RIYADH: The Saudi mining law, approved in 2020, will enable foreign investors easier access to the under-developed market in the Kingdom, a lawyer involved in drafting the legislation said.
The law was formed to streamline the process of obtaining licenses and attract investors to the sector by reducing administrative discretion, bureaucracy, and other possible hurdles.
“There’s an online licensing application system, so investors know where the applications are, who’s applied for which rights, and that’s all totally transparent, everybody can see who’s applied for what,” Peter Leon of Herbert Smith Freehills Law firm told Arab News during his visit to Saudi Arabia to attend the Future Minerals Forum.
The Ministry of Industry and Mineral Resources had advisory sessions with the World Bank, and was inspired by the best practices of leading markets of the sector before finalizing the mining law.
“We looked at the best practice examples from Canada, Australia, Botswana and Africa, and we worked very closely with the World Bank who were also advising the ministry,” the South African lawyer said.
Unlike many other developing countries, there is no requirement for foreign investors to have a local partner in the Kingdom.
Some countries in Africa, for example, normally require investors to have either the government directly, or a state mining company as a minority shareholder in the company.
“In South Africa, the mining company has to divest itself 30 percent in order to get a mining license. That is quite a significant hurdle to investment,” he said.
Leon believes that environmental, social and governance, known as ESG, are important factors to be taken into consideration in the sector.
With the new law, a mining license also has to be reviewed by the Ministry of Environment, Water, and Agriculture.
“The framework really follows not just national best practice, but principles around ESG,” Leon added.
In June 2020, Saudi Arabia’s Cabinet approved the new law to accelerate foreign investment in the sector as part of efforts to diversify its economy away from hydrocarbons.
The new law also facilitates investor access to financing and supports exploration and geological survey activities.