Our comprehensive assessment of Saudi Arabia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Saudi Arabia, as well as the latest industry developments that could impact Saudi Arabia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Saudi Arabia before your competitors.

Country Risk

Saudi Arabia Country Risk

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Core Views

  • Continued heavy spending on the part of the government indicates its ongoing concerns about the need to shore up its key bases of support, given the persistent threat of public unrest. While we maintain that large-scale protests are unlikely to occur in Saudi Arabia, large youth unemployment coupled with a lack of political liberties mean that tensions will continue to linger.

  • Saudi Arabia's economic performance will remain largely insulated from the recent decline in international oil prices. We do not expect the government's expansionary fiscal policy to change significantly over the coming quarters, and public spending will continue to support both private consumption and fixed investment.

  • We forecast real GDP growth of 3.6% in 2015, a slight moderation from an estimated 4.3% in 2014 due to the normalisation of domestic oil...

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Saudi Arabia Operational Risk Coverage (9)

Saudi Arabia Operational Risk

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BMI View : Saudi Arabia is as an attractive proposition for foreign investors on account of its status as the region's largest economy, its minimal tax burden and strong information and communications technology performance. Overall, Saudi Arabia offers comparatively low risks to investors with regards to the good quality of its transport network and utilities costs, the comparatively limited bureaucracy surrounding trade flows (reducing the risk of delays and high costs), low crime rates and limited employment costs owing to the lack of an official minimum wage. However, incoming businesses face significant labour market risks due to a small domestic labour force with basic numeracy and literacy skills, a lack of female workers and rising government focus on the Saudisation of the workforce, which restricts the number of skilled foreign labourers. In addition, the country is not overly open to...

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Saudi Arabia Crime & Security

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BMI View: Despite the potent threat of terrorism, Saudi Arabia's low level of criminal risks , coupled with its competent police and counter-terrorism forces ensure that foreign workers and businesses are largely safe within the country. However, expatriate must strictly observe Saudi cultural norms and laws. The country remains vulnerable to terrorist threats and the potential for social unrest, while geopolitical risks are high due to the Kingdom's ongoing proxy struggle with Iran. Taking these factors into account, Saudi Arabia receives a score of 52.5 out of 100 for Crime and Security Risk, placing fifth in the region, below the majority of its GCC counterparts. 

Businesses face the highest degree of risk from terrorism, owing to the existence of powerful domestic and foreign opponents of the ruling Saud family....

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Saudi Arabia Labour Market

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Although Saudi Arabia has made use of a large pool of low-skilled foreign labour (who currently account for 27% of the population) over the past decades, the government has stepped up efforts to cut the number of expatriates since 2013, presenting new constraints to overall labour availability. The native Saudi workforce is hampered by weak foundational skills, high youth unemployment, and an extremely low rate of female labour participation. The Kingdom therefore performs poorly in terms of Availability of Labour, for which it scores 45.1 out of 100 and comes in 10th place regionally.

Education risks are limited, and Saudi Arabia's score of 65.2 out of 100 places it in third position regionally on that front. The government has invested heavily in education over the past decade, and typically spends around a quarter of its budget on education and related functions. Enrolments in tertiary education have increased substantially, with a...

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Saudi Arabia Logistics

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BMI View: Saudi Arabia boasts a high - quality transport network that offers investors a number of advantages in terms of trade options, while planned infrastructural projects will ensure that the Kingdom's logistics network is increasingly integrated into regional and international trade routes. Despite a high degree of global connectivity, the country's trade performance remains limited by a moderately burdensome bureaucracy and limited growth options for an already well developed trade economy. While businesses enjoy an abundance of energy and fuel at subsidised costs, water scarcity and moderate internet penetration rates hold back the country's potential in the realm of u tilities. Taking these factors into account, BMI awards a score of 63.0 out of 100 for Saudi Arabia's...

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Saudi Arabia Trade & Investment

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BMI View:   As the Arab world's biggest economy, Saudi Arabia offers a large market to foreign investors. Moreover, a low tax regime and relatively strong intellectual pr operty rights help to bolster the investment environment . That said, the country lags the front runner in the Middle East and North Africa (MENA) region - the UAE - for several reasons, including various disincentives to foreign direct investment and an opaque and unpredictable legal system. We have given Saudi Arabia a score of 54.4 out of 100 i n our Trade and Investment Risk Index. This places it in eighth place in the region out of 18 co untries covered.

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Saudi Arabia Industry Coverage (23)

Agribusiness

Saudi Arabia Agribusiness

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BMI View: Saudi Arabia will increasingly be dependent on global grain supply, as the country has decided to phase out domestic grain production in a bid to preserve the country's water supply. The government has not abandoned its strategy of self-sufficiency in poultry and has been ramping up incentives to expand capacity production. This strategy has paid off, as the three major producers in the sector have all started heavy investment initiatives .  We believe Saudi Arabia will find sufficient grain supply from the Black Sea region and the EU to supply its meat and food processing industry in the coming years. However, the country will remain highly vulnerable to volatile grain and feed prices. Recent spikes in feed prices have...

