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Newsletter, Saudi Arabia

Start-ups and Opportunities for Investment in IT and Innovation Sector in Saudi Arabia

June 21, 2018

Have you heard Saudi Arabia has announced many important social as well as economic reforms under their National Transformation Programme and Saudi Vision 2030? The government of Saudi Arabia has been coming up with various laws and changes in its policies to enhance foreign investment and simplify business processes and activities in the Kingdom.

However, innovation in technology field is their main focus. As per some media reports, global giants like Google and Snap are some of the companies, which are interested in these opportunities in Saudi Arabia. The Kingdom is truly trying to utilize the advantages of technology and innovation in the fields of education, power distribution and many more. Saudi Arabia also boasts of very superior and developed technological centres, namely the King Abdulaziz City for Science and Technology (‘KACST’). It also has further plans for NEOM, which is a 500 billion US dollar mega city focused on technology.

Opportunities in Saudi Arabia

Innovation and technology-related fields are being touted as major areas for investment, and the good news is that there has been a lot of development in these fields recently. For example, the Badir Program, which is a national-level program, aims at further improving the development of emerging start-ups and other IT-based enterprises in the Kingdom. Because of this program, almost 250 new organizations are able to breakthrough in the areas of e-commerce, software, communications, etc.

There are two options for people who are planning to start some new enterprises in the technology or innovation field – sole proprietorships and Limited Liability Companies (‘LLCs’).

A Saudi national can also set up a sole proprietorship or an LLC, but he should not be holding a government job and should have an ID as a Saudi national. He or she needs to complete an online registration form on the Ministry of Commerce and Investment (‘MOCI’) website. Post this process, which takes one full day, the local investor can start doing the business under the umbrella of the new business vehicle.

Currently, due to foreign investment regulations, start-up opportunities are available only to Saudi citizens and organizations. A foreign investor needs to give financial statements along with a proven track-record of doing business earlier, so that he or she could be permitted to invest in the KSA market. But in the beginning of 2018, the government has allowed business opportunities for entrepreneurs in the area of intellectual property (IP) or some invention to invest as individuals and company formation in Saudi Arabia has become easier.

Overseas investments in Saudi Arabia

For any foreign investor, as per the laws, it is important to first get a Foreign Investment Licence from the Saudi Arabian General Investment Authority (‘SAGIA’) to set up an enterprise or corporate entity. As per the business one wants to start, some other approvals from specific authorities might be needed.

However, the business or start-up that a foreign investor wants to start should not be from the listed exclusive activities allowed to Saudi Arabian (or GCC) organizations or nationals. This restriction could happen because of the businesses listed in the “Negative List” (the activities which are specified by SAGIA as exclusive to Saudis) or being otherwise identified as being restricted to Saudis in internal SAGIA policies and guidelines.

If you are an overseas investor, particularly in the technology sector, the time for investment in Saudi Arabia has been improving. The Saudi Vision 2030 is helping new start-ups and businesses in Saudi Arabia more than ever.

Newsletter, Saudi Arabia

Saudi Arabia aligning their framework to achieve Vision 2030

February 16, 2018

The Vision 2030 is Saudi Arabia’s step towards steering the economy towards the post-oil era and the introduction of energy efficient producing technologies. The Vision’s purpose is to introduce innovative technologies and avant-gardism in all aspects of the life of the 21^st century. To achieve this end, Vision 2030 has a perfect combination of the Kingdom’s tradition, heritage, and strategy. The Vision 2030 also highlights the three strategies of progress:

Having a vivacious and flourishing society;
Maintaining an incessantly growing and viable economy in all sectors; and
Catering to the ambitions and aspirations of the Kingdom’s young generation.

This Vision aims to achieve balance in this context, and it also covers the legal services in Saudi Arabia. The goals of this Vision seeks to maximize the benefits of the Kingdom and ensure that the strategies are inter-dependable. The announcement of this Vision has stimulated the take-off of various national programs leading to the developments in official departments. These actions have created further ripples in the revaluation of the policies concerning the enforcement of Intellectual Property Rights (IPR) in the Kingdom.

The Kingdom of Saudi Arabia(KSA) in recent times has implemented some measures that will streamline the procedures and reduce the time consumption of customs clearance. In a broader sense, these implementations reflect the KSA government’s aspirations to transform the kingdom into a multinational logistical center and grow as regional and global transactional hub of commerce and trade. The new measures propose a contribution to the economic development of kingdom and appeals for a change in the Customs’ border control policy which can effectively curb the incursion of the products which breach the local, regional and international entities IPR.

Streamlined clearance protocols:

The newly implemented customs clearance protocols will streamline and shorten the customs clearance of goods. The procedures required to release the goods will be released according to a view of reducing the stipulated time of the usual 14 days to 24 hours. The documents needed for the customs approval will also be cut from the existing 12 to 5 documents. The documents required for the newly established protocols would be:

The invoice
The certificate of origin
The delivery order;
The bill of lading; and
A document is proving the method of payment.

