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The Ultimate Guide to Company Formation in Saudi Arabia
  • Article, Saudi Arabia

The Ultimate Guide to Company Formation in Saudi Arabia

Why set up a Company in Saudi Arabia

Best known for its huge oil industry, Saudi Arabia is the largest free-market economy in the Middle East and North Africa (MENA) with an approximate 28% share of total Arab GDP. The geographic location provides easy access to many export markets including Europe, Asia and Africa. Domestic consumption driven by a young and wealthy community is increasing steadily and continuously expanding local demand and accelerating the rate of company formation in Saudi Arabia.

KSA with the highest level of safe and secure business climate and political stability offers low energy cost and 100% foreign ownership in retail and wholesale sectors as a large privatization programme.

World Bank Regional Director of the Gulf Cooperation Council (GCC) and MENA, Issam Abousleiman said, “Saudi Arabia’s impressive reforms in doing business this year show its commitment to fulfilling the main pillar of its National Vision 2030: a thriving economy.” He also highlighted, ” Easing the business climate for local entrepreneurs to thrive as well as foreign investors to work in the Kingdom shows a forward path to creating more jobs for Saudi youth and women, and creating sustainable, inclusive growth.”

Major reforms attracting more foreign investments and doing business in Saudi Arabia are

  • A one-stop system simplifying and easing business startups
  • Protection of minority investors
  • Simple and easier Enforcement of contracts
  • Easier availability of credits through new insolvency law and secured transactions law
  • Online platform for construction permits
  • Cross border trading and investments
  • Easy resolution of insolvency and financial restructuring
  • Streamlining availability of power

Which sectors are promising for new business set up in Saudi Arabia

High standards of living and a young society are boosting the domestic demand and various business sectors are offering immense success and growth possibilities in the KSA now. Following are some lucrative sectors for doing business in Saudi Arabia.

  • Tourism and Hospitality
  • Steel Manufacturing
  • Engineering and Technology
  • Real Estate
  • Lubricants, Glass and Plastics
  • Education
  • Healthcare and Pharmaceutical
  • Financial services
  • Media and Entertainment

How many types of companies in Saudi Arabia

Saudi Arabia, one of the largest emerging economies in the MENA and the MEASA regions offer many different corporate vehicles to its prospective business owners and investors. An understanding of the right corporate entity is important before an investment decision is made.

Company formation in Saudi Arabia and operations of the corporate entities come under the New Companies Regulations (NCR) act came into existence on 2nd May 2016.

The five forms of companies available for both local and foreign businesses in Saudi Arabia are

  • Limited Liability Company (LLC) It is the most commonly formed company in Saudi Arabia. It allows minimum liability for owner’s against company debt. An LLC company is not permitted more than 50 shareholders.
  • Joint Stock Company (JSC) It consists of capital that is divided into shares of equal value.
  • Single Member Limited Liability Company (SMLLC) It is a limited liability company and can have a sole owner who owns all the shares of the company. There are many benefits of owning an SMLLC and one can’t own more than one such company.
  • Limited Partnership Company (LLP) It is a partnership company in which some or all partners have limited liability with elements of partnerships and corporations.

Besides, special business forms are available to foreign companies for doing business in Saudi Arabia.

  • Joint Ventures
  • Branch Office
  • Representative Office

How to form a Company in Saudi Arabia

With Policy Reforms underway, Saudi Arabia is relentlessly pursuing its privatization initiatives and striving to make the company set up process easier and more convenient. One can expect to complete company registration in Saudi Arabia and carry out business activities within a period of six to nine months.

1. Pre-incorporation Process- Planning and Strategy

During this process, due diligence is done on the optimum business type, paid-up capital and license requirement. Following are list items to be considered during this phase

  • The name of Business/ Company
  • The Type of Business Entity; LLC, JSC, Branch Offices or other types
  • Organizing Documents such as Business License, Certificate of Incorporation, Board Resolution, Power of Attorneys etc.

2. Incorporation Process

Once everything has been planned and reviewed, the company registration in Saudi Arabia can be started with simultaneously working on different steps to optimize the time duration. The steps involved are

1. Application for Investment License
All non-GCC foreign investors need to apply to the Saudi Arabian General Investment Authority (SAGIA). Nature and size of the investment activity with key financial information on the company’s operation should be clearly stated and the SAGIA application form to be filled in. The SAGIA will then issue a pre-approved certificate confirming the company’s registration with 100% foreign ownership, as appropriate.

2. Articles of Association
This will need to be submitted to the Ministry of Commerce and Investment and once approved, the document needs to be notarized to register for Commercial Registration certification and Tax Number, and subsequent publication of Articles of Association with a company name in the newspaper.

3. Registration of Company Name
The name for company registration in Saudi Arabia must be reserved with the Unified Centre and get approved before submitting incorporation forms, articles of association and the deed of establishment.

4. SAGIA Foreign Business Investment License
On successful submission of all documents such as the CR, Tax Registration, Municipality License and Bank’s Share Capital deposit letter and approval, SAGIA issues foreign business investment license and allows the company to sign contracts, issue invoices and hire employees.

