The General Secretariat of Tax Committees has launched an electronic edition of the tax regulations guidance. The electronic edition has been issued to create a comprehensive reference for all tax and zakat regulations.
The electronic edition aims to improve the processing times of tax disputes and raise public awareness about the tax regulations.
Saudi Arabia’s General Authority for Social Insurance has announced a Decision has been issued by the Finance Minister and Chairman of the Authority approving an amendment to the registration and subscription regulation for the Social Insurance Law. The amendments will come into force on February 1, 2022.
Under the amendments, the period of time given to the employers to add subscribers becomes the end of the month of the joining and amending the period given to employers to remove the subscribers by the end of the month they are leaving.
Completing the registration of the non-Saudi subscribers and submitting their wages must also be done by the end of the month of their joining.
Nitaqat is an initiative launched by the Saudi Ministry of Human Recourses and Social Development(“HRSD”) to encourage the private sector to hire Saudi nationals, thus, decreasing Saudi unemployment and increasing the share of their participation in the labour market.
The initiative restricts certain positions in the private sector to be occupied only by Saudi nationals. Currently, there are five Zones; Red, Low Green, Medium Green, High Green, and Platinum. Nitaqat applies to all entities that have 6 employees and above.
HRSD would apply Nitaqat to place the Saudi entity into a zone based on the percentage of Saudization it holds. Each range has its privileges and limitations.
Since its application in 2011, Nitaqat has been subject to different changes and updates, the latest of which was in December 2021( the “Advanced Nitaqat”).
Nitaqat classifies entities by their sector, activities and number of employees using the International Classification Standard (“ISIC4”) over three years. By applying a specific equation using the Saudization percentage and number of employees, the entity will be able to know in which zone it falls for the first, second and third year onward.
While there is no specific minimum wage for a Saudi national generally under the Saudi Labour Law, the MHRSD would only count an employed Saudi national towards Nitaqat if his/her basic monthly salary is at least SAR 4,000, which was SAR 3000. However, those whose salaries are SAR 3000 and less than SAR 4000, including part-time workers shall be counted as ½ of the Saudi worker. In addition, flexible-hours workers shall be counted as 1/3 of the Saudi worker, provided the worker has completed not less than 168 hours in service. Handicapped worker will be considered as 4 workers, provided that his/her salary is not less than SAR 4,000.
The previous Nitaqt classified organizations under 85 categories, which have been condensed to 33 activities and placed them in the same category with common characteristics.
| 1 | Agricultural production, animal production, its services and equestrian clubs | 2 | Mines, Energy and Services
|
| 3 | Industries | 4 | Contracting, construction, building and cleaning |
| 5 | Operation and maintenance | 6 | Wholesale and Retail |
| 7 | Health Services | 8 | Accommodation, Recreation and Tourism |
| 9 | Ground transportation and storage | 10 | Sea and Air transport |
| 11 | Financial Institutions | 12 | Business Services |
| 13 | Social Services | 14 | Recruitment services and security guards services. |
| 15 | Personal Services | 16 | Combined Entities. |
| 17 | Higher Education | 18 | Girls’ schools, Kindergartens and Nurseries |
| 19 | Boys’ Schools and boys’ and girls’ complexes | 20 | International Schools |
| 21 | Selling Fuel
|
22 | Women’s goods Sale and maintenance of mobile phones |
| 23 | Restaurants with services that do not include fast food | 24 | Fast food and Ice-cream Shops |
| 25 | Cafés | 26 | Catering |
| 27 | Communication solutions | 28 | IT Solutions |
| 29 | postal activities | 30 | IT Infrastructure |
| 31 | telecommunications infrastructure | 32 | Operation and maintenance of communications |
| 33 | Operation and maintenance of information technology |
To explain how the equation works, the table below shows the values that need to be used to generate the minimum classification for each zone, then the Saudizatin percentage will be compared to the result to allocate the entity in the relevant zone.
