With Saudi-India trade racing ahead, each investment in the other is also increasing by leaps and bounds. The value of the two-way trade, including oil, in 2006-07 was $16 billion — a 360 percent increase over the previous year. Saudi exports to India in 2006-07, including oil, totaled $13.4 billion, while Saudi imports from India in 2006-2007 were $2.6 billion.

Bilateral investment between the two countries is growing steadily. From April 2000, many Indian firms have taken advantage of the new Saudi investment laws which allow the setting up of 100 percent foreign-owned projects or joint ventures in the Kingdom.

The Saudi Arabian General Investment Authority (SAGIA), established in April 2002 as the main licensing body for foreign investment in Saudi Arabia, has awarded 190 licenses to Indian companies for establishing joint ventures or 100 percent Indian-owned companies in Saudi Arabia.

These joint ventures or 100 percent foreign-owned companies account for an investment of over $1 billion in the Kingdom. They operate in different sectors but principally management and consultancy services, construction projects, power, telecommunications, IT, pharmaceuticals and furniture manufacturing. In addition, several Indian companies are working in the Kingdom in the areas of construction, IT software development, designing, consultancy and financial services.

Saudi companies have invested $181 million in 55 Saudi-Indian joint ventures in India. Taking into account other Saudi investments, the total figure was $229 million three years ago, making Saudi Arabia the 24th largest investor, and it has risen significantly since then.

These developments follow an agreement between Saudi Arabia and India to strengthen their bilateral trade and investment ties, with India offering the Saudi national oil firm, Saudi Aramco, stakes in three of its upcoming refineries. The refineries at Bina (Madhya Pradesh), Bhatinda (Punjab) and Paradip (Orissa) are being set up by BPCL, HPCL and Indian Oil Corporation (IOC) respectively.

India’s economic ties with Saudi Arabia received a significant boost with the signing of the Bilateral Investment Protection Agreement and the Double Taxation Avoidance Agreement.

These twin agreements provide the legal and institutional framework for trade and investment ties, said Commerce Secretary S. N. Menon.

India is also in the process of negotiating a Free Trade Agreement (FTA) in goods with the Gulf Cooperation Council (GCC), of which Saudi Arabia is a major member.

The federal Indian government has urged businessmen from India and Saudi Arabia to use the unfolding opportunities and take Indo-Saudi trade to greater heights, especially given the Saudi support for them seen by the visit of Custodian of the Two Holy Mosques King Abdullah to New Delhi two years ago.

The government has underlined the growing Saudi-India cooperation, as already 106 joint ventures with a global investment of $445 million have taken shape in the last few months.

The Ministry of Finance and Ministry of Trade and Commerce led by Minister P. Chidambaram and Kamal Nath have been separately negotiating deals with Saudi officials.

Council of Saudi Chambers of Commerce and Industry (CSCCI) Chairman Abdulrahman Al-Rasheed, said: “Collaboration between India and Saudi companies is an important axis for strengthening bilateral trade and investment.”

Saudi officials have pointed out that while bilateral trade has been growing, India needs to further liberalize import regulations and reduce high customs tariffs on certain products, which have hindered Saudi exports to India.

India and Saudi Arabia are also actively cooperating in the field of science and technology. India’s Council for Scientific and Industrial Research (CSIR) and the Saudi Arabian Standards Organization (SASO) have an ongoing program of technical cooperation since June 1993.

Under this program, Indian experts in different scientific areas, particularly in the field of measurement and calibration, are sent to Saudi Arabia on regular basis.

India offers the highest relative return on investment through high value-added manufacturing. As opposed to China, which is good in high volume and relatively low technology manufacturing, India has the upper hand in lower-volume manufacturing, where technology use is more intensive.