Saudi Arabia, with low oil prices putting the pinch on virtually every corner of the Saudi economy, is pushing hard for foreign entities to invest in Saudi Arabia. This was a theme at the recently-held U.S.-Saudi CEO Summit in Riyadh, Saudi Arabia in January, as well as the Global Competitiveness Forum held in the Saudi capital just after the CEO Summit.
With Saudi Arabia actively courting international companies to do business in Saudi Arabia, authorities have even created a smartphone app to market investment opportunities (Invest Saudi), highlighting non-oil sectors like transport, health care, tourism and building materials, according to reports.
Now, a report in Asharq Al Awsat revealed that authorities are setting up a committee to increase foreign direct investment flows to the kingdom with representatives from the Saudi Arabian General Investment Authority, the Ministry of Commerce and Industry and the Ministry of Labor.
A source told the publication that the committee would likely conclude that the need for a local partner should be removed.
SAGIA will submit to the cabinet this quarter recommended rules for opening the country’s retail sector to 100 percent foreign ownership, according to Abdulateef Al-Othman, SAGIA’s governor, in an interview with Bloomberg last month.
“We really wanted people to recognize that the kingdom’s economy, even in a low prevailing oil price environment, can be extremely productive in terms of leveraging the sectors that are growing,” Al-Othman said.
According to the Saudi newspaper Al Eqtisadiah and relayed in Bloomberg, the need to increase investment is urgent not only because of falling oil prices, but because of falling FDI, too. Foreign direct investment last year fell to the lowest level since 2004, dropping to $7.6 billion from a peak of $39.4 billion in 2008. FDI is considered essential as Saudi Arabia looks to make up foreign exchange losses and balance its $98 billion budget deficit.
Removing the local requirement would make it easier for foreign companies to invest because they would not have to search for and give up ownership of their business to a local individual or company just because they are Saudi. However, for first time investors in Saudi Arabia, a local partner can be helpful in navigating Saudi Arabia’s laws and unique market for international goods and services.
