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Saudi Arabia Dominates Startup Investment Sector in May

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Figures have revealed that Saudi Arabia dominated the startup investment market in the MENA region in the month of May. During the month, a total of $110 million was realized across 35 deals, according to data from Wamda, an entrepreneurship platform in the region.

According to the figures, the Kingdom of Saudi Arabia raised nearly $47 million across 9 startups, through the Series B funding by Sary, a B2B marketplace connecting wholesalers and small firms.

 

Venture capital picking in Saudi market

The managing director of Wa’ed, Wassim Basrawi, wasn’t surprised that venture capital was picking up in the Kingdom, adding that the trend had been sustained for several months as the country emerged from the ravages of the COVID-19 pandemic.

Wa’ed also announced venture capital investments in Saudi firms, including drone maker, FalconViz, IR4LAB, the blockchain artificial intelligence company, and the hydroponic technology business, the Red Sea Farms.

Basrawi also indicated that the public sector support for entrepreneurs had increased during the pandemic as many Saudi startups, such as the Red Sea Farms, were starting to attract external investors. This was one of those pointers of increased growth of venture capital investments.

The B2B e-commerce sector raised $37.6 million, raising the most interest throughout the Middle East and North Africa (MENA) region. Financial technology (FinTech) came second with $18.5 million, while logistics raised $10 million. Education technology and tourism came at a distance, raising $6.9 million, and $6 million, respectively.

Hussain Al-Alawi, speaking to Arab News, observed that the region was experiencing increased investment in venture capital and that technology companies were at the forefront, followed by FinTech, med-tech, and agri-tech. Al-Alawi is a member of the board of the Zurich-based mergers and acquisitions firm, millennium Associates, and a Saudi international partner.

He also added that technology was the driving force behind the 70% of company deals across all markets this year. This trend is also true in the Kingdom of Saudi Arabia as the country’s commitment to technology is helping drive the startup culture, and encouraging investment in the sector.

Al-Alawi also acknowledges the input of the Public Investment Fund (PIF) through projects such as NEOM in helping realize Vision 2030. They have inspired startups looking to innovate and disrupt, with support from progressive funds to help local entrepreneurs, and individuals, and institutions.

The role of women in capital investments

Al-Alawi notes Saudi’s young and highly connected population, and the evolution of the sector as prompted by the COVID-19 pandemic, as some major factors contributing to the growth of capital venture investments in the country.

Saudi Arabia seems to be far ahead when it comes to women’s participation in startups. The Kingdom posted the only investment in the women-led startup, the $6 million Gathern backing – a platform similar to Airbnb in Saudi Arabia. The figure is, however, a pale comparison to the massive $100 million posted by their male counterparts in the MENA region.

However, Al-Alawi was quick to point out that gender disparities in investments were a global issue, and were not unique to the MENA region alone. Despite outperforming their male counterparts, women-led startups received a paltry 2.6% of venture capital funding in 2019, as per CrunchBase reports.

But the situation seems to be changing. Saudi Arabia is seeing more women-led startups and businesses. When it comes to successful family businesses, the Kingdom is experiencing an upsurge in the number of females establishing their own companies, especially in e-commerce. However, many of these businesses are self-funded or family-funded instead of seeking venture capital investment.

The latest trends show that a number of women were beginning to look beyond their own businesses in Saudi Arabia, and venturing into potential investment fields in female-led startups. It’s a clear indication of the increasing role of women in the Saudi business world and their participation in new startups that helped the country dominate the startup scene in the MENA region.

Why Saudi is dominating startups in the investment sector

The venture capital in Saudi Arabia has risen to an all-time high of $151.9 million five years into the ambitious Vision 2030. This is a 124% rise from 2018 to 2020 and a massive increase from the pre-Vision rate of $7.9 million in funding.

But most of the growth can be attributed to the government’s effort to empower the entrepreneurship sector and ease foreign direct investment regulations. Foreign companies can now inject funds into the country and boost the performance of the investment sector.

The Saudi government also launched two funds of fund ventures: the Saudi Venture Capital company (SVC) and the Jada fund of funds backed by PIF. At the same time, the Saudi Telecoms Company was on the sidelines to complement the government with a $500 million funds, the largest tech fund in the MENA region.

According to Nabeel Koshak, CEO and board member of SVC, the success of Saudi startups in the diversification of the venture capital that addresses different sectors, geographies, and stages, to ensure they fill the financing gaps for startups across sectors, stages, and regions.