5. MERAS Registration
It is a government program mainly for foreign company registration in Saudi Arabia and managed by Saudi Business Centre for facilitating procedures and providing services for business operations to speed up the business setup process. Companies can register with a municipality under MERAS and a physical office will be required for registration. The complete registration has to be submitted to the Saudi Arabia Ministry of Commerce and Industry (MOCI)
The Certificate of Registration (CR) is normally issued in 6 weeks and the company does tax registration. Under MERAS, companies can notarize the Articles of Association online, register with the Ministry of Labor and Social Development (MLSD) the General Organization for Social Insurance (GOSI) and the General Authority of Zakat & Tax (GAZT) including registration with Wasel.

6. Creating Company Seal
Company seal needed for contractual agreements, shareholders and management resolutions, Government documents, Official letters and notices must bear the CR number and Company name.

7. Registration at Chamber of Commerce
Within 30 days of registration of CR, all business entities seeking company registration in Saudi Arabia need to submit the certificate of membership obtained from the Chamber of Commerce and Industries (CCI).

8. Bank Account Opening
A local bank account required to be opened within 90 days of issuance of Commercial Certificate.

3. Post-incorporation Process and Staying Compliant

Once the company is incorporated, the following activities need to be initiated for completion of the entire process of company formation in Saudi Arabia.

  • Saudi Employment Visas
  • Conversion of Bank Account to a corporate bank account

How free zones helped diversify Saudi Arabian Economy

Saudi Arabia has implemented two types of free zones to attract foreign investments in economic and industrial activities. While industrial free zones are dedicated mostly for manufacturing industries, the economic free zones were launched for basic economic activities such as Agriculture, Healthcare, Education, Logistics, Science and Research etc.

The industrial cities were built during the 1980s and subsequently transformed into great economic hubs. Economic cities were established at the start of this century and are still being developed. Both the industrial and economic free zones allow 100% foreign ownership besides offering tax exemptions and low tax rates.

Free zones development plan mainly emphasized the need to diversify the country’s economy and reduce its reliance on oil and gas through the utilization of non-oil resources.

Presently, Saudi Arabia, has 28 industrial cities administered and maintained by Saudi Industrial Property Authority and offering custom duty exemption on raw material and equipment, easy availability of loans up to 75% of the capital, extended repayment period of loans up to 20 years and low land lease. Two most famous industrial cities are Yanbu and Jubail and major petrochemicals, fertilizers, steel, iron and chemical manufacturing facilities are located here.

Tax incentives are yet to be implemented in the economic cities which would include custom duty exemptions on raw materials and machinery, lower tax on training and salary cost and overall tax exemptions on some specific business units. Famous economic cities are Jazan economic city, Knowledge economic city and Prince Abdulaziz Bin Mousaed Economic city.

What legal requirements to be considered before Company Formation in Saudi Arabia

Tax Structure in Saudi Arabia
No personal income tax is levied on employees earnings however, companies are taxed based on the company type and business set up.

All registered companies come under the jurisdiction of corporate tax including companies and branches owned by foreign investors. The applicable tax rate is 20% for non-listed companies.

Tax is imposed based on net profits. Incomes earned through interest are also taxed for non- Saudi and non-GCC nationals. The Saudi and GCC nationals, however, need to pay a 2.5% religious tax called Zakat tax.

Withholding taxes are levied on entities who make payments to foreigners e.g rent and management fees. Withholding tax rates are imposed at different tax rates and 20% for management fees, 15% for royalties, and 5% for rent, airline tickets & freight and international telecommunications services.

Activities Prohibited for Foreign Investors
100% Foreign investment is allowed in the service sector. Trading and retail business are mostly prohibited from foreign investors. Following is a list of prohibited activities that include but not limited to

  • Defence and military equipment manufacturing including uniforms and related devices
  • Security Services and Investigation Agencies
  • Brokerage companies in Real Estate
  • Drilling and Exploration of Oil and Gas
  • Fishery Business
  • Real Estate Investment in Medinah and Makkah
  • Printing and Publication Business

Minimum Paid Up Capital
Though there is no statutory minimum capital requirement, normally SAGIA requires foreign LLCs to have SAR 500,000 capital minimum. Based on activities, the minimum paid-up capital requirements are

  • 100% Foreign Commercial: SAR 30 million with a commitment for at least SAR 200 million investment in the first five years
  • Commercial with 25% Saudi Partner: SAR 7 million and a minimum SAR 20 million contribution from the foreign investor
  • Service & Property Investment, Real Estate SAR 30 million
  • Trading SAR 20 million
  • Service Transport: SAR 500, 000
  • Agriculture: SAR 25 million
  • Contracting: SAR 500,000
Accounting and Tax

There is no personal income tax on income earned by individual and employees. However, there are three type of taxes levied on the Companies based on the shareholding structures.

Where a company is owned by both Saudi and non-Saudi interests, the portion of taxable income attributable to the non-Saudi interest is subject to Corporate tax, and the Saudi share goes into the basis on which Zakat is assessed.