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Autos

Saudi Arabia Autos

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New car sales have seen impressive growth in Saudi Arabia year-to-date, rising by a reported 12% over H114, to 408,073 units. June was a particularly strong month, with sales rising by 19% year-on-year (y-o-y). BMI believes this performance was bolstered in part by seasonal promotions.

On current trends, full-year sales would be just above the 815,000 unit mark. As such, BMI retains its forecast of 5.4% growth in new car sales this quarter. The country's macroeconomic backdrop remains broadly favourable, with BMI's Country Risk team forecasting real GDP growth of 4.3% in 2014 and having now revised up its growth forecast for 2015 to 3.6% (from 3.3%) on the back of an increasingly positive outlook for construction activity. Indeed, we see Saudi Arabia's economic performance remaining strong heading into 2015, owing to elevated domestic demand and accelerating progress on...

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Commercial Banking

Saudi Arabia Commercial Banking

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...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Saudi Arabia Consumer Electronics

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BMI   View : The mid- to high-end consumer electronics devices market in Saudi Arabia will experience strong value growth during our forecast period, through to 2018, on the back of rising income wages, especially for public sector workers. However, growth in the low-end of the market will be constrained by the exit of a considerable number of migrant workers in the last two years under the government's 'Saudization' policy.

Headline Expenditure Projections

  • Computer Hardware Sales: USD2.5bn in 2014 to USD2.9bn by 2018. The desktop and notebook market is forecast to stabilise in 2014 after decline in 2012 and 2013, before recovering in the latter years of our forecast through increased hybrid notebook volumes. ...

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Defence & Security

Saudi Arabia Defence & Security

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BMI View:   Within an extremely complex region, Saudi Arabia's security and defence situation faces a number of challenges both on the internal and external front. BMI thinks that Saudi Arabia's defence and security policy-making is been affected by internal political rivalry within the Kingdom. Our view is that it is unlikely to become involved in an interstate conflict, and that its traditional leverage in Yemen, where it has previously intervened has been weakened . We think that its decision to join the coalition against the Islamic State is illustrative of a continuing counter-terrorism policy in view of its fears of attacks inside the Kingdom.

On the interstate front, Saudi Arabia seems to be continuing attempts to improve its relations with Iran to iron out some of the...

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Food & Drink

Saudi Arabia Food & Drink

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BMI View:  Latest data released by Saudi Arabia's Central Department of Statistics (CDoS) shows that the Saudi economy grew at an annual rate of 4.7% in the first quarter of 2014, slightly above our forecast of 4.3% for the year as a whole. We expect the country's economic performance to remain strong heading into 2015, owing to favourable growth prospects for both private consumption and fixed investment. We maintain our medium-term bullish outlook on the retail and trade sector, with sales benefiting from rising disposable incomes, favourable demographics and increasing urbanisation.

Headline Industry Data

  • 2014 food consumption growth in local currency = +8.0%; compound annual growth rate (CAGR) 2013 to 2018 = +7.6%

  • 2014 confectionery value sales growth in local currency = +6.9%; CAGR to 2018 = +6.5...

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Freight Transport

Saudi Arabia Freight Transport

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It is a mixed picture for the Saudi Arabian freight transport sector in 2014 and 2015. A number of the Kingdom's ports are expected to see another year of throughput declines in 2014, though we believe they will return to growth the following year. We believe that growth at Saudi Arabian ports will return to strength over the medium term and the construction of new facilities, while potentially impacting on some existing ports like the Jeddah Islamic Port, will serve to strengthen the sector further. The outlook for growth in air and rail freight volumes is broadly upbeat, however. Air freight will continue performing well with the help of national carrier Saudia, and the country's rail freight sector is expanding at an impressive rate.

Specific investments in expanding maritime facilities, and in projects such as the Saudi Landbridge and the north-south railway, coupled with strong economic growth on the back of large...

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Information Technology

Saudi Arabia Information Technology

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BMI View:  Saudi Arabia offers compelling growth opportunities for IT solution providers across multiple industry verticals owing to the kingdom's strong macro fundamentals and the government's economic diversification plan, which is driving growth and investment in the private sector. We believe that global IT firms with considerable local presence will benefit the most from this opportunity. A number of major IT firms have already taken steps in recent years to ramp up their operations in the country, usually through partnerships with local system integrators .

Headline Expenditure Projections

Computer Hardware Sales: SAR10.3bn in 2013 to SAR10.6bn in 2014, +2.6% in local currency terms. Desktop and notebook volumes are expected to stabilise in 2014, while the continued growth of the tablet market will see total value...

