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Full Foreign Ownership in Saudi Arabia?

As a recent positive development concerning foreign investment in the Kingdom of Saudi Arabia, The Custodian of the Two Holy Mosques, King Salman Bin Abdulaziz Al-Saud gave his directions to both the Minister of Commerce and Industry and the Governor of the Saudi Arabian General Investment Authority (SAGIA) to review all trade and investment laws and regulations. This move aims at facilitating the work of multinational companies and provides incentives to foreign investors, including direct access to the Saudi market. This is intended to position Saudi Arabia as an international center for the distribution, sale and re-export of products.

International companies are invited to submit fully detailed proposals expressing interest and highlighting value propositions that will include: manufacturing plants, technology and know-how transfer and research centers, establishing regional and global branches, and hiring Saudi nationals in highly technical and enriching jobs. The desired result of the new regulation is a win-win situation for both the Saudi government and foreign investors.

Once adopted the new rules will give these Companies the opportunity to do business in Saudi Arabia, through 100% owned subsidiaries. It will eliminate the need for Saudi participation in the capital of the company, which used to be at least 25% of the capital of the company, whether or not the Saudi actually participated in the business.

It is expected that this new approach will attract and encourage international companies to do business in the Kingdom of Saudi Arabia. Companies can manufacture their own products and sell directly the customers, along with providing after sale services. Companies like Apple and Samsung can benefit from this new rule because they sell their own products. However, purely retailing companies like WalMart, TESCO and EBay would not benefit for this rule, because they sell other companies products.

The main reason of this rule is to increase competition and to increase employment opportunities for Saudi nationals. It is expected that the Government will increase the Saudization percentage for international companies who will benefit from this new approach.

 

This piece is for informational purposes only. It does not represent the opinion of Hegazy & Partners, nor is it a substitute for legal advice.

Ahmed Baraka