How Saudi Arabia shows it is open for business
The Kingdom aims to increase foreign direct investment from $8 billion to about $18.6 billion. Among the aims is to create the largest possible number of career opportunities for Saudi citizens, and to diversify the sources of the country’s income.
Since 2000, investment in Saudi Arabia has been regulated by the Foreign Investment Act. The General Authority for Foreign Investment is moving fast to develop its services and initiatives, such as increasing the validity period of a foreign investment license from one year to five years, and reducing the time required to issue such a license from 53 hours to 3 hours and 59 minutes. The precision of these figures indicates the importance of such investment.
The act governs not only individuals, but also foreign legal entities. It explicitly permits a multiplicity of investment activities, provided they are not prohibited; activities such as the manufacture of military equipment and devices, civil explosives, real estate brokerage services, investigations and security services are not permitted. The list of prohibited activities is updated annually to keep up with economic changes and developments. For example, the distribution of films, communications services, trains and air and space services have recently been opened for foreign investors. On a wider scale, companies listed on the Saudi stock market are open for foreign investment, up to a maximum of 49 percent.
Some potential investors wrongly believe that they must have a Saudi partner.
Dimah Talal Al-Sharif
In addition, the act equates foreign investors’ projects with nationals’ project in all respects, including incentives, advantages and guarantees. Recent rumors about the exclusion of foreign investors are erroneous. Some potential investors wrongly believe that they must have a Saudi partner. However, Article 5 of the act makes it clear that any licensed enterprise may be wholly owned by a foreign investor. The act also explicitly gives foreign investors the right to transfer their share of profits or liquidation surplus abroad. It also prohibits any confiscation or seizure of their assets except through a judicial ruling issued by the competent court.
The act also clarifies the penalties for those who break its rules, after offenders have been given reasonable time to rectify their conduct. Then, they may be subject to the suspension of some advantages and incentives, or a fine of up to $133,265. In the case of a dispute, whether between a foreign investor and the government or a foreign investor and their Saudi partner, the regulator recommends that it be settled amicably, as far away as possible from the courts.
The General Authority for Investment is working to standardize the procedures for issuing a foreign investment license, through building communication bridges with the relevant ministries, mainly the Ministry of Commerce and Investment. The aim is to accelerate and unify procedures, so that an investor can obtain an investment license and list his company on the commercial register automatically, using only a passport number.
Such initiatives illustrate the strong appetite of the Saudi market for foreign investors, along with a determination to support them, and guarantee their legal rights. The necessary information can be easily accessed through the online portal of the General Authority for Investment.
• Dimah Talal Alsharif is a Saudi legal consultant, head of the health law department at the law firm of Majed Garoub and a member of the International Association of Lawyers.
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