The SVC is also committed to investing $1 billion in venture capital funds and startups. It has so far invested in 17 venture capital firms, as well as 63 startups across different stages and sectors. The Kingdom’s venture capital company has also allocated 10% of its funds to Angel Networks. One condition for SVC for fund managers is that it must allocate some of its funds to Saudi-based companies.

It’s this kind of government backing that has propelled Saudi Arabia to the forefront of venture capital investments in the MENA region. If this trend continues, the Kingdom of Saudi Arabia will continue to dominate startups in the investment sector.

Take advantage

As Saudi Arabia dominates startups in the investment sector, there is great business potential in the Kingdom for individuals and companies. But you need to partner with experienced, professional, and knowledgeable lawyers conversant with Saudi law. They can help you understand and meet the legal requirements for harnessing venture capital and engaging in startups. If you need such lawyers, please contact HMCO today, and get the ball rolling.

Saudi Entertainment and Amusement Sector to Hit $1.17B by 2030

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A new industry report predicts the Saudi entertainment and amusement sector to hit a massive $1.17 billion by 2030, translating to a staggering 47.65% growth per year. According to a US-based Research and Markets study, this growth compares to just $23.77 million in 2020 alone.

A unique and world-class entertainment hub

According to the US-based report, the Saudi entertainment industry has grown massively, thanks to the concerted effort by the government that has seen the construction of a unique and world-class entertainment hub in the country.

The awe-inspiring entertainment hub features cultural and historical attractions, innovative rides, and mega sporting events. The hub provides the much-needed impetus to get things moving and propel the Saudi entertainment and amusement sector to new heights.

As part of an ambitious plan for economic and social reform, ostensibly to reduce the country’s dependence on oil, Saudi Arabia has embarked on a Vision 2030 project. The project targets the entertainment industry, setting up the country as a popular leisure destination point for locals and foreigners.

Government’s hand in the growth

The Saudi government has played a significant role in the projected growth of the entertainment and amusement sector, establishing the General Authority for Entertainment (GAE) in 2016.

The GAE brought forth massive entertainment investments in the country, the most significant being the Qiddiya project announced a year later, 2017. Work at the site, located just 40 minutes from the Saudi capital, began a year later.

The project expected to cover well over 300 square kilometers of land, will include a Six Flags theme park, Formula One racing track, sports facilities including football stadia and athletes tracks, and development infrastructure. Others include an expansive range of creative and artistic and cultural activities.

One of the major highlights of the amusement park is an enthralling and record-breaking roller coaster appropriately called Falcon Flight. It’s set to be the flagship attraction of the theme park, scheduled to open in 2023, featuring 28 attractions and rides across six themed lands.

Golf legend, Jack Nicklaus, has also ventured into the Qiddiya project, offering to design a golf course in the park. It would be his first golf design project in the Kingdom. Nicklaus made the announcement in February after observing the progress of the project.

Speaking to Arab News, Phillipe Gas, CEO of Qiddiya, sought to shed more light on the project. The CEO stated the Qiddiya project is poised to become the capital of Sports, Art, and Entertainment. He further explained that the Giga project was founded on the need to overarch Saudi Vision 2030.

The Qiddiya CEO also noted that it would be a disruptive destination thrust onto the world stage as the home of the most immersive and innovative experiences on a level never seen before. It will be a celebration of life, a place for families and couples to spend quality time, and create unforgettable memories.

Just last month, Turki bin Abdulmohsen Al-Sheikh, GAE chairman, made public the results of the Ideas for Entertainment initiative. The top 20 ideas had been selected from more than 12,000 proposals submitted for the project.

The top submission dubbed “The Grove” depicted a rich experience featuring an array of activities including musical and theatrical shows, hiking expeditions, and more.

Entertainment is one of the key pillars of Vision 2030, which aims to enhance household expenditure in the sector from 2.9% to 6% by the end of the decade.

The AMC connection

The Saudi entertainment sector received a major boost in December 2020 following AMC Entertainment Holdings’ move to open a sixth movie theater in the country. AMC is the world’s largest movie exhibition company. Saudi Arabia happened to feature in the company’s plans to expand to 50 locations by 2024.

 

AMC also partnered with the Saudi Entertainment Ventures to set up the Saudi Cinema Co., with the full blessings of the Public Investment Fund (PIF). The Saudi Cinema Co. became a state investment and development cog of the country’s entertainment industry.

The entertainment project has also attracted another overseas player, UAE-based chain VOX Cinemas, who plans to build 600 giant screens across the Kingdom by 2023. This would be part of SR2 billion, an equivalent of $533 million investment.