  • Corporate Tax: on all registered entities including companies or branch having foreign ownership.
  • Withholding tax: on entities making payment to non-residents, such as for rent, loyalties and management fees
  • Zakat (Islamic wealth tax): Zakat, a religious levy, is charged on the company’s Zakatbase at 2.5%. Saudi citizen investors (and citizens of the GCC countries, who are considered to be Saudi citizens for Saudi tax purposes) are liable for Zakat
  • Drilling and Exploration of Oil and Gas
  • Fishery Business
  • Real Estate Investment in Medinah and Makkah
  • Printing and Publication Business
Corporate tax rate for unlisted Company is 35%

Basis for Corporate Taxation:

  • Tax is on the net adjusted profits
  • The share of profits attributable to interests owned by non-Saudi / non-GCC nationals is subject to income tax
  • The share of profits attributable to interests owned by Saudi / GCC nationals is subject to Zakat (religious levy)

Withholding tax rates

  • Rent 5%
  • Royalty or proceeds 15%
  • Management fees 20%
  • Payments for airline tickets, air or maritime freight 5%
  • Payments for international telecommunications services 5%
Type Limited Liability Company (WLL)
Under Saudi Law, Foreigners Can own 100% (in certain activities) subject of FSI approval and manufacturing / trading requires local national participation
Share Capital SR 500,000
Director Minimum One
Shareholders Minimum Two
Memorandum & Article of Association Yes
Can the Entity hire Expatriate in Saudi Yes
Type Limited Liability Company (WLL)
Saudi Resident Secretary Required Yes
Statutory Audit Required Yes
How Long to open corporate Bank Account? 4 Days
Timeframe for Incorporation 6 Months
Annual Return Must be Filed
Annual Tax Must be Filed
Access to Saudi Double Tax Treaties Yes

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ZATCA Allows Customs Duty Refunds as Saudi Arabia Clarifies GCC Origin of Goods
  • Newsletter, Saudi Arabia

ZATCA Allows Customs Duty Refunds as Saudi Arabia Clarifies GCC Origin of Goods

  • Saudi Arabia Clarifies GCC Origin of Goods
  • Allows Customs Duty Refunds for Goods Imported from GCC Nations
  • Launches eService Platform

Saudi Arabia issued Ministerial Decision No. 3852 dated 2nd July 2021 on local rules of origin stipulating national rules of origin for the eligibility of preferential duty treatment of imported goods when imported from the Gulf Cooperation Council (GCC) into Saudi Arabia based on the GCC Unified Economic Agreement.

Goods produced in any of the GCC countries are considered as national products and should receive duty exemptions on import, the Saudi Cabinet decided.

Following the Cabinet Decision, new guidance has been issued by the Zakat, Tax and Customs Authority (ZATCA) specifying conditions that must be fulfilled before submitting any request for customs duty refund enabling verification of the Rules of Origin (RoO) for goods imported from GCC countries.

The requirements and conditions for the request of customs duty refund on goods of GCC origin are as under:

  • The importer needs to make a provision for a bank or cash guarantee amounting to customs duties and other taxes subject to the preferential treatment
  • The bank guarantee must be from a bank subject to the supervision and control of the Saudi Central Bank (SAMA)

Request for refund of customs duties must be filed by the importer within 90 days from the date of clearance of the goods of GCC origin on the condition that the request includes the following requirements:

  • Certificate of Origin (CoO)
  • Copy of the customs declaration eg. from Bayan, under Saudi Central Bank supervision
  • National certificate issued by the competent authority in the country of GCC origin
  • Valuation certificate for goods from the country of origin
  • Proof of payment for the value of the goods
  • Bill of lading
  • International Bank Account Number (IBAN)
  • Copy of invoices
  • Copy of Bank Guarantee

Besides the above-mentioned requirements, the value-added percentage following national laws of the country of origin must be certified by a Public Accountant from the country of origin, with a licensed and certified branch operating in Saudi Arabia.

Furthermore, all documents must be verified by ZATCA and other appropriate Saudi authorities by conducting visits to the GCC manufacturing facilities. The process of verification may also be delegated to a competent third party.

In the event of any objections on customs duty refund, the same needs to be done per Common Custom Law of the GCC nations.

Before applying for a customs duty refund, the importers must ensure that they comply with all the rules of the soil including ZATCA rules and regulations. Penalties may be levied if goods declared to originate from the GCC do not meet the requirements specified.

ZATCA has launched an eService platform for Customs Duty Refund on their website permitting an importer in Saudi Arabia to file a request for Customs duties or insurance fee refund. To make a valid claim for the refund, all importers need to provide a completed customs declaration along with all relevant documents for becoming beneficiaries of this service.

The Process of filing an online claim for a refund involves the following steps.

  • Logging on to the ZATCA website
  • Filling in the refund request information
  • Approving the acknowledgement, undertaking and application submission
  • Receiving notification by text message
  • Approval or Rejection of application

The customs declaration must be on or after the 3rd of July, 2021 and goods of GCC origin must be contained in the declaration. The refund shall be made in Saudi Riyal, SAR.

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USD 3 Trillion of Investment Target into The Kingdom Over Nine Years: Saudi Investment Minister Says
  • Newsletter, Saudi Arabia

USD 3 Trillion of Investment Target into The Kingdom Over Nine Years: Saudi Investment Minister Says

Saudi Arabia is planning to attract $3 trillion of investment into the country’s economy over the next nine years as part of the National Investment Strategy (NIS) to drive economic growth and sustainable development. The Public Investment Fund including other global and local firms will play the most valuable role. The investment minister recently remarked.

In his address during Riyadh Future Minerals Forum on 13th January 2022, Investment Minister Khalid Al Falih said, “The kingdom is striving to be ‘the most investor-friendly destination and increase the participation of the private sector to ‘our large and growing economy, to 65 per cent.”