| Activity | Zone | Curve Fixed Value | Absolute Fixed Value for the 1st year | Absolute Fixed Value for the 2nd year | Absolute Fixed value for the 3rd year |
| Industries | Low Green | 1.68 | 14.08 | 20.08 | 25.08 |
| Medium Green | 1.87 | 16.87 | 22.87 | 27.87 | |
| High Green | 2.08 | 20.47 | 26.47 | 29.47 | |
| Platinum | 2.08 | 23.87 | 28.37 | 32.87 |
Below is an example of an activity and the Nitaqat zones for the first year on the assumption that the entity has 19 employees (7 Saudis and 12 non-Saudis):
7%19× 100 = 36.84
Curve Fixed Value * log(total number of employees) + absolute fixed value for the relevant year
Nitaqat Low Green Value: 1.68× log(19)+14.08= 16.22
Nitagate Medium Green Value: 1.87× log(19)+16.87= 19.26
Nitaqat High Green Value: 2.08× log(19)+20.47= 23.12
Nitaqat Platinium Value: 2.08× log(19)+23.87= 26.52
Accordingly, the entity will be placed by comparing the Saudization percentage with the results we reached above:
From 0% – 16.21 falls in Red Zone.
From 16.22 – 19.25 falls in Low Green Zone.
From 19.26 – 23.11 falls in Medium Green Zone.
From 23.12 up to 26.51 falls in High Green Zone.
From 26.52 up to 100 falls in the Platinium Zone.
As the Saudization percentage is: 36.84%, which exceed the minimum range of the Platinium Range (26.52), then the entity shall be placed in the Platinium Zone.
Premium Range Companies:
High Green Range Companies:
Mid Green Range Companies
Low Green Range Companies:
Red Range Companies:
Arbitration is becoming an increasingly popular way to resolve disputes in Saudi Arabia. The government has taken significant steps to encourage the use of arbitration, and recent developments in the law have made the process even more efficient and cost-effective. As a result, more businesses are turning to arbitration to resolve their disputes.
In 2014, the Saudi Center for Commercial Arbitration (SCCA) was founded as the Kingdom’s first independent arbitration institution. They are a not-for-profit organization that administers Alternative Dispute Resolution (ADR) procedures guided by Shariah principles.
Arbitration is used as a means to resolve disputes outside the courtroom. It’s a process in which two or more parties agree to have a neutral third party, called an arbitrator, preside over their case, and make a decision.
Arbitration is often seen as a faster and more cost-effective option than going to court. It allows both parties to agree upon an adjudicator of their own choosing, rather than a court-appointed judge. The arbitrator is often a highly accomplished legal professional or former business leader, who gives both parties the opportunity to present their case.
Although previously an uncommon choice in Saudi Arabia, the government has sought to increase the use of arbitration as a means to resolve disputes. In 2012, a royal decree was issued which set forth the legal framework for arbitration in Saudi Arabia. This new Law of Arbitration is based on the UNCITRAL Model Law, which is the international standard for best practice in arbitration law.
The Law of Arbitration sets out the rules and procedures that must be followed in order to initiate and conclude an arbitration proceeding. It also establishes the legal rights and obligations of the parties involved in the arbitration process.
Arbitration in Saudi Arabia is a private process, meaning that the proceedings and the award remain confidential unless there is written consent from both parties to publish the details of the award granted.
In 2013, the Enforcement Law came into effect, which provides for the enforcement of arbitration awards in Saudi Arabia. This means that if one party does not comply with the award, the other party can take legal action to have it enforced.
Arbitration in Saudi Arabia is considerably cheaper than taking a case through the court and the SCCA has taken recent steps to make it even more affordable. In September 2021, they reduced arbitrator fees by 30% and the initial cost of starting proceedings by 50%.
Filing fees have now been eliminated entirely, and parties are simply required to pay a flat registration fee of SAR 5,000, which is later credited towards the administration fee. The SCCA has also introduced three arbitrator pricing tiers: minimum, maximum, and average. Fees are fixed on a case-by-case basis, depending on the complexity of the case and the time required by the arbitrators to hear and determine the case.
The Online Dispute Resolution (ODR) service also experienced a price reduction of 40%. This allows smaller businesses and entrepreneurs to have access to affordable arbitration, without the need to take their dispute to the courts.
Arbitration in Saudi Arabia is a relatively fast process in comparison to court proceedings. The time it takes to resolve a dispute through arbitration will depend on a number of factors, including the complexity of the case and the availability of the arbitrator.
Generally, arbitration proceedings will take between 6 and 12 months to complete. Once the arbitrator has made a decision, the award will be binding on the parties with a requirement to comply.