Home-grown cinema brands have also burst onto the scene, led by MUVI Cinemas, who announced in April a massive SR820 million expansion plans for this year. MUVI plans to grow to 307 screens Kingdom-wide over the next year, and launch 23 new sites in 8 key regions.

Effect of the pandemic

The entertainment and amusement sector in the Saudi Kingdom came to a grinding halt as the anti-coronavirus restrictions came into effect in the first quarter of 2020, crippling the economy for the better part of the year.

The restrictions have begun to lift, and as of May 18, 2021, a return to the entertainment scene is gradually taking shape, albeit with social distancing policies firmly in place, as well as the wearing of face masks.

As the pandemic subsides, and mass vaccination gathers momentum across the Kingdom, it’s just a matter of time before Riyadh explodes onto the global scene as a top destination for fun-seeking enthusiasts.

The pandemic couldn’t have come at a worse time – the entertainment industry had come from a 35-year ban on cinema, which had elapsed in 2018. Some of the world’s leading lights in the cinema industry had begun moving in when the pandemic struck.

Take advantage of this growth

Without a proper and thorough understanding of Saudi and international law, you may not be in a position to tap into the growing entertainment and amusement sector. You need to work with professional and experienced lawyers to take advantage of the growth in this bustling industry. If you are planning to venture into the entertainment industry, please contact HMCO today for the next course of action.

UN World Tourism Organization Chooses Riyadh as its First Mideast HQ

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The United Nations World Tourism Organization (UNWTO) has set up its first regional office outside Madrid, in the Middle East in Saudi Arabia’s Riyadh.

 

How did it start?

Saudi Arabia hosted the Tourism Recovery Summit and the inauguration of the new UN World Tourism Organization office in Riyadh. The Saudi Kingdom and the World Bank pledged $100 million geared towards reviving the global tourism industry.

 

This money is to be directed to spearhead sustainable international tourism growth through an international fund for comprehensive tourism. This was clearly stated by Saudi Arabia’s first ever minister of tourism, Mr. Ahmed Al-Khateeb.

The approval

The Saudi minister of tourism got the approval from the Council of Ministers to negotiate with the UNWTO on behalf of the country in regard to the draft cooperation agreement between the Saudi government and the World Tourism Organization. The agreement concerns the development of human capabilities through e-learning. The minister was expected to sign and upload the final copy of the agreement to complete the legal procedures.

 

The Ministry of Tourism was also given the green light to negotiate with the French and Omani sides before signing the draft memorandum of understanding with Omani Ministry of Heritage and Tourism, and France’s Ministry of Europe and Foreign Affairs. The Saudi tourism ministry needs to sign the documents and upload them to finalize the legal processes for setting up the UNWTO office in Riyadh.

 

Saudi Arabia is making admirable efforts to boost its international and domestic tourism to diversify its economy. The kingdom heavily relies on oil exports, and it is trying to transform the country into a market with a balance in all its sectors. This was an observation made by Dr. Paul Rivlin, an economist and senior research fellow at the Moshe Dayan Center for Middle Eastern and African Studies at Tel Aviv University.

 

This latest development can be seen as an actualization of Saudi Arabia’s Vision 2030, a strategic plan led by the kingdom’s Crown Prince Mohammad bin Salman. It is intended to create a more balanced economy and develop public service sectors. Dr. Rivlin explains that being a part of UNWTO aids these efforts by Saudi Arabia.

 

Oil and gas exports account for nearly 50% of the country’s GDP, according to the Organization of Petroleum Exporting Countries, or OPEC. The kingdom’s Vision 2030 aims at increasing the tourism sector’s GDP contribution from 3% to 10%. This plan includes the Red Sea Project that aims at creating a luxurious tourist destination on Saudi Arabia’s West Coast.

 

The appointment of Gloria Guevara Manzo

The Saudi Ministry of Tourism announced the appointment of Gloria Guevara Manzo, who worked as a former president of the World Tourism and Travel Council and Minister of Tourism in Mexico, to the position of Senior Adviser. She is to contribute her extensive experience with the Ministry’s work team in moving to the next stage of the development of the tourism sector in the Kingdom within the framework of Vision 2030.

 

Guevara Manzo is considered one of the most influential women in the sector at the global level. This is because she held the position of Minister of Tourism and CEO of the Tourism Promotion Board in Mexico between 2010 and 2012. She also succeeded in developing the tourism sector in the country and strengthening Mexico’s position as a leading global tourist destination.