To promote investment contribution to the GDP, the Kingdom is planning for a global best in class investment law to attract more domestic and foreign investors for doing business in Saudi Arabia. The new law shall address the needs of both local and foreign investors. “It will be a global best-in-class law, it will be enacted this year, sooner than later,” the Minister highlighted.

Commenting on the crucial role the international investors play to support the country’s economic growth by establishing their business setup in Saudi Arabia, Mr Al Falih emphasized, “not only bring in the capital but bring in that know-how and best practices which benefit Saudi partners and the economy.”

To complement Saudi Vision 2030, the Kingdom of Saudi Arabia, the largest economy in the Arab world is steadily diversifying from an oil-based to the non-oil economy and is developing projects across key priority sectors including real estate, petrochemicals, manufacturing, transport and hospitality to drive investment and enhance demand and employment generation.

His Royal Highness Crown Prince Mohammed bin Salman noted last year that the Public Investment Fund is making huge investments infusing billions of dollars into the country’s economy to drive growth. USD 40 billion fund injection has been planned yearly during 2021 and 2022, HRH Crown Prince highlighted.

The Investment Minister added, “The kingdom will be – in terms of its regulatory system and judicial system – one of the best places to do business. We are already good by the way international investors and domestic investors have been finding investing in the kingdom to be stable, predictable and secure, but we are not happy with being very good and we want to be the best. And we believe that our regulations and reforms are taking us in that direction.”

The Kingdom witnessed higher FDI flow into its economy in recent times as also revealed by the issuance of new foreign investor license data registering the highest number of 478 new licenses during the first quarter of the previous year since 2005.

The NIS includes many initiatives including the expansion of the country’s railway network and plans to increase it with 8000 Kms of the new track thus tripling the sizing of the existing network. The investment minister informed.

“New rail will criss-cross the Kingdom and add to the network we already have,” Khalid Al-Falih told the Future Minerals Forum in Riyadh.

There is approximately 3,650 km of track on the Saudi rail network presently and it also plans to build more internal railway networks to jump-start its investment in the infrastructure sector, highlighted the Minister.

To realize Saudi Vision 2030 several socio-economic structural reforms have been rolled out in the Kingdom and approval of new privatisation and agriculture laws including a new mining law in January 2021 feature amongst them.

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Riyadh Strategy 2030 to be Set in Motion In 2022: Saudi Press Agency Reports
  • Newsletter, Saudi Arabia

Riyadh Strategy 2030 to be Set in Motion In 2022: Saudi Press Agency Reports

As reported by the Saudi Press Agency (SPA), the board of directors of the Royal Commission for Riyadh City (RCRC) convened a board meeting on 27th December 2021 to review Riyadh Strategy 2030 in light of the preparedness for its launch and decided to delay the launch of the 2030 strategy for the Kingdom’s capital due to the mammoth work involved and some of the key elements remained to be addressed.

His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince, Deputy Prime Minister, and Chairman of the Board of Directors of the RCRC chaired the meeting.

The strategy for the Kingdom’s capital is to be put in motion during 2022 and further announcements would be made accordingly, the report cited. The Riyadh strategy 2030 to transform Saudi’s capital into one of the world’s top city economies was seen entering the final phase of implementation as the Saudi Crown Prince directed government officials to keep working on the executive plans of the strategy and directed all national and city-level government institutions to conclude the implementation of plans of the strategy before its launch, reported SPA.

As per the report, all government entities would be working closely with the RCRC and would present detailed plans and documentation of the initiatives and projects relevant to their respective sectors. Before setting the strategy in motion, detailed budgets would be proposed and responsibilities defined for ensuring a robust, integrated and full proof governance framework for implementing the strategy. The Crown Prince deliberated unveiling of a more detailed strategy soon.

Businesses willing to expand their operations through company formation in Saudi Arabia need to be in close touch with the RCRC, the entity responsible for implementing the Riyadh strategy, to explore and unlock potential partnership deals.

Prince Mohammed noted during the recently held Future Investment Initiative (FII) conference from 27-28 January emphasizing that the Riyadh Strategy will transform the capital into one of the world’s top ten city economies that would double its population to 15–20 million people. The strategy will also increase the number of visitors to more than 40 million by 2030, he also highlighted.

Built on six main pillars, Riyadh Strategy 2030 includes national human capital development and attracting best foreign talents, economic growth across various sectors, improvement of quality of life of its citizens, word-class measures for improving spatial impacts on urbanisation, effective governance and best utilization of resources of the city, and global branding for improving the city’s competitiveness, the SPA report revealed.

26 sectoral programmes will take the strategy implementation to fruition and include over 100 initiatives and 700 pioneer projects across various sectors. The initiatives and projects will cover different parts of the city and help transform Riyadh into one of the best cities globally to live in.

During the implementation phase, RCRC will monitor and measure more than 50 performance benchmark indicators, based on global leading cities, the SPA report highlighted.

As Riyadh Vision solidifies, foreign companies considering doing business in Saudi Arabia need to get proactively associated with the RCRC that can help address any future regulatory issues.

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Saudi Arabia’s Booming E-Commerce Space Estimated to Touch Sar 50 billion by 2025- Survey Reveals
  • Newsletter, Saudi Arabia

Saudi Arabia’s Booming E-Commerce Space Estimated to Touch Sar 50 billion by 2025- Survey Reveals

We have come a long way since Michael Aldrich invented electronic shopping in 1979 and with time, watched in disbelief how e-commerce transformed traditional retail business worldwide. The recent Covid pandemic and ease of access to innovative smart technology have further accelerated this transformation process as customers opted for increased safety and convenience.

