Introduction
Economy of Kingdom of Saudi Arabia (KSA) has faced the worst hit of a sharp fall in oil prices and to deal with the situation efficiently and overcome the menace, the Government has launched various development and transformation programs to divert the economy from its dependence on oil. Mr. Salman, King of the nation has informed about the Government plan to inject 200 billion Saudi Riyals (SAR) (approx. 53 billion USD) in a period of coming four years between 2017 to 2020 to boost investment by the private sector during the introduction of Budget of KSA for 2017.
The Plan
A reform and transformation program launched last year anticipates the capacity of the private sector to invest tens of billions USD over the coming few years on various projects for schools, housing, communication, power stations and industrial zones. But, the willingness of the private sector to invest in the conventional oil dependent economy is a major challenge for this program.
An official document released with Budget 2017 on 22nd December, 2016 mentioned that the incentive program is proposed to promote private sector investment to boost growth and development programs. An investment of approx USD 53 billion is proposed during 2017-2020. It further mentions about the establishment of an investment fund that will provide capital for investment into development programs, but do not provide the details about incentives being offered or source of finance for the fund. However, it clearly states that incentives shall be granted to the sectors providing support to development programs of the nation and creation of jobs for Saudi nationals.
This initiative is aimed to successfully diversify the economy from oil and create new source of revenue for the Government. It shall also promote private sector to invest in various social development programs of the Government to ensure a sustainable growth of the economy.
This document further states that the Government is increasing the fee charged from companies for employing expats above the number of Saudi workers. Further, an additional fee shall be payable on all dependents of expat workers, which will gradually be increased to 400 SAR per dependent by 2020. This shall obviously have an adverse effect on companies’ ability to invest.
The Bottom Line
Considering the present scenario, it will be a challenging situation, but once, the details of the incentives are revealed by the Government, a better outlook for corporates can be envisioned.
If you are looking to expand your business in Kingdom of Saudi Arabia or set up your company in Kingdom of Saudi Arabia, you can reach us on [email protected]
