RIYADH, 24 June — Easing of regulations on the minimum capital required, supply of feedstock for the petrochemical industry at competitive prices, protection of intellectual property rights and incentives for foreign investors employing Saudi manpower are among suggestions made for promoting foreign direct investment in Saudi Arabia.
The suggestions were submitted by the Riyadh office of Japan External Trade Organization (JETRO) in response to a request from the Saudi Arabian General Investment Authority (SAGIA). A copy of the recommendations was released to Arab News yesterday by Y.Nakamura, director general of JETRO.
The report covers FDI-related fields, such as rules and regulations, investment incentives, domestic industry policy, tax issues, finance, manpower, etc. It suggests that the minimum capital requirement for the issuance of SAGIA license should be relaxed in order to facilitate FDI inflow.
According to Nakamura, SAGIA rules stipulate that no license should be issued if the minimum FDI is less than SR25 million for a project in the agricultural sector, SR 5 million in the industrial sector, or SR2 million in the service sector. He said Japanese investors are in favor of doing away with these minimum capital requirements.
Another suggestion is that the supply of feedstock from the Kingdom’s petrochemical industry to prospective investors should be at competitive prices.
However, there have been periodic complaints from the customers of the Saudi Basic Industries Corporation (SABIC) that its feedstocks jack up the cost of production.
The JETRO report has also stressed the need for providing land and utility services for new projects in the industrial townships of Riyadh, Jeddah and Dammam. In these cities, it points out, not enough land is available for setting up new projects,while the cost of utility services for industrial consumers remains high.
Japanese investors have also sought protection to those investing in the Saudi national industry. To this end, it supports the launch of a “Buy Saudi Products” campaign by both public and private sectors to safeguard the interests of overseas investors. It said the import substitution industry should be shielded over a specified period by means of tariff duties and other forms of preferential treatment.
It is imperative, in the interest of FDI inflow, to promulgate the anti-dumping law to save the national industry from dumping of cheap foreign products, the report said. Such a regulation is already in force, although its implementation is not rigorous enough to prevent substandard material from penetrating the Saudi market. Local producers have already raised concerns in this regard.
Other recommendations concern incentives for hiring Saudi manpower; relaxing the upper limit and the coverage ratio of the SIDF loan component; establishment of FDI-friendly and transparent organ at SAGIA; revival of tax holiday for a limited period; tax breaks to promote technology transfer; and setting of an investment promotion office in Japan to interact with investors.