E-commerce is sweeping across the world and Saudi Arabia is no exception. As the Kingdom advances towards realizing Saudi Vision 2030, new technologies and reforms are being implemented facilitating e-commerce adoption through enhanced mobile and internet usage. During covid 19, the country’s e-commerce market experienced a huge surge, about 60% as more and more customers preferred to go online for shopping with easier access to digital technology.

Market surveys conducted by global firms revealed a rapidly growing e-commerce sector in the Kingdom and as reported by Boston Consulting Group, the size of the country’s e-commerce space would exceed SAR 50 billion by 2025.  E-commerce revenue would grow at a CAGR close to 19% between 2022 to 2025, forecasted Statista. The Kingdom witnessed a steady growth of online sales for the past couple of years and mostly in apparel, electronics, and appliances categories.

Mastercard Newsroom also echoed similar thoughts earlier and reported a higher percentage of online shoppers in the kingdom compared to the Middle East and Africa region.

Saudi Arabia made great progress in e-commerce infrastructure development and as reflected in its 49th position amongst 152 countries surveyed worldwide in the B2C e-commerce index on readiness to engage in online commerce published by the United Nations Conference on Trade and Development (UNCTAD).

Saudi Arabia is a country of youths as about 65% of the population falls in the 14 to 29 age bracket and exhibits a high level of familiarity and skill in online and digital environments and making the country one of the most social media savvy nations in the world. As per the survey conducted by Mastercard, Saudi youths also spend a significant amount of their time upskilling themselves in digital technology. The country also has a huge base of broadband internet subscribers with a high speed of internet. The country has the highest internet penetration in the region and is expected to reach around 93% by 2023.  All together, makes the perfect ground for high online activities including banking and e-commerce.

Saudi E-Commerce Council is working on the country’s ‘e-commerce journey’ and besides developing infrastructure, also bringing in new legislation on imports of consumer products, enabling safe and secure payment systems for cashless transactions, providing supply and logistics services. The council also offers a package of services to prospective medium and small business establishments for setting up a company in Saudi Arabia.

The booming e-commerce sector in Saudi Arabia is all set to benefit its economy by developing other allied business sectors and generating employment. The supply chain and logistics sector should thrive and attract foreign investors for doing business in Saudi Arabia.

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USD 30 Billion Deal Between Saudi Arabia and Oman Mark a New Era of Economic Cooperation Within the GCC
  • Newsletter, Oman, Saudi Arabia

USD 30 Billion Deal Between Saudi Arabia and Oman Mark a New Era of Economic Cooperation Within the GCC

In a bid to boost bilateral economic cooperation and further diversify the non-oil economy, Saudi Arabia and Oman signed deals worth 30 billion USD on 7th December 2021. The MOU signed between the two countries signals a new era of economic and investment cooperation within the GCC.

As per Saudi Press Agency (SPA), the agreements were reached during the tour of Saudi Crown Prince Mohammed bin Salman covering the Gulf states including the United Arab Emirates (UAE), Bahrain, Kuwait and Qatar. The ‘around the GCC’ tour would bode well for future foreign investment and new company formation in Saudi Arabia.

A visit to Doha, for the first time in four years, was also included just ahead of the Gulf Cooperation Council (GCC) summit scheduled to be held on December 14 in Riyadh in light of the solidarity deal signed earlier on January 5, 2021 between Saudi Arabia and Qatar to bring back Doha within the GCC.

Saudi and Omani companies “signed 13 memoranda of understanding worth $30 billion”, SPA reported. The agreements between the two neighbouring countries included diverse business sectors ranging from energy and tourism to finance and technology.

Renewable Energy, Petrochemicals and Green Hydrogen were some areas where deals were struck with Aramco, Sabic and ACWA Power. Dry dock and Logistic Services also witnessed the signing of deals.

The two countries also agreed to identify and evaluate future exploration opportunities in the mining sector. An MOU was signed for developing a tourism project in Oman’s Yiti area on the outskirts of Muscat which has a spectacular coastline and could potentially attract many foreign investors for doing business in Oman.

Other deals made were in the communications, IT, fisheries and financial securities sectors. An agreement was reached between Muscat Stock Exchange (MSX) and Tadawul Stock Exchange.

“They manifest the two countries’ leaders’ vision aimed to meet the aspirations of their peoples,” highlighted Oman News Agency (ONA).

Saudi Arabia and Oman also agreed for joint investment in key sectors earlier and several agreements were reached in August 2021 at the Omani Saudi investment forum convened in Muscat.

Saudi Vision 2030 and Oman Vision 2040 are almost in line and share identical views on economic development and the private sector enterprises of both countries are hopeful and looking towards future economic integration.

The GCC nations have already started making huge investments in sports, entertainment and tourism sectors to reduce their economic dependence on oil.

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How are UAE and Saudi Arabia all Set to Propel the GCC Retail Market Growth
  • Newsletter, Saudi Arabia, U.A.E

How are UAE and Saudi Arabia all Set to Propel the GCC Retail Market Growth?

Though the covid pandemic has slowed down all global economies, the GCC’s retail market is projected to grow by almost 22 per cent to approximately USD 308 billion in 2023 with the UAE and Saudi Arabia leading from the front and accounting for the major share of retail sales over the coming five years.

