flag Saudi Arabia Saudi Arabia: Investing

In this page: FDI in Figures | What to consider if you invest in Saudi Arabia | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information

 

FDI in Figures

FDI flows to Saudi Arabia had gradually declined due to political factors and lower oil prices; however, economic diversification and new projects outside the oil and gas sector helped reverse the trend. According to UNCTAD's World Investment Report 2021, FDI inflows in Saudi Arabia remained resilient despite the pandemic, increasing by 20% to USD 5.5 billion in 2020, up from USD 4.6 billion one year earlier. Notably, investments rebounded in the last quarter of 2020, reaching nearly USD 1.9 billion. Policy interventions aimed at diversifying investment seem to be effective: key investments in financial services, retail, e-commerce, and ICT have been reported. The stock of FDI in the country increased in 2020 and reached USD 241 billion. The United Arab Emirates, the United States, France, Singapore, Japan, Kuwait and Malaysia are the main investors in Saudi Arabia. The investments are mainly oriented towards the chemical industry, real estate, fossil fuels, automobiles, tourism, plastics and machinery. In the first half of 2021, Saudi authorities reported that FDI inflows rose 33% from the same period in 2020.
Meanwhile, outflows from Saudi Arabia decelerated sharply (-64% to USD 4.9 billion). This was the result of the Saudi Public Investment Fund focusing back on domestic investment to offset the negative economic effects of the pandemic, along with a slowdown in FDI inflows.

The Kingdom has pushed to increase FDI in recent years as part of the Vision 2030 plan to end reliance on fossil fuels, and it is aiming for USD 100 billion in annual FDI by 2030. Moreover, Saudi Arabia adopted seven “Guiding Principles for Investment Policymaking”, including non- discrimination, investment protection, investment sustainability, enhanced transparency, protection of public policy concerns, ease of entry for employees, and the transfer of knowledge and technology; and the Saudi Arabian General Investment Authority was upgraded, becoming the Ministry of Investment. Recently, Saudi Arabia also launched a SEZ program that focuses on non-traditional industries, which include cloud computing, tourism, renewable energy, and logistics. Political and social tensions, reduced access to credit and the policy of “Saudization”, which favours the domestic labour force, have all been obstacles to FDI. Nonetheless, the government has invested heavily in national infrastructure to attract investment, and FDI is seen as one of the most effective ways to diversify the economy and provide employment for younger generations. The government opened the retail and wholesale sectors to 100% foreign ownership and has launched a large privatization programme. The authorities welcome FDI due to its ability to transfer technology, employ and train the national workforce, foster economic development and enhance local raw materials. The country's controlled inflation and relatively stable exchange rate, openness to foreign capital in upstream gas, as well as extensive privatisation programmes are among the advantages attracting investors to the country. The dynamic performance of the banking sector is driving the growth of the non-oil sector. Lastly, access to the world's largest oil reserves, very low energy costs and a high standard of living are decisive factors for foreign investors. Nevertheless, foreign investment is currently prohibited in 10 sectors, including oil exploration, drilling, and production; fisheries; security and detective services; and real estate investment in the holy cities of Mecca and Medina.

Saudi Arabia ranked 62nd out of 190 economies in the latest World Bank's Doing Business Report, up by 30 places from the previous edition. The country was also ranked the world's top improver on the list, mainly as a result of significant progress recorded in trading across borders and obtaining credit.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 4,5635,39919,286
FDI Stock (million USD) 236,376241,775261,061
Number of Greenfield Investments* 13488147
Value of Greenfield Investments (million USD) 12,52610,1629,502

Source: UNCTAD, Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

FDI INFLOWS BY COUNTRY AND INDUSTRY

Main Investing Countries 2017 (latest official data available), in %
United Arab Emirates 21.9
USA 20.3
France 9.1
Singapore 6.9
Japan 5.6
Kuwait 4.6
Malaysia 4.6
Main Invested Sectors 2017 (latest official data available), in %
Chemical industry 30.8
Real estate 27.7
Coal, oil and gas extraction 7.9
Automotive industry 7.1
Hotels and tourism 6.9
Plastics 5.0
Industrial machinery 2.4

Source: The Arab Investment & Export Credit Guarantee Corporation - Latest available data.