According to a recent statistical report by the SCCA, arbitration continues to be supported by the judiciary and is experiencing fast growth as an alternative to court litigation. Saudi courts are increasingly reluctant to set aside arbitration awards, demonstrating their strong support for the arbitration process. Between 2017 and 2020, 107 motions were initiated to set aside awards. Out of those 107, only 6% were accepted.
In light of this continued success, it is likely that arbitration will continue to grow in popularity in Saudi Arabia. Parties who are looking to resolve disputes quickly and cost-effectively should consider arbitration as an option.
Since its inception in 2016, Saudi Arabia’s Vision 2030 has been positioned as a transformative blueprint for the country’s future. And while there is no doubt that the plan — which aims to wean the economy off its dependence on oil and gas revenues and make the Kingdom a global investment powerhouse — will have a profound impact on virtually every sector of Saudi society, its legal implications are most far-reaching.
From the introduction of 5G and the accompanying increase in regulation to the need for businesses to embed new systems and ways of working, Vision 2030 is certain to have a major impact on Saudi law. Perhaps nowhere is this more evident than in the area of competition law, where the plan’s ambitious diversification and privatisation goals are likely to bring increased competition — and with it, the need for stricter enforcement.
With this in mind, here’s a closer look at some of the legal implications of Saudi Arabia’s Vision 2030.
5G & Regulation
The rollout of 5G networks is set to transform the way we live and work, and the Saudi government is keen to ensure that the country is ready for this next-generation technology. Abdullah Al-Sawahah, Minister of Communications and Information Technology, stated that “Saudi Arabia is determined to be a world leader in 5G to take early advantage of its benefits.”
To that end, the government announced in 2021, that they would designate the entire 6GHz radio band for unlicensed use. This is in line with global trends, as more countries are making large swaths of radio spectrum available for 5G deployment.
However, in order to ensure that the rollout of 5G in Saudi Arabia is done in a way that is safe and compliant with international standards, the government has also laid out a framework for telecoms companies. Under these new regulations, they must adhere to a number of strict security and privacy requirements and are advised of the need to develop disaster recovery plans and ensure that customer data is properly protected.
Information Security & Data Protection
With the rise of cloud computing and the increasing digitisation of society, the issue of information security and data protection is becoming increasingly important. The Saudi government has taken note of this trend and has introduced several regulations aimed at safeguarding consumer data.
Saudi Arabia’s Personal Data Protection Law was implemented by royal decree in 2021. This regulation sets out a number of strict requirements for businesses that process or store personal data.
Among other things, businesses must, in most cases, obtain prior consent from individuals before collecting, using, or sharing their data. They must also ensure that personal data is properly protected and take steps to ensure that any data breaches are promptly reported and resolved. The CITC has also published a set of guidelines on information security, which businesses are encouraged to adopt in order to protect themselves from cyber-attacks.
Competition Law
As Saudi Arabia moves away from its dependence on oil and gas revenues, the need for strong competition laws becomes increasingly important. This is especially true in the context of Vision 2030’s ambitious diversification plans, which are sure to bring new players into many sectors of the Saudi economy.
In late 2019, a new Competition Law was announced by Royal Decree. This new set of regulations is in line with international best practices and designed to ensure that businesses compete fairly, without resorting to anti-competitive practices such as price-fixing, bid-rigging, and illegal market manipulation.
The General Authority for Competition (GAC) has begun to increase its enforcement of competition law in recent years, and this is likely to continue as the Saudi economy becomes more competitive. In 2021, the GAC blocked its first transaction during a merger, signalling a new era of tougher enforcement.
“Competition filing has been a standard part of acquisition and investment transactions relating to Saudi Arabian companies, including technology companies, which have seen an investment boom over the last 2 years. Private equity and, to a certain extent, venture capital, investors and targets must now consider the impact of competition on their intended transactions” stated Abdulrahman Hammad, partner and head of the finance practice at Hammad & Al-Mehdar.
The Changing Future Of Saudi Arabia
The Saudi government’s Vision 2030 is a bold and ambitious plan that is sure to have a major impact on the Kingdom’s economy. While the full extent of these impacts is not yet known, it is clear that businesses will need to be prepared for a number of legal and regulatory changes. From new regulations on 5G and data protection to increased competition law enforcement, businesses will need to adapt in order to stay ahead of the curve.
The construction and contracting industry in Saudi Arabia is booming, with many high-profile projects underway or in the planning stages. The sector presents a significant growth opportunity for businesses, but it’s important to be aware of the legal compliance issues that need to be considered in order to operate successfully and avoid any potential penalties.