The GCC’s physical retail infrastructure has become highly developed and so has the consumer’s familiarity with online shopping portals. The two biggest economies in the Arab world, the UAE and Saudi Arabia, would contribute more than 75 percent of sales over the next five years, a forecast revealed.

An increase in per capita GDP along with population growth will be primarily responsible for the high growth rate. Tech-savvy young generations and higher consumer awareness are also facilitating a boost in the retail sector market and help these two countries to diversify their economies in the non-oil sector. As the tourism sector opens up, the retail sector will see further growth in revenues.

As the economy of UAE grows at a faster pace compared to its other GCC peers due to sound government policies such as easing of visa restrictions and renewed infrastructural spendings and economic stimulus packages, UAE is expected to lead the retail sector growth in the GCC. The yearly growth in retail sales is projected between 2.2 per cent to 5.1 per cent in the GCC in the next four to five years.

E-commerce in the UAE is also witnessing staggering growth and becoming the fastest-growing economic sector in the entire Middle East region on the back of improved digital connectivity, better infrastructure and substantial growth in demand in apparel, white goods and consumer electronics sectors. The recent Amazon annual White Friday Sales in UAE with a huge discount of 70 per cent bears testimony to how popular the e-commerce market is becoming in this country.

The Riyadh Chamber of Commerce also reported recently that the e-commerce sector in the Kingdom is growing at a faster pace and the transaction volume in the sector hit SR21.375 billion last year.

The statistics available with the Saudi Ministry of Commerce revealed that in comparison with 2019, there has been an increase in the number of licensed online stores in 2020 by almost 14 per cent. The online stores also registered an all-time high commercial record of 28,676. Electronic platforms have also registered considerable growth in recent times. While e-commerce in the UAE is 4.2 per cent of total retail, in KSA it is around 3.8 per cent.

The social restrictions imposed by the governments to mitigate the coronavirus pandemic has resulted in an increase in online spending in the GCC. The e-commerce space in the region is witnessing an annual growth rate of 25% and will touch USD 28.5 billion in 2022, a high-level official of Amazon commented.

Big e-commerce companies such as Amazon and JD.com have already decided to expand their operations in the KSA. Many GCC startups are also showing interest in company formation in Saudi Arabia for providing localized solutions and gaining access to the relatively nascent but fast-expanding market in the country.

To address its expansion strategy of doing business in Saudi Arabia, Amazon recently embarked on opening five new delivery stations in Saudi Arabia including cities of Jeddah, Mecca, Abha, and Dammam with a 36,000 sqm floor area in total.

There is an immense potential for employment generation in the e-commerce sector and the logistics and delivery service areas greatly promoting the economic environment in the GCC. As technology helps humans reach millions of products online sitting at the comfort of their homes, online retail both globally and in the GCC are all expected to grow leaps and bounds soon.

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Saudi Arabia Eyes for Increased Investments from European Companies
  • Newsletter, Saudi Arabia

Saudi Arabia Eyes for Increased Investments from European Companies

Despite the cultural, political and economic dissimilarities, the largest Arab economy and biggest oil exporter Saudi Arabia has long enjoyed a close relationship with certain European countries including the UK, France and Germany. Even for Europe, the Gulf region has always remained crucial both for economic and political reasons. Saudi Arabia, among the seven Gulf countries, occupies a special place in the Gulf–EU relationship.

Saudi Arabia announced its Saudi Arabian Vision 2030 in April 2016 outlining a comprehensive economic reform plan for diversifying the country’s oil-based economy. Private sector participation (PSP) was initiated as a cornerstone of Vision 2030 with a strong focus on strengthening the private sectors, attracting foreign investments and facilitating foreign company registration in Saudi Arabia.

The global economic downturn caused by the pandemic and lower oil prices, however, have necessitated an immediate need to rapidly embark upon social and economic policy reforms to restructure the economy and spearhead a campaign to convince and woo foreign multinationals from Europe and other parts of the world to materialize the targeted plan of vision 2030 and take the private sector contribution to the country’s GDP from 40% to 65%.

Though there has been some important privatisation over the last few years including Saudi Telecom and Saudi Electricity companies, the real privatisation drive started post covid and as of now, 16 government-run organisations are undergoing privatisation process including agriculture, water, tourism, health, housing, labour, education, energy, information technology, social development, energy, environment, communication, municipalities, social development and transportation.

Saudi Arabia has long implemented Public-Private Partnerships (PPPs) and privatisation projects, however, there was no formal laws to govern PPPs. The long-awaited Private Sector Participation Law (PSP Law) was passed by the government on 17th March 2021 providing financial and regulatory support for privatisation schemes, including financial guarantees, tariff subsidies, land ownership rights, tax benefits, custom duty preferences, foreign exchange and interest rate protections and easily obtainable permits and approvals.

The country offers several business and financial incentives to lure foreign investors for doing business in Saudi Arabia which include Saudi Industrial Development Fund (SIDF) loan up to USD 320 million for green and brownfield manufacturing projects, Kafalah loan guarantee scheme to SMEs, Interest-free loan up to 0.8 million USD for small enterprise development, Loans and grants by Human Resources Development Fund (HDRF), 100% Foreign ownership of company, land and properties, Full repatriation of capital and profits, Indefinite carry forward of loss, No Value-added Tax and sales tax, Nil personal income tax, No property tax, import duty exemption on raw materials and spares, tax incentives on investments made in underdeveloped provinces for 10 years etc.

