Foreign investment’s Future within Saudi Vision 2030

Dr Khalid Saad Al Habshan :

Specialist in Corporate Governance and foreign business investments

In the wake of Saudi Vision 2030 is a plan by the government of Saudi Arabia to change the country’s dependence on oil. Details were stated on the 25th of April 2016 by Prince Mohammad bin Salman Al Saud on an interview on Alarabiah channel.

The vision was completed by The Council for Economic and Development Affairs Chaired by HRH Prince Mohammad Bin Salman Al Saud and endorsed by The Prime Ministers Council chaired by King Salman. It depicts the Saudi Plan after oil, and covers development, economy, and social programs.

That can be observed from King Salman latest visit to USA when he announced radically changes to the economic system. The Saudi Arabian General Investment Authority (SAGIA) has declared that the investments plans and reforms would be subject to conditions, which would be disclosed at the latest stage.

The declaration employ big change from the exited investment regulation, the new Foreign Investment Law permits foreigners who can obtained fully ownership of the vehicle investment or company, as well as the assets required for the project itself or for company personnel housing, while allowing them to preserve the same reasons given to national companies. For example, projects are foreign-owned by 100 percent will be acceptable for loans from the Saudi Industrial Development Fund or bank. Investors will also be able to embrace investment licenses in a different type of activity. The new implementing Regulations of the foreign investment law has adopted remarkable changes then old sponsorship regulations. Foreign investors and their non-Saudi employees will be sponsored under the new licensed firm.

The Kingdom of Saudi Arabia has moved forward recently to improve business strategies and improved foreign investment laws.  Nevertheless, private equity investors have expressed their concerns about the mechanism for how these new regulations will be processed.

It has been observed that another very significant change is the reduction in the corporate tax rate for foreign companies with profits over SR100, 000 a year, from 45 percent to 30 percent. The new law also enables companies to carry forward corporate losses for an unspecified number of years.

SAGIA desires to attract more high-end investors into the kingdom of Saudi Arabia to create white collar or technical jobs for Saudi citizens, introduce modern technology andsustain economic growth – goals that may become increasingly important if oil prices stay low.

There is no general limit on the amount of foreign investment in Gulf Cooperation Council (GCC) countries, which can be made in a Saudi company and the establishment of 100% foreign-owned companies is permitted, with certain exceptions such as strategically significant sectors including Medical , defence, oil exploration, Communication &media, professional companies and trading companies.

All foreign companies who have an interest to set up Business in Kingdom of Saudi Arabia are required to obtain a foreign capital investment license from the Saudi Arabian General Investment Authority (SAGIA). SAGIA is required to respond to an application within thirty (30) days after issuance of a receipt acknowledging that the application is in the prescribed form. If SAGIA does not do so, the application is deemed to be accepted according to Act (15) from the foreign investment law.

However, SAGIA has considerable discretion in deciding whether or not an application is in order. It is not uncommon for SAGIA to request documents and information in support of the application over and above what is required by the SAGIA application form and the Investment Laws generally. If further information or documents are required by SAGIA, they must be provided within sixty (60) days of the request, otherwise the application lapses on the ground of Act (12) from the same law.

The General Investment Commission will work towards streamlining the foreign investment application process by creating a one-stop shop facility. It will be required to respond to investment applications within 30 days. If the Commission does not make a decision within this time frame, the license will be issued. If the Commission declines the application for some reason, the foreign investor is allowed to appeal the decision.

Dr Khalid Saad Al Habshan

Specialist in Corporate Governance and foreign business investments

habshan_33@hotmail.com