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Infrastructure

Saudi Arabia Infrastructure

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BMI View :  Saudi Arabia has emerged as one of our choice markets for both scale and growth opportunities over our 10 year forecast period to 2023. We see 2015 being a bumper year of real growth at 10.5% year-on-year, with average growth over the forecast period at 8.7%. We forecast strong growth across all sectors over the medium term; the residential and non-residential sectors especially will drive growth over the long-term - specifically the industrial construction sector.

Key Trends informing BMI's View:

  • The security situations in both Iraq and Yemen have deteriorated heavily in recent months. Not only does this raise the chance that a Saudi military intervention in either state will occur - raising regional tension and making an attack within Saudi Arabia by AQAP or IS even more likely - but may also drain...

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Insurance

Saudi Arabia Insurance

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BMI View:   Looking ahead to 2015 and beyond, we anticipate that Saudi Arabia's insurance sector will record solid growth across both segments, thanks largely to its expanding economy. The non-life segment, particularly compulsory motor and health lines, will continue to drive the sector as a whole. However, low penetration levels and a generous government welfare system will continue to prevent the market achieving optimal growth. Although we agree with the view that a period of consolidation is likely at some point over the forecast period, for now we expect the competitive landscape to remain fragmented.

Despite forecasting solid increases in premiums for 2015 and beyond there remains a number of significant barriers to insurers achieving optimal growth. One key issue remain the fragmented nature of the market. Although the top companies enjoy...

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Medical Devices

Saudi Arabia Medical Devices

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Espicom Industry View:   The Q314 fall in the oil price poses a risk to our Saudi Arabia n medical device market forecast. Sustainability of Saudi Arabia's government budget, and therefore state spending on healthcare, requires Brent to exceed US$90/bbl, which was not the case as of mid-October 2014. A major supply side event - either an OPEC production cut or a curtailment in crude output elsewhere - would be necessary to keep prices up in the face of a deteriorating global demand.

Headline Industry Forecasts

  • Saudi Arabia's medical device market has experienced volatile but overwhelmingly positive growth over the past five years. The country was slightly affected by the downturn in the global economy in 2009. This resulted in lower oil prices and subsequently growth...

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Metals

Saudi Arabia Metals

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BMI View : S audi Arabian meta ls consumption growth is set for rapid growth over the coming years as the country embarks on a construction boom. We forecast strong growth in steel production, however, it is unable to keep pace with domestic demand and thus the country will be more reliant on imports in future.

Saudi Arabia will become increasingly reliant on steel and iron ore imports over the coming years as domestic production is unable to keep pace with the country's infrastructure boom. Production will still see rapid growth rates as SABIC expands production at one of its largest refineries. Steel consumption growth rates will be some of the fastest in the world as infrastructure projects and home building efforts continue apace.

Our expectation for...

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Mining

Saudi Arabia Mining

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We expect to see strong growth in the mining sector of the Middle East and North Africa over the coming years. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful (which we currently give a likelihood of 25%), it will be a game changer for the country's beleaguered mining...

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Oil & Gas

Saudi Arabia Oil & Gas

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BMI View: In an attempt to maintain crude oil export shares in Asia and with increasing use of domestic crude for its refineries, we expect Saudi output to remain stable over the coming months should oil prices remain above the USD90/bbl level. This will see average production of about 9.73mn b/d for 2014, a small increase from 2013 production of 9.68mn b/d, but lower than the record production year of 2012. We do however expect to see a small decline in crude exports with the start of the Yasref refinery. While this is not a 'cut in output' per say, the Kingdom maintaining production at 9.6mn b/d will result in a n effective 'crude export cut' of 200,000b/d cut by the end of the year. The outlook for gas remains tight, despite ambitious plans to tap unconventional resources; we believe that rising consumption and faltering supplies may yet see the Kingdom seriously consider...

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Petrochemicals

Saudi Arabia Petrochemicals

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BMI View:   The Saudi petrochemicals industry is pressing ahead with expansion, but there are signs that investors are re-examining expansion plans in the light of slowdown in China and India and the massive increase in shale-based production in the US, according to BMI 's latest Saudi Arabia Petrochemical Report.

A number of shut-downs were reported in Q314 which reduced Saudi Arabia's total output and helped tighten markets at a time when they faced increased uncertainty. Tasnee & Sahara Olefins (TSOC) shut down its ethylene and propylene production plant in Al Jubail industrial city, Saudi Arabia, throughout September due to planned maintenance work. The plant produces 1mn tpa of ethylene and has propylene production capacity of about 285,000tpa. Production losses due to closure were...

