the art of strategic planning and communications, as well as the impact individual dynamic leader for the organization. HKS Case Number 1926.0 "Hide
by Stephen Goldsmith, Khalid A. Al-Yahya 16 pages. Publication Date: February 07, 2011. Prod. #: HKS126-PDF-ENG

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