The Largest Economy in the Middle East

Saudi Arabia is the largest free market economy in the Middle East and North Africa (MENA), 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 continually expanding domestic market showing population growth of 3.5% annually. This is a young demographic with strong buying power and a desire to consume. For investors, the Kingdom traditionally reflects liberal, free-market private enterprise policies, and has an impressive record of political and economic stability as well as a world-class infrastructure.

Monetary Policy

• There are no restrictions on foreign exchange and repatriation of capital and profits.
• The Kingdom has a stable currency (the “riyal”) and no foreign exchange curbs
• Companies are permitted 100% 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 as low as 27 US cents/square meter.
  *    Corporate tax cut of 30% and cut in port fees on all exports cut 50%.

Exempt from duties

The following goods and services are exempt from duties in the Kingdom:

• Petrochemicals and downstream industries
• Natural gas extraction and distribution
• Water desalination
• Electrical power generation
• Information Technology
• Infrastructure
• Industrial equipment and spare parts
• Mining
• Tourism. 

Saudi Arabia’s workforce is young, educated, and well-trained. Foreign investors will benefit from the government’s emphasis on development of human resources. Joint ventures with the Saudi government and the private sector have groomed a generation of managers and technocrats.

There has been a rise in the number of young Saudi professionals graduating from Saudi universities. The government has created the Human Resources Fund for job skill training for Saudi youth. The Kingdom allows businesses to recruit from overseas if necessary. There are around 6 million skilled and semi-skilled expatriate workers in the Kingdom, from senior managerial level to laborers. Unskilled labor in Saudi Arabia costs US $1.17/hr compared to US $2.63/hr in Mexico and US $22.60/hr in France. The Kingdom offers substantial public and private educational institutions and Research and Development facilities. The private sector also runs major vocational/professional institutes.

Saudi Arabia offers investors a strong banking sector, backed by a sound regulatory and financial framework based on standards and payment systems equivalent to those in major industrial countries. The Kingdom’s financial sector benefits from management expertise and sophisticated technologies, offering diverse financial services to the growing commercial sector. The size of the Saudi market and its reliability make the Kingdom an attractive investment destination.

Financial facts:

• The Kingdom’s financial system consists of the central bank (SAMA, Saudi Arabian Monetary Agency), the commercial banks, the specialized credit institutions and the stock market.
• Banking is regulated under the Banking Control Law issued by Royal Decree in 1966. The Council of Ministers issues licenses for the establishment of banks, based on recommendations from the Minister of Finance after review by the central bank.
• The government stake in commercial banks is less than 10%.
• Sufficient liquidity enables financing at equitable rates.
• Foreigners can invest in the stock market through investment funds.
• The Saudi stock market is the largest in the region.
• The Saudi Riyal has a strong record of stability and inflation rates in Saudi Arabia are very low.
• The Kingdom is signing bilateral agreements with an increasing number of countries to provide relief from double-taxation.

Financial Authorities in the Kingdom

Saudi Arabia is a signatory to various regional agencies guaranteeing a level playing field to foreign investors.

• The  Multilateral Investment Guarantee Agency (MIGA) ensures the same treatment, protection and incentives accorded to a national capital.
• The Saudi Arabian General Investment Authority (SAGIA) and other government agencies offer pre-investment assistance, include helping foreign investors prepare feasibility studies for industrial projects and providing information and statistics for investment projects  according to Saudi Arabia’s development plans.
• The Saudi Industrial Property Authority (MODON) is responsible for developing, maintaining and supervising industrial cities and technology zones in the Saudi Arabian development plans. Land for setting up industrial units are available throughout the Kingdom in several industrial cities. The land can be acquired on lease or sale at nominal charges. The government makes electricity, water and fuels available to industrial projects at low prices. Industrial cities have public utilities such as roads, desalinated water, telephones, police stations, restaurants and postal services. Commodities entering the Kingdom as input for industrial production and some basic foods are exempted from custom duties. Duties on other products range from 5 percent to 20 percent.
• The Saudi Industrial Development Fund (SIDF) gives soft, medium and long-term loans to industrial establishments for up to 50 percent of the total cost of the project. The payback period is up to 15 years. There is also a two-year grace period from the start of production.
• MODON co-ordinates with the Saudi Credit and Saving Bank for the financing of small and medium-sized enterprises, to promote development and create employment opportunities for Saudi citizens in less-developed cities such as Hail, Al-Jouf, Tabuk, Najran and Ar'ar.
  

Saudi Arabia is a signatory to various regional agencies guaranteeing a level playing field to foreign investors. It is a member of the Multilateral Investment Guarantee Agency (MIGA). The Kingdom, hence, ensures the same treatment, protection and incentives accorded to a national capital. The pre-investment assistance provided by Saudi Arabian General Investment Authority (SAGIA) and other government agencies include helping foreign investors prepare feasibility studies for industrial projects. They also provide information and statistics for investment projects within the scope of Saudi Arabia’s development plans. Land for setting up industrial units are available throughout the Kingdom in several industrial cities. The land can be acquired on lease or sale at nominal charges. Saudi Industrial Property Authority (MODON) is responsible for developing, maintaining and supervising these industrial cities and technology zones.

The government makes electricity, water and fuels available to industrial projects at low prices. Industrial cities have public utilities like roads, desalinated water, telephones, police stations, restaurants and postal services. Commodities entering the Kingdom as input for industrial production and some basic foods are exempted from custom duties. Duties on other products range from 5 percent to 20 percent. The Saudi Industrial Development Fund (SIDF) gives soft, medium and long-term loans to industrial establishments for up to 50 percent of the total cost of the project. The payback period is up to 15 years. There is also a two-year grace period from the start of production.

The financing of small and medium-sized enterprises in less developed cities, is also provided by MODON in coordination with Saudi Credit and Saving Bank in order to promote economic development and create employment opportunities for Saudi citizens in these under developed cities such as Hail, Al-Jouf, Tabuk, Najran and Ar'ar.