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Pharmaceuticals & Healthcare

Saudi Arabia Pharmaceuticals & Healthcare

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BMI View:   Saudi Arabia's economic, demographic, epidemiological and political factors will shape the provision of healthcare across the nation. Healthcare spending will be greatly boosted by government initiatives. The new health projects will increase access to healthcare and provide revenue-earning opportunities for drugmakers, medical device companies and healthcare service providers. The government's planned privatisation of the healthcare industry will increase investment in the sector, with greater transparen cy attracting foreign companies .

Headline Expenditure Projections

  • Pharmaceuticals: SAR22.70bn (USD6.06bn) in 2013 to SAR24.79bn (USD6.62bn) in 2014; +9.2% in both local currency and US dollar terms. Forecast...

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Power

Saudi Arabia Power

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BMI View:   We have maintained our outlook for Saudi Arabia this quarter and we expect the kingdom's power sector to register signi ficant growth over our 10 -year forecast period to 2023 . Our positive   view of the market   is not only underpinned by the sheers scale of Saudi Arabia's power generation expansion plans , but also by robust macroeconomic fundamentals  ...

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Real Estate

Saudi Arabia Real Estate

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BMI View:   The Saudi Arabia n commercial real estate sector is enjoying a growing status as a destination for international investment. The government continues to spearhead development of the property market through the economic cities programme and a number of other large-scale initiatives. While the we expect strong growth in the market over coming quarters, oversuppl y is an ongoing concern .

The commercial property market is expected to enjoy consistent growth over the medium term as the government looks to prioritise the development of the real estate sector, which remains largely...

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Retail

Saudi Arabia Retail

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BMI View:   As a market with substantial untapped potential and a vibrant economy, Saudi Arabia is extremely attractive to foreign retailers. Further opportunities are likely to arise in 2015 with the announcement that the kingdom plans to open up its stock market to international investors, giving them access to its USD530bn bourse. Social changes are also creating demand: in the food market, Saudi consumers are increasingly interested in fresh food and in international brands; while women are taking a greater role in the workplace, leading to growing i nterest in fashion . These factors are all expected to result in a steady rise in household spending across all retail subsectors between 2015 and 2018, with restaurants & hotel expenditure forecast to grow most strongly....

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Shipping

Saudi Arabia Shipping

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There is a mixed picture for Saudi ports in 2014, with a number of the major facilities looking likely to endure a second consecutive year of contractions. However, throughput at Saudi ports will be supported by local shipping companies Bahri and Vela Shipping which are in the process of completing their merger. Considerable investment into new facilities is also continuing apace.

Headline Industry Data

  • 2014 port of Jeddah Islamic Port tonnage throughput forecast to decline for a second consecutive year, by 7.0%. Growth will average 2.9% to 2018.

  • 2014 port of Jeddah Islamic Port container throughput forecast to decline for the second year running, by 7.0%. Growth will average 4.8% to 2018.

  • 2014 total trade forecast to see real growth of 3.5%. Growth will average 2.8%...

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Telecommunications

Saudi Arabia Telecommunications

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BMI View:   T he   biggest growth area in Saudi Arabia's telecoms market is high-value services for corporate and individual customers. This view is supported by operators' fi nancial and operational results which show a strong uptake of next generation mobile and wireline data services as well as convergence services. The major service providers will focus on these areas in the future as they look to offset the impact of stagnating mobile subscriptions growth owing to market saturation and increased regulatory scrutiny of SIM card registration and ownership.

Key Data

  • Mobile subscriptions declined by 2.2% q-o-q and 4.2% y-o-y in Q114, according to the regulator's data.

  • ...

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Tourism

Saudi Arabia Tourism

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In general terms, BMI remains optimistic about the medium-term outlook for Saudi Arabian tourism as we approach the end of 2014, targeting 37.4% growth in tourist arrivals (to 25.8mn) and a 40.6% increase in tourism receipts (to USD14.2bn) over the forecast period to 2018. The Saudi Arabian authorities have stated that they want to diversify away from an economic overdependence on oil, with the tourism industry set to become increasingly important to the overall economy. Government expenditure has focused on developing the religious tourism and business travel sectors in particular, and we expect this support to continue over the forecast period to 2018.

Indicative of Saudi Arabia's push to increase the number of foreign tourists visiting the kingdom, in August 2014 the Saudi Gazette reported that the country will be exhibiting at the World Travel Market in London for the first time in November 2014. According to...

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Water

Saudi Arabia Water

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BMI View: The Saudi Arabian water sector remains one of the most active in the region and offers some of the greatest opportunities to private sector participants. In particular, we highlight the continued growth in desalination projects and ongoing water reclamation developments as offering significant potential. However, the country continues to be constrained by limited fresh water resources and rising domestic and industrial demand. Desalination is expensive and requires vast electricity resources . M oreover , electricity generation itself uses significant volumes of water in the cooling processes for thermal generation, and although Saudi Arabia is increasing its solar generation, additional industrial demands are weighing down on water resources. 

Backed by a multi-billion dollar infrastructure...

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