Market regulations paves the way for lucrative opportunities
In recent years, flows of foreign direct investment (FDI) to Saudi Arabia have followed a downward trend due to slumping oil prices and political factors. However, thanks to recent economic diversification efforts and government backed projects outside of the oil and gas sector such for example ‘Vision 2030’ and the ‘National Transformation Programme—FDI inflows have recovered.
According to United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2019, the Kingdom’s FDI went up by more than 120% between 2017 and 2018, reaching a figure of $3.2 billion. Much of this increase is because Saudi Arabia has opened up four major industries to foreign investment: Employment Services, Real Estate, Media services, and Land Transport Services.
How To Invest in Saudi Arabia?
Although Saudi Arabia presents plenty of opportunities for businesses that want to benefit from expanding to a whole new world, there is a process that needs to be followed.
Although the country has opened up massively to FDI in recent years, unfortunately, establishing your business in Saudi Arabia is not as simple as going online and filling out a form to register it. There is still a strict process and framework that all foreign businesses must follow to the letter including applying for any relevant licenses or permits, going through the Saudization process, and opening a Saudi bank account, amongst other things.
You also need to engage with multiple government entities, including but not limited to, the Ministry of Investment of Saudi Arabia (MISA, formerly known as SAGIA), the Ministry of Commerce and Investment (MCI), the Chamber of Commerce (CoC), and the General Authority of Zakat and Tax (GZAT).
What Is the Process?
Due to all recent changes, the investment process, looks very different today than it did just a few years ago. Although the exact process differs from one industry to another and is relatively circumstantial, it can be summarised in five steps:
- You apply for and acquire a MISA license as they governs all FDI in KSA.
- You incorporate your company and get your Commercial Registration.
- You obtain your General Manager’s Visa from the Saudi Embassy.
- You register your company with relevant government bodies, your city’s Chamber of Commerce and open a bank account.
- Finally, you open your business officially by investing in real estate to begin trading.
Why Invest in Saudi Arabia?
There are many reasons why foreign businesses should consider investing in Saudi Arabia. The country’s controlled inflation rate, stable exchange rate, openness to foreign capital in upstream gas, in addition to its extensive privatisation initiatives, are among the most advantageous positives that are currently bringing an influx of FDI into it. In addition to this, the country’s strong banking sector helps drive the growth of many industries and access to the world’s largest oil reserves, low energy costs, and a high standard of living are all an added bonus.
Today, Saudi Arabia is undergoing a transformation from a public sector-based, oil-dependent economy to an economy that is more balanced and built upon the successes of a thriving private sector. By 2030, the Saudi government hopes to increase the country’s private sector contribution to GDP to 65%, up from its current contribution of approximately 40%, and there are reasons why your business should be a part of this and reap some of the rewards, such as:
- Attractive property solutions across 35 rapidly growing cities and commercial hubs.
- Supply of industrial land and commercial real estate at competitive prices.
- A young and skilled workforce (50% of the country’s population is under 25 years old).
- One of the safest places in the world with a high quality healthcare system.
- A stable monetary system and a well capitalised financial sector.
- Zoned cities that are operated by a master developer for maximised investment potential.
The New Attitude Towards FDI in Saudi Arabia
The Saudi government has recently invested heavily in national infrastructure to attract foreign direct investment as it is considered to be one of the most important means for economic diversification. This is because FDI provides untapped employment opportunities for the country’s younger generations. To this extent, many barriers that once stood in the way of foreign investment, such as political and social tensions, restricted access to credit, and the ‘Saudization’ policy, have been relaxed.
Today in Saudi Arabia, the authorities openly welcome FDI due to its ability to bring new technologies to the country, employ and train the national workforce, and boost economic development. Credit to this new positive attitude towards FDI, Saudi Arabia ranked 62nd out of 120 economies as per the World Bank’s 2020 Doing Business Report. This is a great boost upwards from 92nd position in 2019. Saudi Arabia was also ranked as the world’s best improver on the list.
As time goes by, there is no doubt that Saudi Arabia will start to climb higher and higher on this list as attitudes change and more FDI flows in.
Let Us Transcend Your Expectations
Due to all the work involved, the process of investing in Saudi Arabia can be long and drawn out. And because of different customs, laws that seem more ‘restrictive’ and the way processes are handled in generally Saudi Arabia is different from most of the Western world, it can be difficult for business owners to handle everything alone.
At Transcend, we specialise in bringing businesses like yours to the Saudi market and give it the very best chance of initial approval and ongoing success. With our turnkey solution, you can be free to focus on your day-to-day operations while we handle the entire process of establishing your business in Saudi Arabia, from start-to-finish.