This article provides an overview of some of the key legal compliance issues that are relevant to the construction and contracting industry in Saudi Arabia.
Saudi Arabia’s construction industry has seen significant growth in recent years, with many large-scale projects nearing completion. Here are some of the most notable construction projects in Saudi Arabia:
Saudi Arabian law is uncodified and relies on a set of Shari’ah principles interpreted from Islamic religious texts. Currently, there is no complete set of construction laws regulating the industry, and parties are free to enter a contract as long as their agreements do not offend the fundamentals of Shari’ah.
With regards to procurement, an amended Government Tenders and Procurement Law (GTPL) was introduced in 2019 and sets out the rules and procedures for government contracting. Since the majority of major construction projects in Saudi Arabia are government-sponsored, this law is highly relevant to the industry.
The GTPL requires all government contracts to be tendered openly and transparently, with contracting authorities required to publish notices of contracting opportunities and award contracts to the winning bidder after a fair and open tender process.
The Saudi Arabian government has placed a number of restrictions on non-GCC foreigners owning property in the Kingdom. They may only own the property for the purpose of residency and are restricted from acting as a landlord or owning more than one property.
Businesses owned by foreigners can purchase real estate for the purpose of business activities, including accommodation for employees. Within the holy cities of Makkah and Medina, only Saudis are permitted to purchase properties.
In 2017, the government announced that contractors must register with the Saudi Contractors Authority. The authority is responsible for the regulation and control of the construction industry in Saudi Arabia. In 2020, it was discovered that out of 140,000 contracting companies, only 4000 were registered. It was subsequently announced that contractors won’t be awarded building permits or be able to bid on government projects if they are not registered with the authority.
As the Saudi Arabian construction industry continues to grow and attract foreign investment, additional regulation is likely to be introduced in order to ensure the sector remains compliant. In particular, the government is likely to focus on increasing transparency and preventing corruption in the industry. Foreign investors and contractors should ensure they are aware of the relevant regulations before entering into any construction contracts in Saudi Arabia.
As part of Saudi Arabia’s Vision 2030, the government seeks to transform the nation into a hub for technology and innovation. This transformation will have several legal implications, particularly with regards to data protection and cyber security.
In recent years, lenient cyber security implementation has made the Kingdom a global target for cyberattacks. To protect businesses and consumers, the government is implementing new laws and regulations to improve the security of the nation’s digital infrastructure.
The government is also working to create a more favourable environment for businesses and consumers by introducing new data protection laws and establishing regulatory frameworks related to cloud services and e-commerce. These efforts will help to attract foreign investment and encourage innovation within the Kingdom.
In 2020, Saudi Arabia experienced over 22 million cyberattacks, which cost the economy over $6 million. In a survey by VMware, 85% of Saudi Arabian security professionals reported an increase in cyberattacks during the pandemic, due to the increased number of employees working from their homes. Over the past few years, the government has begun to take steps to tackle the country’s long-standing cyber security vulnerabilities with the introduction of several new regulatory frameworks and governing bodies.
The National Cybersecurity Authority (NCA) was established in 2017 as the central authority for cyber security in Saudi Arabia. The NCA is responsible for developing and coordinating the Kingdom’s cyber security strategy, as well as overseeing the implementation of new laws and regulations.
In 2018, the NCA released a whitepaper outlining the minimum standards for cyber security that all organisations in Saudi Arabia must adhere to. This document includes requirements for risk management, incident response, data protection, and more. It was circulated amongst both private organisations and government bodies, to raise awareness and improve cyber security posture across the country.
In 2019, NCA established the Computer Emergency Response Team (CERT), which is responsible for responding to cyber incidents and providing technical and forensic support. Two years later, Saudi Arabia’s Communications and Information Technology Commission (CITC) announced the implementation of a cyber security regulatory framework that aims to raise the security levels of service providers in the IT, communications, and postal services sector.
In 2020, the Saudi government enacted a new e-commerce Law, which includes provisions on data protection. The law requires e-commerce businesses to take measures to protect the personal data of consumers and establishes penalties for companies that fail to do so. It ensures the reliability and trustworthiness of online business transactions while safeguarding consumer rights and protecting online users from fraud and deception.