The work sponsorship regulation has also been relaxed and engaging and retaining foreign employees have become much easier now.

Seeking to attract foreign investment above USD 100 billion annually, a National Investment Strategy (NIS) was recently announced by Crown Prince Mohammed bin Salman on 11th October to further diversify the economy.

NIS rolled out comprehensive investment plans for several key sectors such as manufacturing, transport and logistics, tourism, digital infrastructure, health care and renewable energy and is expected to raise foreign direct investment of USD 103 billion annually. The strategy would also increase annual domestic investment to 1.7 trillion riyals by 2030, the Saudi Press Agency (SPA) reported.

The agency also quoted Prince Mohammed as saying, “Today, the kingdom embarks on a new investment era to empower Saudi and international private-sector investors with more and better opportunities.”

Prince Mohammed added “the NIS will draw up comprehensive investment plans for sectors, including manufacturing, renewable energy, transport and logistics, tourism, digital infrastructure, and health care,” SPA reported.

The fundamental strategy among the various measures lies in the formation of special economic zones with the competitive regulatory framework and attractive incentives; rebuilding strategic supply chains and providing innovative financing solutions to accelerate capital creation.

Saudi Arabia has planned for more than SAR 12 trillion capital injection into the country’s economy by 2030 through investment. While the Shareek programme initiatives are set to inject SAR 5 trillion;  the Public Investment Fund, will contribute SAR3 trillion and an additional SAR 4 trillion will be mopped up through investments facilitated by the NIS, of which some SAR2 trillion is expected to be foreign investment.

Economic recovery is in sight with improved oil prices and remission of covid 19 infections and with aggressive policy reforms, there can be good business and investment prospects for European companies in Saudi Arabia. The GDP growth is expected to be 2.4% in 2021 and touch 3% in the medium term, as per the Gulf Economic Update of the World Bank.

The Kingdom focuses on increasing annual trade with Europe which is currently pegged at approximately 61 billion euros. It also aims to increase the number of Saudi students in European schools and universities for further enhancing the Saudi potential and capabilities, accelerating reforms & transformations and forging stronger & long-lasting ties with Europe.

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Saudi Arabia Gears Up To Lead the Post-Covid Construction Sector Recovery in the GCC
  • Newsletter, Saudi Arabia

Saudi Arabia Gears Up To Lead the Post-Covid Construction Sector Recovery in the GCC

The COVID pandemic has had a devastating impact on businesses, and economies all over the world and Saudi Arabia is no exception. In the construction sector, it has led to project cost escalation, supply chain disruption, and labour shortage. All the gulf nations witnessed a decline in their GDP growth.

However, as the gulf countries put their best foot forward towards sustainable long term development by diversifying economies into the non-oil sectors and bringing in social reforms, the construction sector in the gulf will begin to recover steadily and in all expectations, the post-covid construction sector growth will be led by the KSA with several foreign company formation in Saudi Arabia in real estate and construction space.

Amongst the GCC nations, Saudi Arabia currently holds the greatest potential for the construction sector with more than 5,000 capital projects worth well over USD 1.6 trillion in the pre-execution stage.

The construction sector is expected to expand by 2.9% in 2021 and as per forecast, would grow at an annual average growth rate of 4% during 2022-2025 on the back of the government’s housing development projects and infrastructure spending.

The country has a grand plan to rejuvenate the rail, airport, port and other logistics infrastructure including healthcare and tourism facilities.

On 29th October 2021, Saudi Arabia announced the capital city of Riyadh’s intention to bid for hosting the World Expo 2030 to the Bureau International des Expositions (BIE), World Expo organising body. A new airport for Riyadh for a cost of USD 147 billion has already been planned by the government.

Eight new cities have been planned along the Red Sea coast on the western side of the country and USD 575 billion has been budgeted for this project to build 100,000 hotel rooms, 1.3 million new homes and three million square meters of world-class office space.

A promising development plan has been laid out for Riyadh to solidify its status as the commercial centre of the Kingdom and USD 63 billion has been earmarked for creating more than 100,000 new homes expected to be completed by the end of 2023. There is also a plan to add 12,000 hotel rooms and around three million square meters of new office spaces.

Large-scale construction schemes called ‘giga-projects’ have been planned for promoting the country’s overall economy as part of Vision 2030. The most notable giga projects include NEOM Smart City, Six Flags Qiddiya Theme Park, Red Sea Resort Project and Amaala Red Sea Riviera.

Saudi Arabia’s Property Technology, PropTech market is expected to boost up with the roll-out of ‘giga projects’ like NEOM. Almost USD 2 million initial funding has been set aside for home maintenance services startups including FalconViz, Ajeer, Muqawiloon, B8ak.

The traditional ecosystem in the reality sector is all set to get disrupted and improved in property transactions, tendering and procurement due to smart technology adoption. The country plans to extensively use AI, robotics and 3D printing in the construction sector to improve productivity.

The Saudi government is actively working towards investing in green buildings and standardising the building rating system towards meeting sustainable development goals. A new standard called Mostadam Standard has been developed by the Ministry of Housing for rating buildings and launched in 2019 to validate the sustainability of constructions and avoid re-construction and CO2 emissions in future.