 

The purpose of this regional office

The mission of the UNWTO regional office in Riyadh will be to coordinate policies and initiatives geared towards sustainable tourism across 13 countries in the Middle East. It will also promote tourism products and sustainable development.

 

It will collect important statistics for the sector and exchange information, in addition to stimulating investment in tourism assets and constituents. It will also be working to define policies related to health aspects in the tourism industry.

 

UNWTO celebrated the first-ever tourism academy in Riyadh dedicated to catering to the needs of the Middle East. It launched a program to acknowledge the best tourism villages.

 

According to Zurab Pololikashvili, secretary-general of the UNWTO – in a speech at the Tourism Recovery Summit 2021 in Riyadh — one of the priorities of this UN organization is to create new jobs and new tourist destinations. He said that this new regional office is a ray of hope to many people, as the restart of the tourism industry needs leadership and coordination.

 

The organization’s other priorities include supporting businesses, helping protect nature and cultural heritage, fighting depopulation and regional inequalities, and empowering people and communities. The office was constructed in eight months during the pandemic, he said.

 

How does it affect the rest of the world?

The UNWTO regional office in Riyadh aims to build human and institutional capacity across the pandemic-battered sector, Al-Khateeb said on the sidelines of the Tourism Recovery Summit.

 

In his words, the global tourism sector is unstable and inflexible, as shown by the pandemic. Many people lost their jobs as companies left the work system. He proposed that since the tourism sector is mostly privately owned all around the globe, each nation needs to rebuild a tourism industry that is flexible enough to weather such a crisis.

 

The new regional office in Riyadh will enable the UNWTO to create a flexible tourism industry for the Middle East and parts of North Africa. It aims to unify efforts from multiple countries to create a global protocol that benefits as many nations as possible.

 

The EU came under sharp criticism for developing a unilateral protocol for solo travel for the next summer. This they did without any input or coordination with other countries. He said that the tourism sector is one global sector that needs a unified protocol to facilitate travel.

 

This collaboration of Saudi Arabia and the UNWTO is the best effort to merge multiple efforts to bring the global tourism industry back on its feet. These measures are dedicated specifically to supporting global tourism growth and foster the capability to rebuild a damaged industry.

 

Take advantage

You can take advantage of the immense business potential created by the coming up of the UNWTO regional office in Saudi Arabia by partnering with experienced and professional lawyers well-versed in both local and international law. Contact HMCO today to begin the conversation.

The Capital Market Authority Publishes the Draft Securities Exchanges and Depository Centers Regulations for Public Consultation

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As part of the Capital Market Authority’s (“CMA”) strategic objectives to develop the capital market, and based on the Capital Market Law issued by Royal Decree No. (M/30), dated 2/6/1424 H, the CMA Board issued its resolution to publish the draft of Securities Exchanges and Depository Centers Regulations (the “Draft Regulations”), for public consultation for a period of (60) calendar days ending on 11/8/1443H corresponding to 14/3/2022G.​

The Draft Regulations aims to develop the regulatory framework for the authorization and supervision of securities exchanges and depository centers for the efficient performance of their duties and obligations, and to further the stability and regulatory environment of the capital market, in addition to enhancing the confidence of capital market participants in support of its growth and prosperity, as well as the development of procedures that ensure effective supervision over securities exchanges and depository centers in line with international best practices and standards in this regard.

The Draft Regulations can be viewed via the following link:

The CMA, with full gratitude, would receive the opinions and comments of relevant and interested persons, through any of the following:

  • The Unified Electronic Platform for Consulting the Public and Government Entities (Public Consultation Platform), affiliated with the National Competitiveness Center, through the following link: istitlaa.ncc.gov.sa.

The prescribed form through the following email: Laws.Regulations@cma.org.sa.

Controls for Electronic Verification of Banking Documents Issued

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The Saudi Central Bank (SAMA) has announced the issuance of the governing rules for electronic issuance and authenticity verification of banking documents. This comes as part of its continuous efforts to improve the quality and effectiveness of electronic services provided to banking sector customers. The aim is to ensure easy financial transactions, save time and effort in obtaining bank documents and certificates, and boost confidence in the authenticity of electronically issued documents.

 

 SAMA stated that the rules include the requirements banks must observe before issuing bank documents. Additionally, banks are required to provide an E-document Verification service, a service to electronically verify the authenticity of electronic and paper documents they issue. Moreover, the document must also state any available method to verify its authenticity electronically.

