The government has clamped down on companies which enjoy foreign direct investment (FDI) after it was found that many of them were trading in visas in violation of the Kingdom's rules and regulations.

The scale of misuse is rampant in the Kingdom which has issued 11,242 licenses to companies to avail themselves of FDI mainly from third world countries. Though it accounts for only two percent of the total business units in the country, the sheer volume of violations by these companies is alarming, particularly in the Central and Eastern Provinces as also parts of Western Province.

According to available statistics, FDI units employ about half a million people in the Kingdom, and many of them do not work for the companies which sponsored their employment visas.

In an attempt to attract FDIs into newly established Economic Zones, the authorities had generously considered companies’ requests for employment visas even at the cost of Saudization. According to the concessions granted by the Saudi Arabian General Investment Authority (SAGIA), FDIs enjoy only 10 percent quota currently and with the latest Nitaqat rules, it has increased to 20 percent.

The concessions are largely misused by FDI units in the contracting sector from developing and poor nations. And with SAGIA not armed with proper mechanism and clear authority to monitor visa violations committed by FDIs in the Kingdom, the problem has only compounded.

Many FDI-sponsored units commit visa violations using Saudi Arabia’s agreement with the World Trade Organization (WTO) on the percentage of expatriates to be employed in the organization.

The lion’s share of companies allowed FDIs are located in the Jubail and Yanbu industrial areas and are involved in mining and petrochemical-related fields. The businesses there are mainly owned by European, American, Japanese, Korean and Chinese companies. There is hardly any problem reported with these companies.

Most of the problems are reported from FDI units involving countries like Egypt, Turkey, Pakistan, India and Yemen. The authorities uncovered several such violations including in one case where an FDI unit in Riyadh sold 1,200 visas, leading to a joint probe by the Ministry of Interior and the Riyadh Governorate.

Several such cases also surfaced in Jeddah, Rabigh, Jazan, Dammam and Jubail where visa trade was rampant.

The authorities stopped issuing licenses for new FDI units after detecting the large-scale misuse.