With giga-projects incorporating a mix of technology and sustainable development elements, the government is trying to build a better future for the younger generations and empower the country to build a new era driven by digital transformation and innovative technology. The real estate company called “Roshn” launched by Public Investment Fund specializes in integrated urban neighbourhood development incorporating the latest technologies in construction. The Sakani housing program also reaffirms the country’s commitment to development using smart tech.

Adopting Construction delivery Technology is instrumental in transforming the construction sector in the Kingdom. The government is already on a move towards the widespread introduction of prefabricated building techniques including those developed by the Ministry of Housing with 3D printing to reduce the construction time, standardise designs and operations, improve quality and productivity.

Exponential growth is on the cards in the transport and logistics sectors as the country recovers from the pandemic and restrictions ease. In July 2021, His Royal Highness Prince Mohammad bin Salman bin Abdulaziz Al-Saud proposed USD 147 billion capital infusion into the transport and logistics sectors over the next ten years. Once implemented, these sectors would contribute 10% of the country’s GDP by 2030, an increase over 4% from the current level.

An agreement has been signed between Maersk, a global integrator of container logistics and Saudi Ports Authority (Mawani) for an investment of USD 136 million over 25 years for an integrated logistics park set up at the Jeddah Islamic Port.

The huge infrastructure spending planned for reshaping the economy and future of the Kingdom will attract many foreign talents and institutions for doing business in Saudi Arabia.

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SMEs are the Main Pillar of Saudi Arabia’s Non-Oil Economy
  • Newsletter, Saudi Arabia

SMEs are the Main Pillar of Saudi Arabia’s Non-Oil Economy

SMEs in both developed and emerging economies play the most crucial role in promoting economic growth and development through effective utilization of resources and promoting entrepreneurial talents and job opportunities. Saudi Arabia is no exception and since the Saudi Vision 2030 was launched in 2016, the contribution of the small and medium-sized enterprises (SMEs) to Saudi Arabia’s gross domestic product (GDP) has grown by 45% against the original plan for increasing SME contribution to GDP from 20% to 35%.

A new Government agency was also established in 2016 as SME Authority (SMEA or Monshhat) for supporting, nurturing and developing small businesses and startups that have launched a set of initiatives for the ease of doing business in Saudi Arabia and include reimbursing government taxes paid during the first three years of operation, covering business risks of SMEs for financial institutions, providing money to the investing companies for low-cost SME funding and venture capital funding.

Over the last five years, the number of SMEs under the Vision rose from 447,000 to 614,000 in 2020. The SMEs’ share of bank loans also got closer to the target of 11% by 2025 effectively rising from 2% to 8% and acting as evidence of much new company formation in Saudi Arabia.

In a recent survey of the SME confidence index in the MENA region, Mastercard revealed Saudi Arabia to have the highest percentage (57%) of optimistic SMEs with a 50% SME population projecting business and revenue growth over the next twelve months after experiencing unprecedented economic upheaval caused by the covid pandemic. 83% of Saudi SMEs were found to be projecting that the revenue would either grow or hold steady shortly. Access to data, digitalization and skills have been cited as the key drivers for growth by the leading global payments and technology companies.

With the loosening of a tight set of restrictions imposed by circuit breakers to reverse the tide of the covid pandemic, economic normalcy has started being restored in many parts of world geographies including Saudi Arabia and helped raise hopes for a brighter economic future amongst the SMEs.

“Small and medium-sized businesses are vital to the Saudi economy as it diversifies and grows. Through the most difficult days of the pandemic, SMEs continued to press ahead, and it is encouraging to see the renewed optimism and confidence in this sector today.

While 62% of the respondents reported Private sector partnerships as the main reason for future business growth, 55% of SMEs cited government-led initiatives as the major growth driver.

In Saudi Arabia, 99% of Private sector companies fall under the ‘SME’ category employing less than 249 employees and earning less than SAR 200 million as revenue. Though the economic output of SMEs doesn’t match that of big corporations like Saudi Aramco, they employ the largest Saudi population and keep the economy running. Most of the SMEs in the KSA maintained steady growth over the years and promoted employment opportunities in the country. Institute of National Entrepreneurship Initiative (NEI) described SMEs as the backbone of Saudi’s economy.

King Salman bin Abdulaziz and Crown Prince Mohammad Bin Salman, with their visionary leadership, led the country’s economic growth and prosperity through Saudi Vision 2030 with continuous government support and initiatives to the SME sector through a variety of reform programmes. Economic diversification and reduced dependence on oil are at the core of the country’s 2030 vision with a primary focus on enhancing local SMEs’ capability.

Significant resources have been allocated by the Saudi government for enhancing the role of SMEs in the economy in recent years. In 2020 itself, an economic package worth 13 billion USD was announced for SMEs 2020 to mitigate the covid virus-induced financial crisis caused by reduced cash flows. The Kingdom has set a target of a 25% increase in GDP contribution for the private sectors.  

The government has also made a considerable investment to promote SME funding through Sovereign Wealth Fund PIF with several initiatives like Jada investment for providing funds to SMEs through investment in private equity and venture capital funds and contribute 2.29 billion USD to the country’s GDP by 2027.

The SME sector in Saudi Arabia is considered as the pulse of the Kingdom’s economy and enhancing overall economic prosperity through employment generation, local capabilities boost up, ensuring business competitiveness and economic diversification.

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