The Saudi Arabian General Investment Authority (SAGIA) was originally meant to encourage foreign investment in the Kingdom by attracting capital and technology and improving the efficiency of the private sector as a leading contributor to national income. The overall objective is to serve the strategic goal behind development which is the diversification of sources of national income. SAGIA’s task has never been easy, given the intense regional competition to attract foreign investment. To this is added domestic obstacles, scores of which have been cited by SAGIA Governor Prince Abdullah ibn Faisal ibn Turki.

The Saudi economy is the largest in the region and the most capable of attracting foreign investment. It enjoys a competitive edge with regard to economic resources. But it is also true that the Saudi economy suffers from choking structural, administrative and organizational problems that block any attempt to attract the required investments.

Now that the war in Iraq is over and attention is focused on the country’s reconstruction, it too will compete for foreign investment. Countries such as the United Arab Emirates that for years have attracted foreign investment thanks to their efficient and resilient investment laws now have to face tough competition. The change in the investment atmosphere and the emergence of new competitors will make it even more difficult for the Saudi economy to establish itself as a strong competitor unless it moves quickly and introduces radical changes in the way it operates and functions.

Just recently, the Shoura Council debated a proposed corporate income tax and passed a bill slapping a 25 percent tax on foreign companies. The move was immediately criticized by the SAGIA chief who said it would jeopardize fair competition between Saudi and foreign investors. The tax, he said, could block foreign investment and put on hold any attempts to expand current joint ventures between Saudis and foreign companies.

Now that the proposed tax has been sent to the king, the question is whether the views expressed by the governor will be taken into consideration. I don’t know on what basis the Shoura Council passed the 25 percent tax but I do know we ought to review this figure while taking into account the changes occurring on the regional level as well as the arrival of new players who will compete aggressively for foreign investment.

Arab News From the Local Press 11 May 2003