Foreign Direct Investment in Saudi Arabia
FDI in Figures
Long hampered by its unattractive regulatory framework, foreign investment in Saudi Arabia recovered thanks to its accession to the WTO in late 2005 and especially thanks to the adoption of a more favorable investment legislation in April 2000.
Saudi Arabia is the main recipient of the foreign direct investments in the Gulf and Middle-East with USD 24.3b. FDI stocks are constantly on the increase. The Saudi Arabian government has invested massively in national infrastructures in order to attract investments. FDIs are among the most efficient means of diversifying national economy and providing investment for the young generations. The authorities welcome FDI according to their capacity to bring in technology, employ and train the workforce, aid economic development and valorize local raw materials.
With controlled inflation and relatively stable exchange rates, openness to foreign capital in upstream gas, as well as extensive privatization programs are among the advantages attracting the investors into the country. The dynamic performance of the banking sector is driving the growth of the non-oil sector. Lastly, access to the world's largest oil reserves, very low energy costs and a high standard of living are decisive factors for foreign investors.
Country Comparison For the Protection of Investors
|Saudi Arabia||Middle East & North Africa||United States||Germany|
|Index of Transaction Transparency*||9.0||6.3||7.0||5.0|
|Index of Manager’s Responsibility**||8.0||4.6||9.0||5.0|
|Index of Shareholders’ Power***||4.0||3.4||9.0||5.0|
|Index of Investor Protection****||7.0||4.8||8.3||5.0|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||22,821||38,151||35,514|
|FDI Stock (million USD)||73,480||111,631||147,145|
|Performance Index*, Ranking on 141 Economies||55||33||17|
|Potential Index**, Ranking on 141 Economies||29||29||-|
|Number of Greenfield Investments***||54||106||141|
|FDI Inwards (in % of GFCF****)||29.9||46.0||299.2|
|FDI Stock (in % of GDP)||19.2||23.9||40.5|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Why You Should Choose to Invest in Saudi Arabia
- Strong Points
Once Saudi Arabia became a member of WTO in 2005, the foreign investment climate in the Kingdom substantially improved. From an investor's point of view, the country's strong points are economic stability, the large local market with a high spending power (and a population of over 27 million), sound infrastructures and a well-regulated banking system.
- Weak Points
The week points are the inadequate legal framework in resolving commercial disputes, the lack of transparency in applying the intellectual property legislation, the government imposed quotas of Saudi employees in companies, the delayed payment of some government contracts, a restrictive visa policy for all workers, a very conservative cultural environment and enforced segregation of the sexes in most business and social settings.
- Government Measures to Motivate or Restrict FDI
- According to the law on foreign direct investment, revised in 2000, foreigners are now allowed to invest in all sectors of the economy, except for specific activities on a “negative list”. This list continues to shrink as Saudi Arabia attempts to liberalize trade.
Foreign investors are no longer required to take local partners in a number of sectors and may own real estate for company activities. They are allowed to transfer their company money outside the country and can sponsor foreign employees.
In order to facilitate investments in the Kingdom, the Saudi Arabian General Investment Authority (SAGIA) has set up an Investment Services Centre (ISC). The ISC must decide to grant or refuse a license within 30 days of receiving an application from an investor.
- Bilateral Investment Conventions Signed By Saudi Arabia
- Saudi Bilateral Investment Agreements
Procedures Relative to Foreign Investment
- Freedom of Establishment
- Not guaranteed
- Acquisition of Holdings
- Competent Organization For the Declaration
Ministry of Finance, Saudi Arabia
- Requests For Specific Authorizations
- Saudi Arabia maintains a Negative List that tabulates sectors not open to foreign investment (visit SAGIA site). The sectors currently closed to foreign investment include three manufacturing categories and 13 service industries. The list includes real estate investment in Mecca and Medina, some sub-sectors in printing and publishing, audiovisual and media services, land transportation services excluding the inter-city transport by trains, and upstream petroleum. SAGIA periodically reviews the list.
- Investment Aid Agency
Saudi Arabian General Investment Authority (SAGIA)
- Tenders, Projects and Public Procurement
Tenders Info, Tenders in Saudi Arabia
DgMarket, Tenders Worldwide
- Other Useful Resources
Saudi Chamber of Commerce and Industry
Riyadh Chamber of Commerce and Industry
Jeddah Chamber of Commerce and Industry
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