According to data from the Saudi Arabian General Investment Authority (SAGIA), Saudi Arabia, with a per capita income forecasted to rise from $20,700 in 2007 to $33,500 in 2020, is the largest economy in the MENA (Middle East & North Africa) region and one of the world’s largest financial forces.
The Kingdom is ranked 4th in the world for “fiscal freedom” and possesses the 7th most rewarding tax system on the globe. Out of 181 countries, Saudi Arabia is ranked 11th for overall ease of doing business and first for ease of registering property, while being the largest recipient of foreign direct investment (FDI) in the Arab World.
In addition, the variety in the type of domestic and export-oriented investment opportunities has been noted to be steadily attractive to increasing FDI as the local economy continues to expand to include the non-oil related sectors as part of the Kingdom’s economic diversification plan away from black gold.
The sectors seeing substantial growth over the past year, according to the 2009 World Investment Report, are the mining and extraction sector registering FDI inflows of $3.8 billion, industry and agriculture with inflows of $14 billion, infrastructure $6 billion, financial services and insurance $2.9 billion, and real estate and hospitality $8 billion.
Due to these impressive figures, it is no wonder that so many companies worldwide are currently seeking a partner in Saudi Arabia to break into the market. Nonetheless, as many foreign companies will tell you, it isn’t always easy to locate a company in a foreign country such as Saudi Arabia without some assistance at least. Luckily for both parties, the potential investor and the potential Saudi partner, this is where SAGIA can help. To streamline the process of initial business connection, SAGIA has set up international offices across the globe with regional and local SAGIA representatives available for assistance. Interested investors wishing to e-mail or chat directly with a representative can log on to www.sagia.gov.sa/en/contact-us/international-offices/
Once the initial work is done in finding a partner, the next step is to consider investment laws and financing to operate in the foreign country. Costs in terms of time and money must be taken into consideration. With this in mind, in 2000 the Saudi government introduced a new investment law that has revolutionized the application process, investment environment and ease of doing business for foreign companies wishing to invest in the Kingdom.
The new investment law includes acceleration in the application process with a guaranteed decision for foreign investment applications within 30 days from submission to SAGIA. In addition, the government has set forth equal benefit incentives for local and international companies, and 100 percent foreign ownership of company and property. No minimum capital is required, and there are no restrictions on repatriation of capital with the ability for the foreign investor to sponsor foreign employees.
Financial incentives created for foreign investors also include no personal income taxes and only a 20 percent corporate tax. Foreign investors also have access to generous regional and international financial programs including the Arab Fund for Economic and Financial Development (AFESD), the Islamic Development Bank (IDB), the Arab Monetary Fund, the Arab Trade Financing Fund, the Real Estate Development Fund, the Saudi Industrial Development Fund (SIDF) in addition to 12 commercial banks available in the Kingdom to facilitate various types of business loans.
Other vital questions that still need answering pertain to supporting and sustaining the business once up and running, locating and hiring local employees in Saudi Arabia, and the state of the transportation infrastructure as well as the IT infrastructure, and whether these sectors are up to date and easily accessible to do business in the Kingdom.
Again, SAGIA has the answers to these questions. Through CADRE, an innovative human resources institution launched by Custodian of the Two Holy Mosques King Abdullah, Saudi Arabia provides a recruiting engine to match investors to the right people whether Saudi or foreign, thus solving any gaps in maintaining company officers and employees.
Pertaining to infrastructure, the Kingdom has embarked on a number of large-scale projects to realize its true potential as a leader and global transportation and logistics hub. The initiative will cost the Kingdom $100 billion to upgrade existing airports, road links and seaports as well as construct the six economic cities, including the King Abdullah Economic City (KAEC), which will contain the region’s largest seaport with a capacity of 10 million TEU, in addition to a special Haj terminal. Saudi Arabia is also working to construct a number of rail developments including the Land Bridge project and the Haramain rail project, to name a couple.
IT infrastructure support is also a must for any business these days. Currently the Kingdom is investing SR20 billion to upgrade and introduce the latest state-of the art technology. Fiber optic technology as well as implementation of smart cities is all part of the plan to bring the Kingdom forward and provide foreign investors with the answers to their evaluation in helping them decide that opening in Saudi Arabia is a one-stop-shop.
