Saudi Arabia: Investing

FDI in Figures

Long hampered by its unattractive regulatory framework, foreign investment in Saudi Arabia recovered thanks to its accession to the WTO in late 2005 and especially thanks to the adoption of a more favorable investment legislation in April 2000.

Saudi Arabia is the largest recipient of foreign direct investment in the Gulf and the Middle East, and according to the 2011 World Investment Report published by UNCTAD, the country was the twelfth global destination for FDI flows in 2010. FDI stock has been rising steadily. The government of Saudi Arabia has invested heavily in national infrastructure to attract investment. FDI is one of the most effective ways to diversify the national economy and ensuring the employment of young generations. The authorities welcome FDI due to their ability to transfer technology, employ and train the national workforce, foster economic development and enhance local raw materials.

With controlled inflation and relatively stable exchange rates, openness to foreign capital in upstream gas, as well as extensive privatization programs are among the advantages attracting the investors into the country. The dynamic performance of the banking sector is driving the growth of the non-oil sector. Lastly, access to the world's largest oil reserves, very low energy costs and a high standard of living are decisive factors for foreign investors.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	38,151	32,100	28,105
FDI Stock (million USD)	111,631	142,300	170,450
Performance Index*, Ranking on 141 Economies	33	17	-
Potential Index**, Ranking on 141 Economies	29	-	-
Number of Greenfield Investments***	106	141	-
FDI Inwards (in % of GFCF****)	46.0	299.2	-
FDI Stock (in % of GDP)	23.9	40.5	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2009
USA	17.6
U.A.E.	12.6
Japan	10.2
Kuwait	9.2
France	7.0
The Netherlands	4.7
China	3.7
Bahrain	3.3
Jordan	2.9

Main Invested Sectors	2009
Chemical and oil industry	13.7
Real Estate	12.9
Contracts	12.1
Refined oil products	11.8
Financial services and insurance	10.1
Mining, oil, gaz	7.7
Transport, storage and communication	5.5

Source: Saudi Arabian General Investment Authority (SAGIA) - Last Available Data.

Form of Company Preferred By Foreign Investors: Joint stock companies and limited liability partnerships are the most attractive to foreign investors.
Form of Establishment Preferred By Foreign Investors: Joint stock companies and limited liability partnerships are preferred because a foreigner is not allowed to conduct business in Saudi Arabia as a sole proprietor.
Main Foreign Companies: Visit: 'Top Companies' at Saudi Business Centre (The Saudi Network).
Sources of Statistics: Central Department of Statistics (in arabic)

Why You Should Choose to Invest in Saudi Arabia

Strong Points: Once Saudi Arabia became a member of WTO in 2005, the foreign investment climate in the Kingdom substantially improved. From an investor's point of view, the country's strong points are economic stability, the large local market with a high spending power (and a population of over 27 million), sound infrastructures and a well-regulated banking system.
Weak Points: The week points are the inadequate legal framework in resolving commercial disputes, the lack of transparency in applying the intellectual property legislation, the government imposed quotas of Saudi employees in companies, the delayed payment of some government contracts, a restrictive visa policy for all workers, a very conservative cultural environment and enforced segregation of the sexes in most business and social settings.
Government Measures to Motivate or Restrict FDI: According to the law on foreign direct investment, foreigners are now allowed to invest in all sectors of the economy, except for specific activities on a “negative list”. This list continues to shrink as Saudi Arabia attempts to liberalize trade.

Foreign investors are no longer required to take local partners in a number of sectors and may own real estate for company activities. They are allowed to transfer their company money outside the country and can sponsor foreign employees.