 
Form of Company Preferred By Foreign Investors
Joint stock companies and limited liability partnerships are the only companies available to foreign investors. However, it is possible to establish a branch of a foreign company in Saudi Arabia, which may be owned by a single foreign entity except individuals.
Form of Establishment Preferred By Foreign Investors
Joint stock companies and limited liability partnerships are preferred because a foreigner is not allowed to conduct business in Saudi Arabia as a sole proprietor, unless the individual is operating a branch of a foreign company.
Main Foreign Companies
Invest Saudi affirm that more than 1,100 licenses for foreign investors were issued in 2019 – 54% more than in 2018 and three times as many as in 2017.
Pan-Asia, EDS Renewables, WngFu, McDermott, GlaxoSmithKline, Unibio are some of the major investor that choose to signed a deal with Saudi Arabian General Investment Authority (SAGIA) in 2019.
Sources of Statistics
General Authority for Statistics (GASTAT)

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What to consider if you invest in Saudi Arabia

Strong Points

Once Saudi Arabia became a member of the WTO in 2005, the foreign investment climate in the Kingdom substantially improved. From an investor's point of view, the country's strong points are:

  • Economic stability
  • Largest world oil reserves, important position in OPEC
  • A large local market with a high spending power (and a population of over 35 million)
  • A strategy of economic diversification (with the program Saudi Vision 2030)
  • Sound infrastructure
  • Consolidated finances
  • Well-regulated banking system
Weak Points

While the country has undertaken reforms to encourage foreign investment, the legal framework in resolving commercial disputes is considered by some to be inadequate. There is a lack of transparency in applying intellectual property legislation, and the Government imposes quotas of Saudi employees in companies. Cases of delayed payment of some government contracts have been reported. The traditionally conservative cultural environment, including the enforced segregation of the sexes in most businesses and social settings, may discourage certain investors who are not accustomed to such practises.

Other weak points are:

  • High dependence on hydrocarbons sector
  • High unemployment rate among natives, and under-employment of women
  • Economy is dependant on public spending
  • Weak political governance
  • Weak economic transparency
  • Deteriorated regional geopolitical environment.
Government Measures to Motivate or Restrict FDI
According to the law on foreign direct investment, being licensed to operate in Saudi Arabia as a foreign investor is necessary to obtain any permit to start operations. In 2018, the Saudi Council of Ministers approved full foreign investments in the transport, recruitment, audio visual and real estate sectors. Foreign direct investments (FDI) can be made in Saudi Arabia in all business activities that are not restricted to those which must be exclusively undertaken by Gulf Cooperation Council nationals or companies owned by them, the negative list (oil and mining sector, some services, etc.). Foreign investors are no longer required to have local partners in a number of sectors and may own property for company activities. They are allowed to repatriate their company money and can sponsor foreign employees, subject to certain criteria in accordance with the Nitaqat (Saudisation) programme. In 2016, Saudi Arabia authorised the acquisition of 100% of assets by foreign investors in retail and wholesale trade. A privatisation program has also been launched. The government also tries to attract FDI in the sectors of renewable energy and entertainment.

In order to facilitate investments in the Kingdom, the Ministry of Investment has set up an Investment Services Centre (ISC). The ISC must decide to grant or refuse a license within 30 days of receiving an application from an investor. The Saudi Centre for commercial arbitration has also been created, which assures foreign investors an inexpensive fee in case of commercial arbitration.  

The Saudi government launched Saudi Vision 2030, an ambitious development program that foresees important opportunities for foreign investors in the sectors of education, housing, health and energy, among others.

Invest Saudi was created by the Ministry of investment (MISA) to be the national investment promotion brand of the Kingdom and offer several services to investors. Saudi Arabia's incentives and support schemes are specifically designed to encourage investment with the potential to diversify and improve the Kingdom's competitiveness. The incentives include financial, fiscal and employment support. The MERAS facilitates services with government agencies.

Nevertheless, other recent governmental initiatives aimed at favouring employment of Saudi citizens may discourage foreign investors: cost of working permits for foreigners, quota of foreign worker employees, stricter policy of localisation and introduction of a VAT since 2018.

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Protection of Foreign Investment

Bilateral Investment Conventions Signed By Saudi Arabia
Saudi Bilateral Investment Agreements
International Controversies Registered By UNCTAD
The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. Saudi Arabia is involved in 3 cases as Home State of claimant and in 8 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement
ICCWBO , International Chamber of Commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency
Saudi Arabia is a signatory of the MIGA Convention.
 