In March 2022, a new standalone personal data protection law (PDPL) came into force to provide additional protection for Saudi citizens’ personal data. The law requires organisations to take steps to protect the personal data of Saudi residents, including obtaining written permission before collecting, using or sharing personal data. Data controllers will be required to register with Saudi Data & Artificial Intelligence Authority (SDAIA) and pay an annual fee. Failure to adhere to this new law may incur criminal penalties including up to two years’ imprisonment or a fine of up to SAR 3 million. At the time of writing, the PDPL Implementing Regulations will be postponed until 17 March 2023, in order to consider the public consultation responses. That said, businesses are aware of the regulations which will be enforced soon, and are therefore urged to implement operational realignment to ensure legal compliance with the law from 2023.
In 2020, the Saudi government also released a Cloud Computing Regulatory Framework (CCRF), which sets out the requirements for organisations that wish to provide cloud services in the country. Cloud Service Providers (CSPs) are required to register with the Communication & Information Technology Commission (CITC) before they can provide cloud services within Saudi Arabia. In the event of any type of security breach, CSP must inform the CITC and any affected subscribers of their services, without delay. Additionally, the CSP is not permitted to share, or use their subscribers’ data for any purpose, unless express permission is obtained from the subscriber.
As Saudi Arabia’s tech transformation continues, the legal landscape is also evolving to keep pace with these changes. By ensuring that its legal system meets the demands of the modern IT industry, the Saudi government is sending a clear message that it is committed to protecting the privacy and security of its citizens in the digital age. In the coming years, we can expect to see these laws evolve further as the Kingdom looks to stay at the forefront of the global tech landscape.
Education in Saudi Arabia has come a long way over the past few decades. In the 1970s, only 7,000 students were enrolled in Saudi universities and today that figure stands at over 1 million. There has been a concerted effort by the government to provide education for all its citizens, and the results are evident. The primary education enrolment rate has increased dramatically, and the country now boasts several world-class institutions of higher learning.
There are still some challenges to be addressed, however. The quality of education remains uneven, with attainment levels still lagging some of the leading developing nations. COVID-19 also put a strain on the sector as schools were forced to close, meaning students had to learn remotely. Nevertheless, the future looks bright for Saudi Arabia’s education sector.
The Saudi private sector has been playing an increasingly important role in education over the past few years. As part of Vision 2030, the government is aiming to increase the proportion of students in private schools to take the strain off public funding and boost attainment levels.
Saudi Arabia’s exceptionally young population has increased the demand for good-quality schooling, and many parents are now willing to pay for private education. This has created opportunities for a number of international school chains to enter the market. By the year 2025, it’s anticipated that there will be a need for an additional 980 private schools to support the 2.1 million new school seats that will be required. In 2018, private school enrolment sat at 13%, but by the year 2025, this will likely increase to 15% to match the 3.5% annual increase in the total number of Saudi students. As a result of these factors, the private education sector is expected to grow at a CAGR of 11% until 2026.
As part of the government’s plan to increase private participation to 25% of the education sector, they have created an “independent schools” program. This program aims to make 2,000 public schools independent, meaning they have full autonomy over their administration, financial support, and curriculum. It opens up even more opportunities for private investment and management of public schools.
Saudi Arabia has typically fallen behind its Gulf neighbours when it comes to quality of education. However, government efforts are starting to have a positive effect, and the country is now ranked 35th place globally for quality of education (up from 45th in 2020). However, attainment levels remain relatively low when compared to other nations.
To tackle this issue, the Saudi government has funnelled one-fifth of their budget into the education sector and made steps to increase private sector participation in the market. Their efforts were somewhat hampered by the COVID-19 pandemic, which forced students to switch to online home-based learning. This meant private schools had to drop their fees, resulting in reduced funding and staffing issues.
In 2017, the Saudi government opened the private education sector to 100% foreign ownership and investment. This means there are now plenty of opportunities for foreign businesses to get involved in the education sector without the requirement of a local partner.
In the same year, the government announced new regulations under the Tadarruj system to regulate the building requirements for private schools operating in the Kingdom. By 2018, over 113 private schools were shut down for not abiding by these new regulations and operating out of buildings not designed for educational activities. Private schools are now required to wholly own their school buildings in order to be granted the appropriate licensing. Their premises must also fulfil a number of criteria to ensure they are fit for purpose.