The Saudi customs are planning to enforce these new rules gradually and progressively in all ports of entry(including airports) to the Kingdom. Also, Mr. Ahmed Al-Hagbani, the Director General of the Saudi Customs issued a circular stating that an individual clearance certificate of origin of the goods will no longer be required if the goods bear a secure non-removable mark which specifies their place of origin. If the goods do not carry such non-removable mark which indicates their place of origin, a separate certificate of origin will be required as per the existing rules. These new measures will have a major sway on the Saudi customs effort to prevent the entry of counterfeit products into the Kingdom. The new measures are being drafted to speed up the process of customs clearance; however, at the same time, the Saudi customs are also aware of the imperative need of streamlining IP enforcement at all ports of entry.

Prevention of Trade frauds and IP trespassing goods:

The Saudi customs are always on the job of monitoring and preventing trade fraud with a particular emphasis on the import of counterfeit goods into the Kingdom. The recent success of Saudi customs in this prevention of counterfeit goods area has been lauded in the report issued by the World Customs Organisation (WCO). This report details that in the year 2016 Saudi customs seized goods which trespassed the third party intellectual property rights more than any other customs authority of WTO member countries. A total of 146 million infringing items were seized during 2016, and a 49 million of these were counterfeit.

To further tighten the security measures for the fast-tracking of customs clearance, Saudi customs has entered into a Memorandum of Understanding(MOU) with companies for exchanging expertise and information in the area of anti-commercial fraud. The MOU will enable the companies to register its client’s trademarks with the Saudi customs which will help in monitoring the incoming shipments that are suspected to be counterfeit.

In accordance with this registration, the Saudi Customs are also working on a program that would enable the officials to alert the concerned parties of any shipment that bears the one or more trademark of the stakeholders. This alert would have the essential details of shipment that can be cross-checked with the stakeholders to verify the legitimacy of the goods and take legal action if the need arises. Such verification would necessitate responding to the customs alert by filing a complaint which would then lead to the stopping of the consignment, seizing the products in question and a thorough investigation of the concerned importer.

Saudi customs would then decide on the further course of action to be taken against the importer (levying of a fine, demolition of the products at the importer’s cost and additional escalation by referring the case to the public prosecution) as regards to their investigation.

This MOU with the Saudi Customs with the above-detailed features showcase welcomes signs of better and strict scrutinizing of border controls which are expected to support the accelerating custom clearance procedures. In the second phase, it is of the opinion that Saudi customs will implement related border control, registration and alert systems for patents, industrial designs, and copyright.

The summation:

The policy developments of the Saudi customs in the area of Intellectual Property Rights(IPR) are in perfect sync with Saudi Arabia’s Vision 2030. The Saudi customs are acutely aware of the importance of maintaining a balance of sufficient procedures to speed up the clearance process and at the same time ensure adequate protection of the Intellectual Property Rights(IPR) at all ports of entry into the Kingdom.

Newsletter, Saudi Arabia

Saudi Arabia and UAE top wealth contenders in the MENA region

February 6, 2018

The global wealth index indicates a 6.4 percent growth in the year 2017. The Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) have secured the first and second place respectively in the region of Middle East as per the report of Credit Suisse Research Institute’s 2017 Global Wealth.

The estimated total wealth of KSA or the net household worth amounted to $772 Billion whereas the UAE came close in second place with the estimated value of $603 Billion. The countries of Kuwait and Qatar show an estimated total net worth of $292 Billion and $218 Billion respectively. The net household worth of Bahrain is calculated to be $34 Billion, and Egypt’s wealth declined to $178 Billion as opposed to the peak of $511 Billion in 2010.

The data for the region of the Middle East and North Africa for the period of 12 months till the period of mid-2017 indicated that the total wealth of the MENA region grew by $ 2.22 Trillion or 156% from the year of 2000 which was over and above the global average of 140%.

The wealth per adult net of debt increased by 1.9% in the MENA region when compared to the global average of 6.4%. The region of Qatar recorded the highest wealth per adult at $102,517 in the mid-2017 and was flowed by Kuwait closely by $97,300. Nevertheless, Kuwait registered an increase in the percentage of wealth per adult at a 1.4% while Qatar had a drop of 0.2%.

The UAE comes in the third position with wealth per adult at $78,800, and its percentage grew by 1.2% since last year. Bahrain shows a steady increase of 2.7% from the mid last year by parking the wealth per adult at $30,800.The leading economy of the MENA region, the KSA registered a growth of 2.8% at $35,000 whereas Egypt saw a substantial drop of 50.2% nearing $3,200 due to the clash against the US Dollar. In the next five years, household net worth of the Mena region is expected to increase by a further 52% or nearly 8.8% annually.

The eighth edition of the Global Wealth Report showed that the Global Wealth has grown at a rate of 6.4% which is the fastest growth since the year 2012 and has reached $280 Trillion with a gain of $16.7 Trillion. This increase is the reflected result of vast profits across the equity markets which were well matched by the rises in the non-financial assets as they moved above the pre-crisis level of the year 2007. The growth of wealth outranked the growth of population which means, that the global wealth grew by 4.9% and created a new record high of $56,540 per adult.

