gif World Islamic Finance Review
Which Saudi Arabian business structure is right for you?
Limited Liability Company (LLC)
1. May be wholly owned by foreigners
2. May have one or more manag- ers, with no requirement for any manager to be a Saudi national
3. May choose any start date of the fiscal year (but must expressly do so).The default calendar is the Hijri calendar
Source:
http://www.sagia.gov.sa Investment Incentives
Hub between East and West: Saudi Arabia offers unparalleled access to a diverse portfolio of dynamic economies. The Kingdom of Saudi Arabia (KSA) is an ideal gateway to the emerging Eastern markets of the South Asian subcontinent, Africa and the Asia-Pacific region, and the advanced Western markets of the European Union, Eastern Europe, and the Com- monwealth of Independent States (CIS). Saudi Arabia has joined the World Trade Organisation (WTO) and offers investors an open economy, a leading production forum, a logistics platform and strong a transport network.
High Economic Stability and Consumer Demand: The Milken Institute’s 2007 Capital Access Institute rated Saudi Arabia’s macro-economic envi- ronment as the world’s best (out of 122 countries ranked). Saudi Arabia lies at the heart of the Middle East and North Africa (MENA) region, pro- viding easy access to a consumer base of 400 million people. The King- dom has 27 million prosperous inhabitants and a high GDP, as well as domestic demand. The attractive developing opportunities are leading to growth in potential demand within the healthcare, power and water, and consumer goods sectors.
Abundant Skilled Workforce: Saudi Arabia is ranked as the world’s 8th highest education spender, and is heavily investing in education and training programs in order to provide investors with a workforce capa- ble of global leadership in a knowledge-based economy. The World Eco- nomic Forum rates Saudi Arabia’s labour market as the seventh freest in the world. It has a 0 per cent individual income tax and offers attrac- tive incentives for industrious opportunity seekers. Companies based in Saudi Arabia are able to easily draw upon global talent, as the country has a well-established infrastructure providing for the accommodation of expatriate workers of all types.
Ease of Doing Business: Saudi Arabia has liberal private enterprise policies. The World Bank rates Saudi Arabia as the easiest place to do business in the entire MENA region. Compared to other Arab countries, Saudi Arabia is the easiest place to register property, to get credit, and to start a business. Saudi Arabia’s Foreign Investment Law allows 100 per cent foreign ownership of any projects or real estate. The country is highly competitive internationally due to its investment-friendly fiscal policies, business-friendly regime, and overall openness to trade. It has a stable currency, extremely low taxes, and excellent incentives; the coun- try offers an estimated time span of only fifteen days to establish a new business. Saudi Arabia has an open economy and the lowest average weighted tariff rate in the entire MENA region.
Energy-rich and Investment Capital Abundance: Saudi Arabia has the world’s deepest petroleum reserves and high current account surpluses, estimated in excess of 20-25 per cent of GDP. Both public- and private- sector market players in the Saudi economy are using their strong cash positions to improve the Kingdom’s infrastructure and business facilities, through pre-planned projects such as Economic Cities.
46 Global Islamic Finance February 2011 Joint Stock Company (JSC)
1. May be wholly owned by foreigners
2. Shares are freely transferable, with the exception of founders’ shares
3. May have nominative or bearer shares and preferred shares
will be entitled to a three-month temporary license to help complete the process. Register Residency: Must apply for a “700” file at the SAGIA Business Centre Labour Office. This document allows visiting investors with a Visit Visa to upgrade to a residency card (an Iqama). Commercial Registration: Once the investor is in Saudi Arabia, s/he must apply for Commercial Registration, by submitting an application to register the legal business name at the Business Centre at SAGIA. Once the name is approved by the Ministry of Chamber and Industry (MOCI), office space can be searched for and inhabited.
Company Registration: To register the company, the investor must go through a registration process with the Chamber of Commerce, the Department of Zakat and Income Tax (DZIT), the General Organisa- tion of Social Insurance (GOSI), and the Municipality and Labour Of- fice. After registration, investors are free to commence business.
On the whole establishing a business in the country is quite easy compared to establishing a business in any of its Arab counterparts, taking only fifteen days or so.
The way forward
Saudi Arabia is ready to capitalise on its competitive advantages, and as the world’s largest oil supplier it offers US $500 billion worth of investment opportunities in the energy, transportation and education sectors. Economic and population growth in Saudi Arabia, the Arab world’s largest economy, has produced high demand for investment in the infrastructure, energy and education sectors.
The Saudi Arabian economy is expected to expand by 3.5 per cent this year, due to higher prices for crude oil. According to a recent Bloomb- erg report, Saudi Arabian General Investment Authority Governor Amr Al-Dabbagh has claimed that “We have identified investment oppor- tunities in Saudi Arabia and divided them into three areas.” These three areas are education, energy and transport.
Saudi Arabia is well on the way to attaining an effective mix between conventional and Islamic investment. It aims to channel investment worth US $300 billion in the energy industry (petrochemicals, min- erals, power and water), another US $100 billion in investments towards the expansion of the country’s transport network (airports, ports, railway networks and logistical hubs), and US $100 billion for its knowledge-based industries (education, health life sciences and information technology).
It is hoped that these well-planned investment targets will facilitate the Kingdom’s achievement of a global competitive advantage, and will make the region worthy of significant investment stakes in both Islamic and conventional ventures.
gif References and Further Reading •
http://www.sagia.gov.sa/ [Accessed: Nov 15, 2010]
• Arif Sharif, 2010, Saudi Arabia Seeks $500 Billion Investment in En- ergy, Transport, Education, Bloomberg,
http://www.bloomberg.com [Accessed: Nov 15, 2010]
• Investment opportunities abundant in Saudi Arabia, http://www.
ilikeinvesting.com/general-investing-news/investment-saudiarabia. php [Accessed: Nov 15, 2010]
• Investment and Trade Issues,
http://www.infoprod.co.il/country/ saudia2f.htm, [Accessed: Nov 15, 2010]
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