 

 SAMA pointed out that the rules set out the minimum bank documents required to be issued electronically, most requested by customers, such as bank certificates, debt certificates, and no liability letters. SAMA stressed that banks must comply with the processing times specified under relevant instructions as well as set procedures and measures that ensure compliance with these rules. In this regard, SAMA stated that the rules should be effective starting from April 1st, 2022.

 

 Please visit SAMA’s website (link) to view the governing rules for electronic issuance and authenticity verification of banking documents. Please visit SAMA’s website (link).

Financial Reports for Enforcement Applications Service Launched

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Saudi Arabia’s Justice Ministry has announced it has launched a financial report for enforcement applications service. It will be available via the Najiz portal.

It will help improve users’ experience by providing various options to get information regarding banking accounts transactions by date, application, or ID number. It will be available to institutions and individuals.

KSA Infrastructure Boom Means Big Business for Investors

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After the Covid-19 pandemic’s destabilizing impact on market conditions, Saudi Arabia is finally experiencing an economic resurgence. A Mordor Intelligence report suggests that the country will benefit from dramatic infrastructure growth at a CAGR of approximately 6% to 2026, and the launch of the new National Infrastructure Fund (NIF) certainly supports this prediction.

Due to factors such as vast population growth, extensive urbanisation, an increase in religious tourism, economic diversification and the streamlining of business processes, investment potential in KSA has reached new heights.

Now, with a trillion-dollar pipeline of projects leading to significant transformations in national infrastructure, KSA investment opportunities are both diverse and exciting, to say the least. Vision 2030’s foreign investment objectives were designed to boost infrastructure growth in Saudi Arabia, and so far, its goals are right on track.

Infrastructure projects in Saudi Arabia span various sectors

Saudi Arabia is renowned for being an oil-based economy, with the world’s largest crude oil reserves. In a bid to move beyond economic reliance on the oil industry, the KSA construction sector is generating opportunities in both residential and non-residential projects, as well as transport infrastructure. Healthcare infrastructure is set to receive $66.67 billion in investment, and the energy sector will be subject to a high-speed digital upgrade. Construction is also underway on a number of schools, hospitals and industrial hubs across the Kingdom.

Other sectors receiving investment are chemical, mining and metals, information technology, industrial and manufacturing; there are also countless opportunities to invest in real estate, hospitality, clean energy, tourism and smart cities.

The advanced infrastructure plans in KSA are driving increased global attention to the country, thus bringing a welcome boost to the leisure, tourism and entertainment industries. Similarly, the lucrative opportunities emerging across this wide range of sectors are extremely promising for investors in Saudi Arabian infrastructure projects.

Current KSA Infrastructure investment opportunities

One current investment opportunity is the entertainment mega project known as the Qiddiya project, which was launched in 2019 with a first phase completion date of 2022. This Public Investment Fund project is located approximately 45km from Riyadh, and aims to become ‘the capital of entertainment, sports and arts.’ After an original injection of $8 billion, the project requires further investment to reach its goal of accommodating 17 million annual visitors by 2035.

Another promising investment opportunity in Saudi Arabia is the Saudi Green Initiative, which offers international investment opportunities in the sustainability sector. The first wave of over 60 initiatives represented more than SAR 700b investment in the growth of sustainable living.

The legal requirements for KSA investors

There are, as can be expected, various legal elements for investors and construction businesses to consider when investing in KSA infrastructure projects. In order to remain protected while leveraging such new opportunities, it is prudent to be aware of the national requirements you will be asked to adhere to.

The following procedures must be undertaken to enable business activities in Saudi Arabia:

  • Acquire an investment license from the Saudi Arabian General Investment Authority (SAGIA)
  • Open an account with a local KSA bank to deposit your initial capital
  • Obtain a commercial registration (CR) from the Ministry of Commerce and Industry (MOCI)
  • Register with the Chamber of Commerce
  • Register with the Customs department
  • Acquire a municipality license
  • Register with the Ministry of Labour
  • Register with the General Organisation for Social Insurance (GOSI)
  • Register with the General Authority of Zakat and Tax (GAZ)

Note that since the official language is Arabic, an official translator must translate into this language before you submit it to the appropriate Government authority.

Although this is an extensive process, it may help to know that the Foreign Investment Act (FIA), a framework that permits non-Saudis to invest in KSA, aims to ensure equal treatment of all non-Saudi companies. In Article 5 of the Implementing Regulations for the Foreign Investment Law, it states that a foreign venture “shall enjoy all the benefits, incentives and guarantees enjoyed by a national project”.

With  it is evident that KSA is soon to be a worldwide hub for logistics and investment.