After more than a decade since the start of the global financial crisis, there has been a significant increase in global wealth and the country of Switzerland, the wealth per adult increased by more than 40% and leads in the global rankings.

In this year’s edition of the Credit Suisse Research Institute’s annual Global Wealth Report, we explore the wealth prospects of the Millennial generation, which emerges from a more challenging period than its predecessors,” said Urs Rohner, Chairman of the Credit Suisse Research Institute and Chairman of the Board of Directors of Credit Suisse Group.

For more information reach us at [email protected]

Newsletter, Saudi Arabia

Saudi Arabia widens its business horizons by issuing licenses to overseas businesses

January 19, 2018

Saudi Arabia has expanded its horizons as a part of vision 2030 and is planning to branch out and steer the economy into other frontiers thereby stealing the spotlight away from oil.The Saudi government has thrown its door open for overseas business by introducing business licenses.

In recent times, the Saudi Government are of the view to facilitate the growth of the Small and Medium size enterprises(SME) sector and are doing so by allowing overseas entrepreneurs to create their foothold and obtain business licenses to start their operations in the kingdom.

This revolutionary announcement was announced in the Misk Global Forum annual meeting held in Riyadh by Monsha’at, Saudi Arabia’s SME authority, the Saudi Arabia General Investment Authority (SAGIA), King Abdullah Economic City (KAEC) and the Economic Cities Authority (ECA).To commemorate this announcement, the Minister of Commerce and Investment, Dr. Majid Al-Qassabi issued the first 11 licenses to entrepreneurs at the Misk Global Forum.

It was also said that the licenses would be issued to those who give a patented and innovative service or business to the Kingdom. The permits are issued by SAGIA or by the economic free zones, which provide substantial incentives which includes rent-free premises, transportation, and subsidized housing.

“The new licensing initiative is designed to help build up the private sector, particularly SMEs, and move away from an over-reliance on oil revenues,” said Dr. Ghassan Ahmed Al Sulaiman, Governor of Monsha’at, said while commenting on the government’s attempt to create a flourishing start-up environment in Saudi.

This massive feat was inspired by the Vision 2030 and will help Saudi Arabia in garnering and drawing the best intellectuals and will help in the transference of information and expansion of the economy. This initiative of Saudi Arabia will provide a conducive environment for small- and medium-sized companies which ultimately leads to the increase of GDP and job creation for its citizens.

The reason for launching in this Misk Global Forum is that it is a global event which connects young and experience innovators and leaders to focus on the stimulation and swapping of innovative technologies and its knowledge.

Newsletter, Saudi Arabia

The workings of the Shari’ah law in the operations of personal and corporate guarantees

December 11, 2017

The Kingdom of Saudi Arabia (“KSA”) is a sovereign Arab state whose final code is the Shari’ah. The Shari’ah is an assortment of principles resulting from different sources, but predominantly the Holy Qu’ran and the Sunnah. As the KSA has not adopted a civil law system, no primary legislation governs financial transaction guarantees in the KSA.

The working of the KSA law for different case scenarios are summarised as follows:

In case of primary obligations of the guarantor:

The guarantor has a secondary responsibility when compared to the principal person, and if the principal is released from the guarantee, the guarantor is also not liable. In the case where the dealing with the primary person is declared void, the guarantor’s obligations are declared void as well. If the principal’s dealing does not satisfy the KSA Shari’ah law, then the eventuality of claiming from the guarantor is not enforceable.

The need for hard copies:

If the dealing is recorded in hard copies, the transaction will be accepted under the KSA law.NO soft copies of fax, telex, bank wire transfer or any other means of electronic communication is accepted in the KSA law. It is prudential for the lenders to gather evidence in the way of hard copies and not depend upon the electronic means of communication.

The favour of ruling:

KSA law is known to favour the guarantor’s as they take on the position as the guarantor’s takes on an obligation not because he has to but because he can. If the lender delays initiating a procedure against the guarantor then, Banking Disputes Settlement Committee in the past has been found to understand that any delays on the part of a lender to use its rights against a guarantor can be interpreted as a waiver of the lender’s rights against the guarantor.

Full and specific guarantee:

KSA law favours contract that has specified the reason for the contract and is of the view that the contract should have a date of expiry. The contract should not have a general obligation involving all the monies guarantee clause as they might face obstacles in enforcing this agreement.

Governing body:

The KSA law and other adjudicatory system do not conventionally identify the applicability of foreign law irrespective of any agreement between the parties in respect of authority and applicable laws. Based on this reason lenders should be prepared to enforce a guarantee provided by a KSA entity in the KSA.

Final word:

KSA law is quite clear on its stand regarding the personal and corporate guarantees; the lenders should take comprehensive guidance about the KSA law before entering into these contracts.

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In case of primary obligations of the guarantor:

The need for hard copies:

The favour of ruling:

Full and specific guarantee:

Governing body:

Final word:

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