The government recently announced that by the end of 2022, the Human Resource Development Fund (HRDF) would withdraw their funding support for Saudi citizen teachers. Until now, the government had been paying up to 50% of Saudi teachers’ salaries. This funding program was previously initiated after a Saudi citizen minimum wage was introduced, but schools must now start paying these salaries in full. This may result in a fee increase to combat the shortfall in funding.
The government has made it a priority to address the issues affecting educational attainment within the Kingdom and is working hard to ensure that Saudi Arabia’s education sector continues to develop and improve. In the coming years, we can expect to see even more progress in this vital area.
Private institutes who are considering entering the education sector will need to consider a multitude of elements, which include:
Incorporation – navigating the registration structure, considering your location, core age demographic which you are targeting, incorporation legal requirements, regulatory legal approvals,
Funding & Finance – the financial resources required to incorporate and operate across Saudi Arabia, whether you should consider a joint venture or merger, feasibility and due diligence assessments, banking structure across the country
Real estate – land law considerations, development, and leasing requirements, musataha agreements with government entities and developers.
Construction and infrastructure – construction laws, operating and maintaining of new campuses and student accommodation.
Employment – contracts, review of HR policies, employment laws.
Technology – technology procurement, outsourcing arrangements, licensing agreements.
Our education specialists at Hammad & Al-Mehdar have been supporting the education sector and its related entities for decades and have delivered the full lifecycle of legal and corporate services for its clients.
To discuss your education entity contact us.
Saudi Arabia is going through a period of unprecedented transformation and rapid economic diversification. Thanks largely to the regulatory, legal, and social reforms under Vision 2030, the nation is opening up new opportunities for businesses and investors.
The Vision 2030 plan — championed by Crown Prince Mohammed bin Salman — set a clear goal to reduce the country’s dependence on oil. The government is investing in several growing sectors, such as renewable energy, tourism, technology, and education, in a bid to position Saudi as a regional hub of technological innovation, entrepreneurship, and economic opportunity.
The government’s strategic investments and reforms have already begun to bear fruit. The Saudi economy has flourished despite the pandemic, with foreign investment at an all-time high and the private sector playing an increasingly important role.
Legal reforms have played a significant role in this success. The government has taken steps to remove investment restrictions and develop a more regulated legal framework for businesses operating within the Kingdom. These reforms have brought Saudi in line with global standards of best practice and improved their positioning in the World Bank’s “ease of doing business” index from 59.16 out of 100 in 2016 to 71.56 in 2020. This figure is expected to grow at a rate of 4.6% each year.
In 2016, the government opened up multiple sectors to 100% foreign investment and ownership, allowing foreigners to fully own their businesses for the first time. In the same year, the process of obtaining a foreign investment licenses was eased dramatically, with the number of required documents reduced to three, and the maximum processing time capped at five days. In 2021, the number of foreign investment licenses issued jumped by 250% compared to the previous year, with 4,431 licenses issued in total.
The Vision 2030 strategy was designed with Saudi’s large youth population in mind and aims to reduce the local population’s reliance on public sector employment. More than half of the population is under 35, making the country one of the most youthful in the world. Saudi’s private sector economy was largely supported by foreign labour until recently, reducing employment opportunities for Saudi citizens. Under Vision 2030, the government has funneled nearly 20% of their total budget into their education system, with the aim of developing a more skilled and employable Saudi workforce.
According to the MSCI, Saudi Arabia topped the Emerging Markets Index in 2021, representing a 27% rise in total market value compared to the previous year. The country presents a unique opportunity for British investors, who are now welcome to visit the country freely since the adoption of a new visitor visa model. Additionally, the Saudi government has approved the issuance of a new foreign investor visa that allows potential investors to reside in the Kingdom, sponsor their family members, and engage in property and business ownership.
Many sectors across the country are growing at an accelerated rate since the start of the pandemic, providing ample opportunity for foreign skill sets and investment. Most notably, the telecommunications and IT sectors have seen a surge in recent years, with the latter expected to grow at a CAGR of 7.78% through 2025. The move towards economic diversification has also meant a shift away from the petrochemical industry, towards renewable energy and other sustainable sectors. In 2021, the government announced its intention to invest $100 billion in the development of the renewable energy sector by 2030.
The government has also paved the way toward developing the nation as a prime tourist destination for travelers seeking to explore Arabia’s rich heritage. The Vision 2030 strategy prioritizes tourism as a key economic enabler, with the aim of increasing the number of tourists to 100 million annual visitors by 2030. The rapid development of this previously unexplored sector presents the need for hospitality industry experts, who can help to develop the necessary infrastructure and establish best practices.