KSA Foreign Investment Reforms Boost License Issuance by 400%

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During the Invest Saudi Forum at Expo Dubai 2020, Dr. Saad Al-Sharani of the Ministry of Investment delivered positive news of a 400% increase in the issuance of Saudi Arabia (KSA) investment licenses. This dramatic leap was recorded in Q4 of 2021, in comparison with the same quarter in 2020.

By Q4 of 2021, the Ministry of Investment had issued 4,439 new foreign investment licenses alone. This promising surge in interest is thought to be due to economic recovery after the pandemic. While it currently ranks 25th globally, KSA aims to reach the top ten by improving foreign investment laws and fortifying investor protection.

It also plans to raise the contribution of small, medium, and finite enterprises from 20% to 30%, offering them superior economic privileges and effective participation in local markets. The 2030 initiative brings many advantages to foreign investors, who will now benefit from both the investment law reforms and the unprecedented increase in KSA opportunities.

 

The NIS has launched plans to improve the KSA investment environment.

The National Investment Strategy’s (NIS) recent initiatives demonstrated clear aims to boost the Saudi economy significantly. According to Dr. Al-Shahrani, the Kingdom is set to become one of the 15 largest economies worldwide. With approximately 40 new initiatives supporting legislative reforms in the Saudi investment environment, the goal certainly appears to be within reach.

The legislative reforms are designed to bring foreign investments into the region of $100b (SR388 billion) by 2030. The achievement will in turn assist the NIS in reaching and reviewing its annual targets, which are in place to give the necessary support to emerging sectors.

Entertainment, tourism, sports, transport, culture, and education are just a few of the sectors that will benefit from the promising KSA foreign investment reforms. As a result, many more jobs will open, and projections indicate that unemployment will be as low as 7% by 2030.

 

KSA investment regulations received more than 555 reforms.

KSA has big plans for its flourishing economy, and openly welcomes foreign investment in support of this ongoing expansion. As such, investment regulations in Saudi Arabia have been subject to over 555 reforms, all designed to enable flexible, smooth, and prosperous investments for foreign nationals.

The reforms included expediting the process of starting a business, which can now be done in 30 minutes, as opposed to the original 15-day waiting period. Another positive result was that in 2020, the number of SMEs also rose to over 626,000.

As foreign investment in Saudi Arabia is a top priority for the Saudi Government, its regulations and controls now ensure full support of international investors’ rights and investment goals. The aims include boosting market efficiency and function, broadening access, and improving transparency and corporate governance.

As a result, both liquidity and investor security have been enhanced, risks have been mitigated, and pricing is significantly less volatile. Furthermore, market practices are now fully aligned with international standards.

 

The current Saudi foreign investment licensing regulations.

The Ministry promotes investment in the Kingdom of Saudi Arabia, sets the foreign investment regulations, enables investors to enter the Kingdom and issues the required licenses.

Vision 2030 has opened up all areas of investments for foreigners in Saudi Arabia, with the aim to raise foreign direct investments from around 3.8% to 5.7% via the enactment of the new investment laws; it also plans to fully open up foreign ownership.

With the great attention the Kingdom has paid to reforming its investment regulations, the current investment climate in Saudi Arabia is now undeniably welcoming to foreign investors. Those looking to benefit from the country’s recent economic resurgence will now find it beneficial than ever before, however the legal landscape will need to be considered, specifically as navigation of this can becoming overwhelming during the initial investment and incorporation period.

KSA Announces Next Steps in Licensing Process for Khnaiguiyah Mining Site 

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The Ministry of Industry and Mineral Resources (MIM) has announced the next steps in the process of awarding the license for the largest mining site in KSA. Khnaiguiyah, situated in Al Rayn Terrane, spans 350km2 and is part of the Arabian Shield. The site has a 3D geological model and has already been subject to much exploration work, with over 100,000 meters drilled to date. According to the Saudi Geological Survey, with its estimated 26 million tons of zinc and copper, the site’s geological potential is huge. 

Saudi Arabia’s mining sector has an estimated value of $1.3 trillion, and the country has 48 identified minerals, including large quantities of gold, phosphate, and copper. In addition, rare earth metals such as nickel and zinc are also mined in the Kingdom, generally for use in smart devices and computers.  

The KSA mining sector is set to receive high levels of foreign investment over the coming decade, and as such, the government has released further concessions for mining and quarrying to private firms. Saudi Arabia’s national mining champion, Ma’aden, is owned by both the government and private shareholders. As is demonstrated by this rapidly growing company’s international joint ventures, the Kingdom welcomes investment from the private sector. 