Country Comparison For the Protection of Investors Saudi Arabia Middle East & North Africa United States Germany
Index of Transaction Transparency* 9.0 6.4 7.0 5.0
Index of Manager’s Responsibility** 9.0 4.8 9.0 5.0
Index of Shareholders’ Power*** 7.0 4.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Not guaranteed
Acquisition of Holdings
Possible
Competent Organisation For the Declaration
Ministry of Investment of Saudi Arabia (MISA)
Requests For Specific Authorisations
Foreign ownership of private company shares in Saudi Arabia is subject to the Foreign Investment Law and regulated by the Saudi Arabian General Investment Authority (SAGIA). Saudi Arabia maintains a Negative List that tabulates sectors not open to foreign investment ( visit SAGIA site and check the Negative List). However, most sectors are open to foreign investment provided the foreign acquirer obtains a foreign investment licence. SAGIA has an instant licence regime and investors can apply online for an immediate licence if they meet certain criteria published by SAGIA.

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Office Real Estate and Land Ownership

Possible Temporary Solutions

There are ready-to-move-in offices available on rent in various business parks across Kingdom's main cities.

However in case the foreign company is of national interest, the Saudi Government may provide temporary space for a limited period till the company establishes itself in the country.

The Possibility of Buying Land and Industrial and Commercial Buildings
It is possible to purchase land for the purpose of conducting licensed activities and for employee residences. However, land may not be bought by a foreigner for investment purposes only (i.e. real estate trading).
Risk of Expropriation
The risk of expropriation in Saudi Arabia is negligible. The Saudi Board of Grievances has jurisdiction over commercial disputes between the government and private contractors. According to article 11 of the Foreign Investment Act: “Investments related to the foreign investor shall not be confiscated wholly or partially without a court order, moreover, it may not be subject to expropriation wholly or partially except for public interest against an equitable compensation according to Regulations and Directives”. The US investment guide records no documented instance of expropriation, nonetheless they state that some SMEs have had their investment licences cancelled without justification.

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Investment Aid

Forms of Aid
The Government has created industrial sites attracting foreign investors in Riyadh, Jeddah, Dammam, Qaseem, Al-Ahsa and Mecca. The setting up of a subsidiary allows tax exemptions for 5 years. The State provides electricity, water, fuel, etc. at low prices when industrial plans are involved. The Government encourages partnerships with local companies, granting more aid and advantages to companies whose capital is shared with Saudis. The Department of Industry and Electricity and the Department of Finance should be contacted for more information on the various forms of assistance granted to foreign investors.

Foreign investment that fulfils the requirements of the Foreign Capital Investment Code enjoys all privileges of national capital and is entitled to the same treatment, protection, and incentives accorded to national capital, which includes exemption from customs duties on machinery and equipment.

In addition, foreign investors who hire Saudis may benefit from a rewards system, whereby the Government would pay 50% of the employees’ salaries, subject to conditions as specified by the Human Resources Development Fund.

The Saudi Arabian General Investment Authority (SAGIA) and Invest Saudi may be contacted for further information about investment laws and opportunities in Saudi Arabia.

Privileged Geographical Zones
The Government has set up six “Economic Cities” located in Hail, Medinah, Rabigh, Jazan, Tabouk and Eastern Province in order to attract foreign investment and create job opportunities. These cities focus on different industries.
Free-trade zones
Saudi Arabia does not have duty-free zones or free ports.

However Saudi Arabia is a member of Gulf Cooperation Council (GCC) and Arab League. Saudi Arabia grants special trade and investment privileges to GCC members, allowing free movement of local goods. The Arab League has also agreed to negotiate an Arab free trade zone.
Public aid and funding organisations
Saudi Industrial Development Fund

Saudi Arabian Basic Industries Corporation (SABIC)

Islamic Development Bank

 
 

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Investment Opportunities

The Key Sectors of the National Economy
Oil sector, automobile industry, building, information and communication technologies, health, pharmaceutical industry, defence.
High Potential Sectors
Franchising, tourism, banking, electricity, mines.
Privatization Programmes
The Privatization Program, is one of the executive programs launched by the Council of Economic and Development Affairs (CEDA) to achieve the objectives of Vision 2030. The targeted sectors are linked to ministries of Education; Communications and Information Technology; Municipal and Rural Affairs; Environment, water and agriculture; Transport; Sport; Energy; Housing; Health; the Haj and Umrah and Labor and Social Development.
Tenders, Projects and Public Procurement
Saudi Tenders
Tenders Info, Tenders in Saudi Arabia
DgMarket, Tenders Worldwide

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Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
Telecommunications, electricity, water, hydrocarbons.

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Latest Update: June 2022