Vision 2030 presents a wealth of opportunities for UK investors looking to expand into new and rapidly growing markets. The Saudi government has made a concerted effort towards improving the ease of doing business in the country by focusing on developing a more highly skilled and employable local workforce. Sectors such as telecommunications, IT, renewable energy, and tourism are growing rapidly and offer ample opportunity for foreign investment and skill sets. The government has also made it easier for investors to obtain visas, making Saudi Arabia a more attractive destination for those looking to expand their business operations.
Digital assets are becoming increasingly popular all over the world, as investors see the potential for great returns. By the end of 2022, global owners of crypto assets are expected to exceed 1 billion. Although initially slow to gain mainstream adoption in the region, their popularity is quickly growing among GCC residents. In Saudi Arabia specifically, cryptocurrency ownership has rapidly increased over the past 5 years, with 77% of the population having some awareness of digital assets and 18% actively trading in crypto. This increased level of digital asset trading activity is creating a need for a clearer regulatory framework within the region.
Digital asset regulation differs from country to country across the GCC. Some take a more hands-on approach while others have been unhurried. Bahrain, an early adopter of crypto regulations, launched a directive in 2019. The directive states that no person may market or undertake business activities comprising regulated crypto-asset services from within the Kingdom of Bahrain, without obtaining a licenses from the Central Bank of Bahrain (CBB).
In 2020, the UAE’s Securities & Commodities Authority (SCA) published “The Authority’s Chairman of the Board of Directors Decision No. (21/R.M) of 2020 Concerning the Regulation of Crypto Assets”. This directive outlines SCA’s licensing regime for any ICOs, exchanges, marketplaces, crowdfunding platforms, custodian services, or related financial services based upon, or leveraging crypto assets that wish to operate within the country. It states that crypto trade service providers must be incorporated onshore within the UAE and obtain the correct licensing. They must also comply with the country’s anti-money laundering and counter-terrorism financing laws, cyber security compliance standards, and data protection regulations.
In contrast to its Gulf neighbours, Qatar took the decision to announce an outright ban on cryptocurrency trade, with the exception of security tokens in 2020. Citing sources of Islamic scholarship, the leadership determined that cryptocurrency trading was in breach of the Shari’ah principle of the forbiddance of riba (usury).
While interest in digital assets remains high within the Kingdom (34% of residents express an interest in investing), adoption remains lower than the global standard. However, within the Arab world, Saudi residents come in third place in crypto ownership. Younger higher-income Saudis (earning at least 30,000 riyals per month) are the demographic most likely to pursue crypto investment, while those over 45 years of age show the most hesitancy.
Saudi Arabia’s first non-fungible token (NFT) marketplace Nuqtah was launched in 2021, showcasing digitally tradeable art from leading Middle Eastern and North African artists. Founder, Salwa Radwa believes, “We are currently witnessing the revolution of what is known as the Internet, not only with blockchain technology, but ownership of virtual assets through NFTs”.
Princess Reem Al Faisal — one of the first women to document the hajj with her photography — recently entered the NFT world with the launch of her NFT collection “Makkah and Medina”. Her digitized historic images of the holy pilgrimage were sold on the OpenSea NFT marketplace, drawing greater attention to this form of digital asset trading within the Kingdom.
Cryptocurrencies have a quasi-legal status within Saudi Arabia. In 2018, the government placed an outright ban on banks processing any transactions involving cryptocurrencies. The government has repeatedly maintained that those who trade in cryptocurrencies are doing so illegally and have no financial protection and risk the loss of their assets. However, there are currently no legal penalties in place for people who choose to trade in digital assets, whether crypto, NFT, or otherwise.
Currently, this legal grey area presents a challenge to potential crypto investors within Saudi Arabia, who may be hesitant to engage in crypto-trading activity out of fear of possible legal repercussions. NFTs remain a safe option for many in the Kingdom as they are not currently considered to be cryptocurrencies, with their trade not falling under the blanket crypto ban.
With Saudi Arabia’s neighbors seeking to bring the world of digital asset trade under the control of a regulatory framework, it’s possible that the Kingdom may follow suit in the coming years. The country’s youth population maintain a keen interest in all things digital and will likely welcome the introduction of regulations that legitimise the crypto and digital asset space.