Saudi Arabia is the largest free market economy in the Middle East and North Africa holding 25% share of the total Arab GDP. The Kingdom’s geographic location provides easy access to export markets in Europe, Asia and Africa. It has a continuously expanding domestic market (annual population growth of 3.5 percent), which is adding to a young and consuming population with strong buying power. The investment environment in the Kingdom reflects traditions of liberal, open market private enterprise policies and its new Foreign Investment Law allows 100 percent foreign ownership of projects and real estate. The Kingdom has an impressive record of political and economic stability and has a modern world-class infrastructure.
Saudi Arabia has the biggest oil reserves in the world (25 percent). The Kingdom is endowed with other natural resources including a wide range of industrial raw materials and minerals such as bauxite, limestone, gypsum, and phosphate and iron ore. There are no restrictions on foreign exchange and repatriation of capital and profits. It has a very stable currency and has no foreign exchange curbs, and companies are allowed 100 percent repatriation of profits. The Kingdom is among the few countries in the world that allows companies to carry forward losses indefinitely, effectively relieving businesses of the tax burden until they become profitable. The Kingdom does not impose personal income tax. Labor cost in almost all spheres is low. Additional incentives offered to investors include:
Exemption of export goods from storage fees for 10 days. Annual land rent in industrial areas fixed at 2 US cents/square meter. Cut in corporate tax by 30 percent. 50 percent cut in port fees on all exports. Exemption of industrial machinery and equipment from duties.
Saudi Arabia is fully committed to increasing private sector participation in economic growth. Privatization is a key element of the Kingdom’s economic liberalization and a host of sectors are being opened to the private sector. Telecommunications, electricity, airlines, postal services, railways, port services and water utilities are some of the potential areas for investment.
The Kingdom proposes to invest $200 billion in the oil, gas, electricity and desalination and petrochemical industries. Global oil companies are also considering investing $100 billion over a period of 20 years in the production of natural gas. It is also expected that $6 billion worth of domestic capital will be invested in the tourism sector. Saudi Arabia is a founding member of Convention on Arbitration and is in the process of obtaining World Trade Organization (WTO) membership. The Kingdom is also a member in numerous other international and regional organizations.
Saudi Arabia’s privatization and economic diversification efforts have gained momentum since the creation of the new Supreme Economic Council (SEC). The purpose behind the creation of the SEC is to speed up economic reforms aimed at opening Saudi markets and ensure stability for investors. The SEC has been officially responsible for the Kingdom’s privatization efforts since early 2001. It plays a supervisory role in the formulation of economic policy, managing the budget and coordinating the implementation of policies between government departments and agencies. The SEC evaluates economic, industrial, agricultural and labor policies to assess their effectiveness and impact on the national economy, diversification of the country’s economic base and the growth of its competitive economic strength.
The sectors with most opportunities are:
+ Information Technology
+ Natural gas extraction and distribution
+ Water desalination
+ Industrial equipment and spare parts