Since Saudi’s latest mining law was passed, more than 1,500 licensing requests have been submitted to the government. KSA aims to receive mining sector investments in the region of $170b by the end of the decade, and with rising demand for the metals required for the energy transition, this appears to be an achievable goal. 

Revisions to the Saudi mining investment laws and regulations 

The executive regulations of the Mining Investment Law offer many benefits for both the sector and its investors. A permanent committee will decide upon objections filed by government agencies and applications for allocation of the areas of mining complexes, and there are provisions for an Exploitation License and General-Purpose License in place of the Material Collection License. In addition, the export of mineral ores is subject to further regulation, and control procedures will support investors with licenses. 

There is an increase in licensing procedure efficiency, with all license procedures being made electronic. There is also a more comprehensive violations and penalties regime, with maximum fines of up to SR1m for law violations, and transparency will be increased by publishing licensing records. Data is to be provided for mineralized sites, and precise decision periods are determined. 

KSA has an estimated SR5 trillion in untapped mineral deposits, so revisions were designed to accommodate foreign investors with an interest in the mining sector and the Kingdom’s mineral industry. The revisions support the Vision 2030 reform plans, which aim to boost mining sector contributions to the overall national economy. The revisions were also backed by the Ministry of Energy, Industry and Mineral Resources (MEIMR), which aims to propel the mining sector’s contribution to GDP from $3b to $64b by 2030. 

Benefits to KSA mining workers and local communities 

 The SAR2bn Khnaiguiyah project is predicted to generate 2,000 to 3,000 direct and indirect jobs for mining workers in the region. It will also contribute to the development of neighboring regions and mining projects, employing local people from those regions and boosting numbers of purchases from the local markets. 

It will positively impact the development of communication networks in the areas surrounding the project and make a substantial contribution to the development of Saudi’s zinc and downstream copper industries. 

The Mining Investment Law revisions demonstrate a healthy, modern approach to the KSA mining sector and are likely to develop more mining and exploration programs. The subsequent licensing processes are also extremely supportive toward potential investors in the sector, having been brought in line with industry standards. As a result, KSA is openly welcoming mining companies and investors to take full advantage of the many opportunities its mining sector is offering. 

Saudi Arabia’s Vision 2030 Offers Exceptional Opportunities For French Investors

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Saudi Arabia’s Vision 2030, which was launched by Saudi Crown Prince Mohammed bin Salman in 2016, is the major driver for current investment opportunities presented in the country. In the second quarter of 2021, Foreign Direct Investment in Saudi Arabia reached an impressive $1.4 billion. Through many incentivization programs and regulatory transformations, the government hopes to increase this to an annual figure of $100 billion by 2030.

With Saudi Arabia’s rapid economic recovery in the wake of the global pandemic, French companies and investors have an opportunity to leverage the array of new business and investment opportunities on offer within the Kingdom. However, to engage in business with the Saudi market, French companies will first need to familiarize themselves with the legal and regulatory factors that may affect their business operations in this rapidly transforming nation.

What Is Vision 2030?

The aim of Vision 2030 is to create a more diversified economy that is less reliant on oil revenue. As part of this process, the National Transformation Program seeks to increase non-oil government revenue from SR163 billion to SR1 trillion by 2030.

The government hopes to achieve this goal by the development of public-private partnerships (PPP), encouraging foreign investment in the country, introducing value-added tax (VAT), and privatizing several sectors including transport, education, and healthcare. The vision also includes plans to invest heavily in renewable energy and to develop the nation as a hub of technology and entrepreneurship in the MENA region.

So far, Vision 2030 has already seen significant success, with a string of major international companies, including Siemens and Google, committing to multi-billion dollar investments in the country. Since the program was first launched, the government has pledged over $1 trillion in development schemes. This has led to the creation of over 550,000 new jobs for local Saudis, with a further 1 million expected to materialize before 2030. In addition, foreign investment licenses nearly doubled from 700 in 2018 to 1300 in 2020, demonstrating that there is a keen interest from within the international venture capitalist community to make moves towards Saudi Arabia.

How Can French Business & Venture Capitalists Leverage This Opportunity?

In 2001, the Saudi-French Business Council was set up by the Saudi Arabian Chambers of Commerce & Industry with the aim to further develop business ties between both nations. French investment in Saudi Arabia now stands at $4.37 billion and trade between the two countries has nearly doubled over the past 10 years. French business leaders can build on this positive relationship history and take advantage of the plethora of new opportunities in the Kingdom created by Vision 2030.

