There are many reasons to invest in strategic sectors in which Saudi Arabia has high comparative advantages:
-
Saudi Arabia represents the main core in the Middle East and North Africa countries, which has nearly 400 million people.
-
The Kingdom of Saudi Arabia is ranked 23rd. among the largest twenty-five economies in the world, and ranked first in the Middle East and North Africa. It is also ranked 11 among 181 countries in the world ranking in terms of ease of doing business according to "Business Performance" report for 2010 published by International Finance Corporation (IFC) of the World Bank.
-
The Kingdom of Saudi Arabia is the largest free economic market in the Middle East where it has 25% of the Arab gross national product.
-
Saudi Arabia has 26% of the world’s oil reserves, the largest of any country, and provides energy to investment projects at the lowest prices worldwide, which makes the Kingdom an ideal destination for projects that rely on energy consumption.
-
The Kingdom also possesses a number of promising natural resources used in mining, and the geographical location of the Kingdom makes it an easy access to the markets of Europe, Asia and Africa.
Currency and Inflation
-
The Kingdom is the fastest growing economy in the world, with a per capita income expected to increase to $33,500 US by the year 2020 from $20,700 US in 2007.
-
The Saudi Riyal is one of the most stable currencies in the world. There has been no significant change in its exchange value during the three last decades, and there are no restrictions imposed on the exchange and foreign currency conversion and on the transfer of capitals and profits abroad.
-
The inflation rate in Saudi Arabia is low, and the Kingdom seeks to conduct bilateral agreements with a number of countries to prevent double taxation.
Tax incentives for foreign investment
The Saudi government has granted tax incentives for a number of less developed regions in the Kingdom in order to attract more investment. This concession is granted for a period of ten years from the beginning of any project. The regions covered by tax incentives are:
- Ha’il
- Jazan
- Najran
- Al-Baha
- Al-Jouf
- The northern borders region.
All of these regions have industrial cities which are supervised by MODON, and they have many industrial, commercial, residential and service opportunities.
The tax incentives include the following benefits:
- 50% discount on the annual training cost of Saudi manpower.
- 50% discount of annual wages paid to the Saudis.
- Additional discounts are granted in case the capital invested exceeds one million Saudi riyals, and also if more than five Saudi nationals are hired for a period of not less than one year in technical or administrative jobs.
Regulatory and financial incentives for foreign investment
The investment environment in Saudi Arabia is characterized by its continued development as an attracting factor of foreign investment into the Kingdom.
The Custodian of the Two Holy Mosques King Abdullah is heading the Saudi Supreme Economic Council which is responsible for drawing up and bringing out the economic policy and focusing on building an effective national economy to include the supervision and encouragement of foreign investments. The foreign investment system includes a group of regulatory incentives such as:
- The establishment of the Saudi Arabian General Investment Authority (SAGIA) to be the authority responsible for issuing investment licenses to foreign investors and coordinating with other related government agencies.
- Ownership of companies and land by foreigners is 100%.
- No restrictions on repatriation of capital.
- No taxes imposed on personal income. Taxes on foreign firms equal to 20% on profits.
- Possibility of carrying forward losses in the balance sheet statement for unlimited time.
- The foreign investors shall have the right to benefit from the local and international specialized funding institutions, which include:
o Arab Fund for Economic and Social Development (AFESD) which participate in financing the development of economic and social projects in the Arab countries.
o Arab Monetary Fund: It works in enhancing the development of Arab financial markets and intra-regional trade of member states as well as provides advice to member states on the investment of its resources.
o Arab Trade Financing Program: It grants medium-term and long-term loans to individuals and trade institutions to support commercial exchange and financial transactions of the private sector.
o Arab Investment Guarantee Corp: It provides insurance coverage for investments and credits on exports among the Arab countries against commercial and non-commercial risks.
o Islamic Development Bank: it contributes to the investment capital projects, grants loans for productive projects and enterprises; and accepts deposits for the recruitment of financial resources in line with the provisions of Islamic Sharia.
Other lending sources for industrial investments in the Kingdom
- Saudi Industrial Development Fund: provides loans for industrial projects of up to 50% of the project capital.
- Guarantee Program to finance small and medium enterprises: It follows the Saudi Industrial Development Fund and aims to cover the risk rate of the banks in financing small and medium enterprises. The rate of guarantee is up to 75% of the value of the loan.
- Saudi Fund for Development: Provides assurance and export credit insurance services to help exporters. The policy covers 90% of credit value.
- Agricultural Development Fund, Saudi Credit and Savings Bank, local banks: They have financing programs on easy terms.
Industrial incentives in the Kingdom
Land for industry:
-
The government provides industrial cities located in all regions of the Kingdom. The Saudi Industrial Property Authority (MODON) oversees twenty four industrial cities, while the Royal Commission for Jubail and Yanbu oversees two cities on the coasts. There are industrial zones supervised by the Economic Cities Authority, which was established recently.
-
The Saudi Industrial Property Authority (MODON) provides industrial lands at incentive rents starting from 1 Saudi riyal/square meter per year, depending on the availability of infrastructure, supporting facilities, logistical services and its developmental and economical dimensions.
Subsidized services:
-
All types of energy whether (electricity, gas, diesel, gasoline) are available in the industrial cities in addition to water provided at subsidized prices.
-
Logistical, residential and commercial services are provided at competitive prices.
-
Some industrial cities are located close to the coastal or dry ports and all industrial cities in the kingdom are located in sites of economic benefits, near international or regional main roads.
-
Raw materials and semi-manufactured materials are provided to local plants and factories at discounted and competitive prices.
Customs exemption:
According to protection and promotion regulation of the national industries, any industrial establishment is entitled to obtain a customs exemption, which is divided into three main types:
- Raw Materials.
- Machinery, machines and equipment.
- Spare parts of machinery, machines and equipment.
Industrial promotion programs:
The Ministry of Commerce and Industry in addition to customs exemption provides a range of facilities that support the industry to include the following:
- Obtaining supporting letters for participation of factories in government tenders (for obtaining preference).
- Obtaining advertising reduction letters for Saudi Arabian TV.
- Obtaining supporting letters for bringing in foreign labor into the Kingdom.
Apply to MODON for Investment Opportunities
To facilitate the provision of investment application, MODON allows all applicants to request through its website (www.modon.gov.sa). MODON has also established a Customer Services Center, located at MODON headquarters, to take care of inquiries from industrialists and other investors.