International Development Consultants, LLC
About the Author: Dr. J. Michael Cobb, worked extensively in Saudi Arabia in the early 1980's and later in the mid 1990's, especially on the planning, development finance and implementation of Jubail Industrial City, while serving as a senior manager and consultant with the Saudi Arabian Bechtel Company and the Royal Commission for Jubail and Yanbu.
August 9, 2002 Saudi Arabia announced important changes to its 2000
Investment Law. These changes were approved by the Saudi Arabian
General Investment Authority (SAGIA) on June 24, 2002. Although
important issues related to some sectors of the Saudi economy remain
to be addressed and further clarified, overall the new rules appear an
important positive step in attracting foreign investment.
One of the key clarifications of the new rules involves an investor’s rights of appeal against charges alleging investment law violations. The new rules specifies that foreign investors first appeal to the Investment Disputes Settlement Committee of SAGIA. If the dispute cannot be resolved there, the case goes to arbitration as specified under Saudi Arabia's Arbitration Law.
In seeking to provide greater clarity
to investors, the new rules replace the entire set of Executive Rules
issued subsequent to the landmark 2000 law on foreign investment. In
addition to the important dispute resolution clarification, other
important new clarifications include those related to foreign
ownership of property, capital repatriation, loss carry-forward
regulations, double taxation avoidance and the issue of legal parity
of foreign with domestic companies.
Also, newly specified are minimum capital investment
requirements for economic sectors, such US$1.3 million for industrial
projects, US$6.7 million for agricultural projects and US $533
thousand (SR2 million) in the category 'other installations'. There are also relaxation provisions for these minimum
requirements for certain high technology projects with export-oriented
Other important change relates to permitting foreign investors under one company to obtain multiple business licenses thus simplifying investment process, assuming the new law on capital is established. SAGIA has also been designated as the only investment licensing authority for the Kingdom, regardless of investment sector. Although further details remain to be specified, to seeking to stream line and speed the investment process, SAGIA says it intends to permit investment applications to be made and by email.
While the new investment regulations do
not contain all the detail actually needed in practice, they do show
progress. In major areas
such as the gas sector and the as yet undefined capital law, however,
there are still substantial issues related to foreign investment
needing explanation. Further
clarity is promised to be available soon from SAGIA. For
example, it has plans to produce on an
overall investment guide for the Kingdom where the full spectrum
of procedures and
documentation required for gaining business licenses are to be specified.
In general, we do not see the most recently promulgated new rules from SAGIA opening major flood-gates to new foreign investments flowing to the Kingdom. The revised rules do, however, provide some important new guidance to project investors and should be viewed as another important step in further opening the Kingdom to outside private investment.
those needing further information, please click
here to see the full text of the 26 articles comprising the
new investment rules posted on SAGIA's website.
Saudi Arabia: Major Investment Opportunities in the 21st Century. WDF Conference Presentations. Jubail, Nov. 2000
Profile of Saudi Arabia: Economy and Industry, WWW SaudiNet site.
U.S.-Saudi Arabian Business Council. Joint US-Saudi Business Organization. Economic trends, data and key sector reports.
Other Background Reports & Articles:
Arab News, March 23, 1993; Saudi Arabia Survey: Oil Policy and the Private Sector. Financial Times, Jan. 30, 1992; 15 Years of Development, Jubail Development Review, Vol. 7, No.2, Dec. 1992, Investment Promotion Department, Jubail Directorate, Royal Commission for Jubail and Yanbu; Information on Jubail Industrial City: A Place for Industry, Economic Development Department Brochure, Jubail Directorate, Royal Commission for Jubail and Yanbu, 1990; Saudis Turn Desert Into City, New York Times, Feb. 17, 1987; Bechtel's Master Builders, Time, July 12, 1982; Vast Saudi Gas-Gathering System Moves Into Final Phase, Oil & Gas Journal, Apr. 12, 1982.