Investment Climate & Incentives in Saudi Arabia

How many countries can offer secure supplies of low-cost energy, a geographical launch pad to a vast market and a custom-designed, “turnkey” solution for your new venture or investment? One of the Top 20 destinations for foreign direct investment in the world, Saudi Arabia can do all this - and much more.

Saudi Arabia – a nation on the move

Saudi Arabia has long been recognized as a powerhouse of the Middle East. Now’s it’s

poised to become one of the world’s top 10 most competitive nations and with that, one

of the most lucrative markets for strategic investment.

The Kingdom of Saudi Arabia (KSA) is undergoing an exciting transformation. One of the

most enterprising nations in the Middle East, Saudi’s vast natural energy combined with

the long-term vision and strategic planning of its rulers has helped to create today’s

stable, robust economy. Now, Saudi is looking to the future with an ambitious program of

accelerated growth and development that will position it firmly as a new global force.

To capitalize on these geographic advantages, Saudi has set itself three strategic

targets:

To become the global capital of energy. Up and downstream petrochemicals, minerals,

power and water are all vital to the Saudi and global economy.

To act as a transport and logistical hub between east and west. KSA’s roads, railways and

air links create a potential consumer base of more than 250 million, all within 3 hours’

reach.

To transform its knowledge-based industries, i.e. healthcare, life science, education and

IT. These industries are all crucial drivers of long-term, sustainable change.

Building a nation of sustainable prosperity

KSA is a nation that is looking to and preparing for, a different kind of future, a future

that’s more inclusive, expansive, sustainable and integrated on both economic and social

levels; a future that revolves around investment. New communications infrastructures,

new transport routes, state of the art industrial complexes, dynamic training opportunities

and a commitment to greater business efficiencies – all of these things and many more

will be delivered through Saudi’s focused investment, helping to build a nation of

sustainable prosperity.

Saudi has set itself a challenge – to become one of the world’s top 10 most competitive

economies by 2010. This makes it the place to be for ambitious investors and businesses

that want to be part of a compelling and exciting future.

The Kingdom is investing massively to enhance its value proposition to foreign

businesses, both with infrastructure and with reform. His Majesty King Abdullah bin Abdul

Aziz Al Saud, Custodian of the Two Holy Mosques, has directed the Saudi government to

become one of the world’s Top 10 most competitive economies by 2010—the 10x10

mission. In pursuit of this goal, the organs of government have initiated a multi-faceted

reform strategy that has made the Kingdom one of the easiest places in the world to do

business.

Meanwhile, Saudi Arabia is investing tens of billions of dollars into the launch of four

Economic Cities: public-private partnerships that will create tomorrow’s most attractive

investment platforms for foreign companies. These unprecedented developments

combine world-class infrastructure, cutting-edge design principles, and special incentives

and streamlined processes to create foreign investment-led hubs in knowledge-based

industries and other crucial sectors.

Investment climate in Saudi Arabia

Saudi Arabia’s 27 million increasingly prosperous consumers are at the heart of the

Middle East/North Africa (MENA) region’s 400 million-strong population. One of the

world’s 25 largest economies (23th), and No.1 in the MENA region, Saudi Arabia ranks

11th out of 183 countries for the overall ‘Ease of Doing Business’, according to the

International Finance Corporation/World Bank’s ‘Doing Business’ report in 2010. The

Kingdom is one of the fastest-growing countries worldwide, with per capita income

forecast to rise from $20,700 in 2007 to $33,500 by 2020. In addition, Saudi Arabia is also

the top foreign investment destination in the Arab world and among the top 20 globally. As

you can see, Saudi Arabia is an exciting and rewarding place to invest and do business.

You can rest assured that you will find no better partner than the Saudi Arabian

government in supporting your investment in the Kingdom. With account surpluses

consistently in excess of 25% of gross domestic product, Saudi Arabia has ample capital

to move the Kingdom forward by making large investments in targeted areas of growth.