The planned expansion of investments in infrastructure, healthcare, education, renewable energy, and tourism throughout the country will undoubtedly create a great number of prospects for French companies and investors across a broad range of sectors. Saudi Arabia has recently unveiled plans to invest over $100 billion to develop its renewable energy infrastructure and solar power capacity. France’s longstanding push towards increasing its use of renewable energy sources makes it a perfect partner for Saudi Arabia’s new infrastructure plans.

In addition to this, Saudi Arabia is positioning itself within the Gulf region as a hub of technological progress and development. However, achieving this status will be no easy feat without the assistance of foreign expertise and investment. French companies and technical experts may find themselves ideally positioned to enter this market given France’s highly developed digital sector.

Legal Considerations for French Businesses Entering The Kingdom

Off the back of the National Transformation Program, there has been a significant lifting of red tape. Local business regulations have been streamlined and simplified, to create a more transparent and agile process. But as with any new business venture, French companies need to be aware of the laws regulating Saudi Arabia’s commercial sector before commencing activities in the region.

Licencing Regulations

Expatriates can now have full ownership of their company based in Saudi Arabia without requiring the involvement of a local business partner. However, they will still need to obtain a MISA Entrepreneurial Licence issued by the Saudi Arabian General Investment Authority before commencing business within the Kingdom. Additionally, they will be required to apply for Commercial Registration and get a certificate from the Chamber of Commerce. For businesses operating in certain sectors, additional licensing may also be required.  With these documents, you will be able to open a bank account and start operating your business within Saudi Arabia.

Saudization (nitiqat) Rules

As a result of the government’s Saudization program, all companies operating within Saudi Arabia are required to employ a certain number of Saudis to maintain their business license. Employers are required to meet these quotas to ensure that the labor market continues to develop within Saudi Arabia rather than simply relying on imported foreign workers. This is particularly pertinent for companies operating in certain sectors such as marketing, where the percentage of Saudi employees must be at least 30% of the total workforce.

Other sectors, such as secretarial, translation, storekeeping, and data entry jobs, are prohibited from employing any non-Saudis. These new regulations will come into place in April of 2022. Any business operating in the Kingdom must adhere strictly to Saudization rules, or they may face penalties.

In addition to employment quotas, Saudi workers are also entitled to a minimum wage appropriate to their industry. This starts at 4000 SAR per month, but it increases to 7000 SAR for certain professionals, such as qualified dental professionals. If your company employs a Saudi national on a part-time basis, then they will only partially count towards your Saudization figures.

Taxation

Saudi nationals and GCC residents in Saudi Arabia are not subject to any form of personal income tax. Businesses owned wholly by Saudis are subject to Zakat, which is a form of Islamic taxation set at a flat rate of 2.5%. However, businesses owned wholly by non-Saudi/GCC nationals will be subject to income tax.

If business ownership is a combination of Saudi and non-Saudi/GCC nationals, then Zakat and income tax will be paid in proportion to ownership. Income tax is set at a flat rate of 20%, but this increases to between 50% and 85% if the income is derived from oil and hydrocarbon production revenue.

In 2018, Saudi Arabia introduced VAT at a standard rate of 5%. However, it has now increased to 15% with an exception for the financial sector.

A Mutually Beneficial Relationship

Vision 2030 has eased investment restrictions and streamlined registration processes for foreigners. This means that there has never been a better time for French investors to start doing business with the Kingdom.

France has always been a world leader in terms of innovation, so they are well-placed to accommodate the needs of Saudi Arabia’s growing technology sector. In the long term, this will be a mutually beneficial relationship for both French businesses and the people of Saudi Arabia.

French companies will have greater access to a market of almost 35 million consumers, where there is a growing middle class seeking innovative and high-quality products and services. As a rapidly developing and youthful nation, Saudi Arabia will benefit from more foreign investment and expertise, while they achieve their national transformation goals.

Unlocking Saudi Arabia with Hammad & Al-Mehdar

Hammad & Al-Mehdar is a new-age law firm bridging traditional and emerging business sectors for private sector companies, family offices and SMEs entering or operating in the Middle East.  We help navigate essential legal and regulatory requirements to grow and succeed in the Middle East, with specialty in the Kingdom of Saudi Arabia given our 40-year track record.  Our firm is forward thinking and has depth of knowledge in business of the past, present and future, and therefore well qualified to support French companies as they evolve their presence into Saudi Arabia and the wider MENA region.  To discuss your business presence and expansion in Saudi Arabia contact Senior Associate, Samy Elsheikh. 

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