RIYADH, Saudi Arabia, September 20, 2018 /PRNewswire/ --
Dramatically reduced paperwork and waiting times for trade licences; introduction of labour and commercial courts; and relaxation of restrictions on foreign ownership all cited as catalysts for 'bright and sustainable future'
The Ministry of Justice today forecast a "wave" of foreign direct investment (FDI), following a slew of legal and regulatory reforms in the kingdom that have simplified applications for business licences, strengthened commercial- and labour-court systems, and relaxed restrictions on foreign ownership.
Many analysts and commentators now talk of the "golden opportunity" Saudi Arabia represents for investors, following "unprecedented" economic reforms that include - in a bid to boost employment - a pledge to increase FDI from $8 billion to $18.6 billion.
The first quarter of 2018 saw a 130 percent increase in the number of foreign-investment licences granted in Saudi Arabia compared with the year-earlier period, according to the Saudi Arabian General Investment Authority (SAGIA). Ministry of Justice officials attribute this surge to many current legal conditions. Article 5 of the Foreign Investment Act permits any licensed enterprise to be wholly owned by a foreign investor. In addition, SAGIA has increased the validity period of a foreign investment license from one to five years. And digital transformation initiatives, along with reforms in application requirements, have reduced the waiting times for licenses from an average of 53 hours to less than 4 hours. Now applicants are required only to submit incorporation certificates and the previous year's audited financial statements.
Saudi Arabia has also opened more sectors to foreign investors for 100 percent ownership, recently adding film distribution, communication services, and rail, air and space services to accompany the engineering, education and recruitment sectors. International tech giants are among those companies starting to notice the extensive overhaul taking place within the legal sector. In December, Apple and Amazon entered talks to invest in the kingdom, encouraged by relaxed licensing laws. The US tech giants' interest in Saudi Arabia is timely, given the country's increasingly young demographic; an estimated 70% of the population is now under 30 years of age.
Foreign investors also now have access to Saudi stock markets, which has led to the kingdom outperforming international peers. Monitored performance across 137 national exchange-traded funds (ETFs) proved mostly flat this year, but Saudi Arabia was one of only two countries that showed growth. The iShares MSCI Saudi Arabia ETF was up almost 18 percent, with analysts citing economic and legal reforms for the uptick.
Another major factor in the FDI surge is the introduction of the kingdom's commercial courts in September 2018. Specialist commercial chambers within existing public courts also opened, as did a number of appeals chambers. Specialist labour courts will begin operation in early 2019, to serve the country's 13-million-strong workforce. The Ministry of Justice predicts that the forthcoming court system will optimise the routing of skilled employees to key roles, further boost investment in the kingdom, and significantly assist the achievement of Vision 2030 objectives.
"Saudi Arabia's future is one of unprecedented opportunity for local and foreign businesses, as we implement Vision 2030 through the National Transformation Programme," said the Saudi Ministry of Justice. "The Ministry has taken several steps to ensure reliable, pragmatic legal processes are in place to serve the continued prosperity of the nation. The strides forward we have taken in our labour and commercial courts, and our introduction of enhanced efficiencies across the legal system, will likely encourage a wave of foreign investment and a surge in employment. We shall never rest. Expect to see continual change, as we sweep away barriers and inefficiencies, and build a legal framework that delivers a bright and sustainable future for all who reside in the kingdom."
SOURCE Saudi Ministry of Justice