The Saudi economy is supported by one of the world’s most stable currencies (the Saudi

Riyal) and by low inflation. The government of Saudi Arabia also offers the 7th most

rewarding tax system in the world and is also the 7th ‘freest labor market’ according to the

World Economic Forum. You will find that, at all levels, the Saudi government is dedicated

to supporting the growth of your business in the Kingdom.

Saudi Arabia is more than ready to meet your investment needs through its progressive

regulatory and generous financial incentives.

Regulatory incentivesthe government is also committed to reducing bureaucracy at all levels and transforming

government departments in an effort to support foreign investment. H.M. King Abdullah

chairs the Saudi Supreme Economic Council, which is in charge of overseeing

Privatization and encouraging foreign investment. In 2000, the Saudi government

announced a new Foreign Investment Law, introducing major regulatory incentives

including (but not limited to):

The establishment of the Saudi Arabian General Investment Authority (SAGIA), to assist

foreign investors in the application and approval process for operating in the Kingdom.

Accelerated investment application, business registration and set-up process, with a

guaranteed decision for foreign investment applications within thirty (30) days of

submission to SAGIA.

Equal benefits, incentives and guarantees for foreign investors and domestic companies.

100% foreign ownership of companies and property.

100% property ownership for foreign investors.

No minimum capital requirement.

No restrictions on repatriation of capital.

The ability for foreign investors to sponsor foreign employees.

Financial incentives

No personal income taxes and only a 20% corporate tax.

Ability to carry forward losses on balance sheets indefinitely.

Foreign investors have access to generous regional and international financial programs,

including:

o Arab Fund for Economic and Social Development (AFESD): Participates in financing

economic and social development projects in Arab countries.

O Arab Monetary Fund: Promotes the development of Arab financial markets and trade

among member states; advises member states on investment of resources.

O Arab Trade Financing Program: Provides medium and long-term loans to individuals

and organizations for private and commercial trade.

O Inter-Arab Investment Guarantee Corporation: Provides insurance coverage for inter-

Arab investments and export credits against commercial and non-commercial risks.

O Islamic Development Bank: Participates in equity capital and grants loans for productive

projects and enterprises. It accepts deposits to mobilize financial resources through Shari'

a compatible avenues. 

Other financial incentives to realize the full potential of your investments in the Kingdom

include (but are not limited to):

o The Human Resources Development Fund to support activities related to qualifying,

training and recruitment of Saudi labor.

O Preferential allocations of natural gas.

O Competitive industrial utility rates for water, power and land.

O Large research and development endowments at King Abdullah University for Science

and Technology (KAUST) and King Abdul Aziz City of Science and Technology (KACST).

Tax incentives

The government of Saudi Arabia has granted tax concessions to six less-developed

regions in the Kingdom, with the intention of attracting more investment. These tax

privileges are granted for a period of ten years from the start of any project. The tax cuts

will be offered in the following regions:

1. Ha’il

2. Jazan

3. Najran

4. Al-Baha

5. Al-Jouf

6. Northern Territory 

The benefits are as follows:

50% deduction from the expenses of annual training for Saudis.

50% deduction from the annual salaries paid to Saudis.

More deductions are granted if investment capital for any project exceeds SR 1,000,000

and if more than five employees of Saudi nationality have jobs of a technical or

administrative nature with contracts of at least one year.

Being one of the world’s Top 10 most competitive economies makes Saudi Arabia the perfect investment opportunity. But that’s not the only reason why: 

Saudi Arabia is ranked 4th in the world for “fiscal freedom” and it’s the 7th most rewarding

tax system in the world.

7th freest labor market in the world according to the World Economic Forum.

One of the world’s 25 largest economies (23rd) and the largest economy in the MENA

region.

One of the world’s fastest growing countries: per capita income is forecasted to rise from

$20,700 in 2007 to $33,500 by 2020.

It’s the world’s fastest reforming business climate.