In order to facilitate investments in the Kingdom, the Saudi Arabian General Investment Authority (SAGIA) has set up an Investment Services Centre (ISC). The ISC must decide to grant or refuse a license within 30 days of receiving an application from an investor.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Saudi Arabia: Saudi Bilateral Investment Agreements
International Controversies Registered By UNCTAD: Visit UNCTAD website mentioning the dispute between Saudi Arabia and the investor country.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International Chamber of Commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Yes

Country Comparison For the Protection of Investors

	Saudi Arabia	Middle East & North Africa	الولايات المتحدة	Germany
Index of Transaction Transparency*	9.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	8.0	4.6	9.0	5.0
Index of Shareholders’ Power***	4.0	3.4	9.0	5.0
Index of Investor Protection****	7.0	4.8	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Not guaranteed
Acquisition of Holdings: Possible
Competent Organization For the Declaration: Ministry of Finance, Saudi Arabia
Requests For Specific Authorizations: Saudi Arabia maintains a Negative List that tabulates sectors not open to foreign investment (visit SAGIA site). The sectors currently closed to foreign investment include three manufacturing categories and 13 service industries. The list includes real estate investment in Mecca and Medina, some sub-sectors in printing and publishing, audiovisual and media services, land transportation services excluding the inter-city transport by trains, and upstream petroleum. SAGIA periodically reviews the list.

Office Real Estate and Land Ownership

Possible Temporary Solutions: There are ready-to-move-in offices available on rent in various business parks across Kingdom's main cities.

However in case the foreign company is of national interest, the Saudi government may provide temporary space for a limited period till the company establishes itself in the country.
The Possibility of Buying Land and Industrial and Commercial Buildings: Yes
Risk of Expropriation: Negligible. No such case has been reported so far.

Investment Aid

Forms of Aid: The government has created industrial sites attracting foreign investors in Riyadh, Jeddah, Dammam, Qaseem, Al-Ahsa and Makkah. The setting up of a subsidiary allows tax exemptions for 5 years. The State provides with electricity, water, fuel...at low prices when industrial plans are involved. The government encourages partnership with local companies, granting more aids and advantages to companies whose capital is shared with Saudis. The Department of Industry and Electricity, the Department of Finance should be contacted in order to know the various helps granted to foreign investors.

Foreign investment that fulfills the requirements of the Foreign Capital Investment Code enjoys all privileges of national capital and is entitled to the same treatment, protection, and incentives accorded to national capital which includes exemption from customs duties on machinery, equipment. The SAGIA (Saudi Arabian General Investment Authority) may be contacted for further information about investment laws and opportunities in Saudi Arabia.
Privileged Domains: The government encourages investment in transportation, education, health, information and communications technology, life sciences and energy. However foreign investment in petroleum and mineral projects is not encouraged.
Privileged Geographical Zones: The government has set up six “Economic Cities” located in Riyadh, Jeddah, Dammam, Qaseem, Al-Ahsa and Makkah in order to attract foreign investment. These cities will focus on focusing on different industries.
Free Zones: Saudi Arabia does not have duty-free zones or free ports.

However Saudi Arabia is a member of Gulf Cooperation Council (GCC) and Arab League. Saudi Arabia grants special trade and investment privileges to members of (GCC) allowing free movement of local goods. Arab League has also agreed to negotiate an Arab free trade zone.
Organizations Which Finance: Saudi Industrial Development Fund

Saudi Arabian Basic Industries Corporation (SABIC)

Islamic Development Bank

Investment Opportunities

The Key Sectors of the National Economy: Oil sector
High Potential Sectors: Franchising, Tourism, Banking
Privatization Programs: The Supreme Economic Council launched a privatization program in 2002, which allowed privatization of 20 state-owned companies in a phased manner. These companies belong to sectors like: telecommunication, water and drainage; saline water desalination; mining; power; air transportation and related services; railways; some sectors of roadways; post services; flour mills and silos; seaport services; some municipality services; some educational and social services; some agricultural services; some health services, etc.
Tenders, Projects and Public Procurement: Saudi Tenders
Tenders Info, Tenders in Saudi Arabia
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: Telecommunications, Electricity
Sectors in Decline: Insurance

Finding Assistance For Further Information

Investment Aid Agency: Saudi Arabian General Investment Authority (SAGIA)
Other Useful Resources: Saudi Chamber of Commerce and Industry
Riyadh Chamber of Commerce and Industry
Jeddah Chamber of Commerce and Industry
Doing Business Guides: Deloitte International Tax and Business Guide about Saudi Arabia
Saudi Arabia Commercial Guide 2010 - Buy USA

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