Foreign investor in Saudi Arabia, Foreign Investment Act - Negative List.

Iam an expatriate Indian doing business in Qatar. I would like to start business in Saudi Arabia. I cannot leave my existing business in Qatar. Any possible way?  Could you please clarify the advantages provisions in favor of foreign investor? As per my knowledge, some of the businesses prohibited for non-Saudis. May I know what the prohibited business areas for foreign investors?

In April 2000, Government of the Kingdom of Saudi Arabia approved a new foreign investment law and encouraging liberal, open-market private enterprise policies. The law brought significant changes to the previous sponsorship regulations and tremendous changes in the business atmosphere of the Kingdom. The Foreign Investment law allows international companies for the possibility of 100 percent ownership of the projects and the property required for the project itself, while enabling them to retain the same incentives given to national companies. Projects, for instance, that are 100 percent foreign-owned are eligible for loans from the Saudi Industrial Development Fund.

One of the significant and most attractive points in this law is that, there are no restrictions on foreign exchange. No restrictions on the repatriation of capital and profits. Moreover a new income tax law passed in January 2004, which reduces taxes on corporate profits to 20 % from 45 %. 

Saudi Arabian General Investment Authority (SAGIA) is responsible for implementing policies of foreign investment in Saudi Arabia. They are responsible for issuing investment licenses, visas, residence permits, and other related papers to foreign investors. Investors are also allowed to hold investment licenses in more than one type of activity.

SAGIA handling the foreign investment application process by creating investor service centers. Within thirty days of the submission of the investment application, the centers shall require to respond. If SAGIA will not make any decision within the stipulated time frame, the license will be issued. If SAGIA declines the application, the foreign investor has the right to appeal the decision. 

According to Article 1 (e) of the Foreign Investment Act, "a Foreign Investor is a natural person who is not of Saudi nationality or a corporate person whose partners are not all Saudi".  Article 6 (3) of the Executive Rules of Foreign Investment Act explains " the license applicant should be a natural or nominal person who has come to the Kingdom for the purpose of investment". So he should be a resident in Saudi Arabia with a purpose of investment. A non-Saudi resident is, therefore, ineligible to become a foreign investor as per the Foreign investment Act. 

The law permits foreigners to invest in all sectors of the Saudi Arabian economy, except for specific activities contained in the negative list. The Negative list formulated by SAGIA is given below.

List of businesses prohibited for foreign investments

Industrial Sector

1.  Oil exploration
2.  Drilling and production. Except the services related to mining sector listed at in International Industrial classification codes.
3.  Manufacturing of military equipment, devices and uniforms.
4.  Manufacturing of civilian explosives.

Service Sector

1.  Catering to military sectors.
2.  Security and detective services.
3.  Real estate investment in Makkah and Madina.
4.  Tourist orientation and guidance services related to Hajj and Umrah.
5.  Recruitment and employment services including local recruitment offices.
6.  Real estate brokerage. 
7. Printing and publishing. Except the following activities:

• Pre-printing services internationally classified at ( CPC 88442)
• Printing Presses internationally classified at ( CPC 88442)
• Drawing and calligraphy internationally classified at ( CPC 87501)
• Photography internationally classified at ( CPC 875)
• Radio and Television Broadcasting Studios internationally classified at ( CPC 96114)
• Foreign Media Offices and Correspondents internationally classified at ( CPC 962)
• Promotion and Advertising internationally classified at ( CPC 871)
• Public Relations internationally classified at ( CPC 86506)
• Publication internationally classified at ( CPC 88442)
• Press Services internationally classified at ( CPC 88442)
• Production, selling and renting of computer software internationally classified at (CPC 88)
• Media consultancies and studies internationally classified at ( CPC 853)
• Typing and copying internationally classified at ( CPC 87505 + 87904).
• Motion picture and video tape distribution services internationally classified at ( CPC 96113).

      8.   Commission agents internationally classified at ( CPC 621). 

      9.   Audiovisual and media services. 

    10. Land transportation services, excluding the inter-city passenger transport by trains.

   11. Services provided by midwives, nurses, physical therapy services and quasi-doctoral    services internationally classified at ( CPC 93191). 

    12. Fisheries

    13. Blood banks, poison centers and quarantines.

There is a review clause inserted in the executive Rules for the periodical review of the Negative list. Article 3 of the Executive Rules of Foreign Investment Act indicates that "The Board of Directors shall periodically review the list of activities excluded from foreign investment in order to shorten it and submit it to the The Supreme Economic Council to consider its approval".