It’s the largest free market in the MENA.

Represents 25% of total Arab GDP.

It has 25% of world's oil reserves.

13th out of 181 countries for the overall ease of doing business globally. 7th in terms of

ease of paying taxes.

1st for ease of registering property and it’s the largest recipient of Foreign Direct

Investment in the Arab world.

Documents:

The Global Competitiveness Report 2009–2010 Saudi Arabia Economic Freedom Score 2010 Ease of Doing Business Report (2010) Country Comparison – GDP

Saudi Arabia offers a dynamic and robust economy, perfect for serving the world’s most demanding markets.

Dynamism and growth.

The performance of both Saudi Arabia and MENA’s economies have exceeded world

growth. Meanwhile, Saudi’s non-oil sector has delivered accelerating growth rates as the

economy diversifies.

 

Encouraged by robust GDP growth and macroeconomic stability, consumer confidence is

well above the regional average. Growing private credit and increased public

expenditures on infrastructure and other projects provide a broad basis for robust

opportunities across the Middle East,  but in Saudi Arabia these are translating into

particularly strong and sustained growth in domestic demand KSA itself has never been

more committed to supporting economic growth. Robust growth in government revenues

is supporting double-digit increases in government expenditures on social, infrastructure,

and other investment projects. Perhaps even more crucial in the long term, an

increasingly deregulated and competitive economic environment is supporting an

explosion of business formation as the private sector takes an increasingly prominent

role in the economy.

 

Foreign investment

The variety of domestic and export-oriented investment opportunities in Saudi has

attracted steadily increasing foreign direct investment as the economy has been

progressively opened. Saudi Arabia’s rapid improvements have made the country an

increasingly attractive destination for investment. The World Investment Report 2009

measured Saudi Arabia’s FDI inflows to be the 14th largest in the world and the highest amount in the MENA region. The country’s growth in FDI inflows was

especially impressive in light of the global economic downturn, which caused

international investment levels to drop significantly in the second half of 2008. 

 

 Economic stability

Sound macroeconomic management and an inflection point in world energy markets

have made the KSA’s economy stable, despite the global financial crisis. Saudi Arabia’s

economy ranks 3rd in the world for macroeconomic stability as a result of “a healthy fiscal

environment, relatively low interest rates, and inflation that has been kept under control.”

 The International Monetary Fund’s 2008 World Economic Outlook notes that “regional

growth remains strong” as “global financial market turmoil has had little direct effect on

the Middle East.”  While much of the world economy has recently been affected by a

global liquidity squeeze, Saudi Arabia’s twin surpluses in the government budget and

current account have made KSA an attractive, high-liquidity environment for local and

foreign ventures.

Market size

As the region’s largest economy and the world’s 24th largest exporter, the sheer size of

the markets that Saudi-based projects serve is “a competitive advantage, allowing Saudi

businesses to benefit from economies of scale.”  With excellent access to Saudi and

other MENA markets, as well as the advanced and emerging economies of nearby

Europe and Asia, market exposure for Saudi-based projects is not only vast but also

highly diversified.  

Cluster development

Investors in Saudi Arabia enjoy increasingly well-developed business clusters and value

chains that set the nation apart from its neighbors and from other emerging economies.

The World Economic Forum ranks the Kingdom 39th in the world for Local Supplier

Quantity and 35th for both Value Chain Breadth and Production Process Sophistication. 

Well established, competitive and efficient, Saudi Arabia’s domestic industries—from

energy and chemicals to transportation—provide industrial projects with exceptional

opportunities for cost savings.

Documents:

WORLD ECONOMIC OUTLOOK 2010 MIDDLE EAST AND NORTH AFRICA: GROWING OUT OF ITS D FIGURE : REAL GDP , 2008 FIGURE :PUBLIC EXPENITURE ON EDUCATION AS % OF GDP

Source: Saudi Arabian General Investment Authority (SAGIA)