Saudi tourism boom will help boost local SMEs: Jadwa

The development of tourism and entertainment sector in Saudi Arabia will bolster the growth of small and medium-sized enterprises (SMEs), helping the Kingdom reach its goal of diversifying the local economy away from oil, Jadwa Investments said in a new report.

“Whilst tourism enterprises constitute 60 percent of total SMEs in the European Union (EU), the share is only 12 percent in the Kingdom,” the report said.

Within the tourism enterprises, there is a big divergence between the proportion of art, entertainment and recreation enterprises between the EU (47 percent of total SMEs) and Saudi Arabia (0.2 percent of total SMEs), offering a “great potential for growth for these SMEs in the local economy, with the anticipated expansion in the sector,” it noted.  

According to Jadwa, more opportunities are likely to arise from building public-private partnerships and with regional governments playing a vital role in supporting SMEs through initiating partnerships between regional hotels, tour operators, transport providers, vendors, entrepreneurs and government departments to address obstacles.

“Through the adequate government support, the private sector could benefit from the growing tourism and entertainment market and from the economies of scale provided by the emerging tourism and entertainment sector,” it said.

While  tourism and entertainment will be challenged with rising costs related to expat levies, higher commercial electricity prices, VAT and rising cost of funding, Jadwa said the strong political will enable the sector with the needed cultural environment, and support it to become a strong performer in the plan of economic diversification, in accordance with Vision 2030.

In terms of investments in the entertainment sector, the General Entertainment Authority has estimated SAR 267 billion worth of investment needed to build the suitable infrastructure for the sector across the Kingdom. It estimates the amount of expected investments in the industry to reach SAR 18 billion annually between 2017 and 2030.

Meanwhile, the Public Investment Fund (PIF) is planning to invest a total of SAR42 billion out of SAR 83 billion on “new” projects in 2018, as per the 2018 budget statement.

“We expect this to include PIF’s giga-project, the Qiddiyah entertainment city, which will move to phase four, from planning to building, during 2018,” Jadwa said.

On Tuesday, Saudi Press Agency reported that King Salman will launch the construction of Al-Qiddiya entertainment megacity project in Riyadh on April 28.