7 Advantages of Setting up a business in Saudi Arabia
Saudi Arabia’s economy has a long history, but until relatively recently, its foreign investment world was limited. However, Saudi Arabia is now a big player in a globalised economy.
In 2005, Saudi Arabia joined the World Trade Organization. This helped with promoting global access to investments within the country. It also helped to modernize Saudi Arabian trade policy.
The entrance of Saudi Arabia into the WTO made some of its market practices more standardised in relation to global practices – other areas were negotiated by the government with an eye toward accommodating the residence of the sovereign nation.
Essentially, Saudi Arabia is opening and expanding the areas in which foreign investors can participate – while still delivering some protectionism in terms of off-limits trading areas. At the same time, Saudi Arabia’s sovereign wealth fund is quickly investing in other countries, with tremendous loans including high-value ownership of American real estate landmarks.
The Saudis are quickly working to revolutionize their banking system with a move toward digital and paperless designs, and even looking at cryptocurrency and blockchain digital ledger technologies for the purposes of financial organization.
Then there’s the Saudi Arabia stock exchange – the Tadawul with an index of about 150 companies that offers investment opportunities in fields like finance and energy.
With a value of around $780 billion, Saudi Aramco, the country’s largest oil company, has a major impact in global finance.
The privatization of industries like telecom is one other factor in evolving foreign investment, while Saudi Arabia also struggles to diversify from oil, which can be an issue for investors.
Advantages of Working in Saudi Arabia
There are many advantages of working and doing business in Saudi Arabia that are leading foreigners from many different countries to cast their eyes on this nation when looking to find a home for capital.
Some of them have to do with the country’s financial system, and others have to do with its favorable environment and business climate.
First, there’s a different system of taxation where foreign investors may not be held liable for significant income tax, or even a lot of sales tax. These favorable tax climates are a big draw for some investors who are either ideologically opposed to taxation or want taxes to take a smaller bite out of their bottom line. Deloitte’s coverage of Saudi policy last year shows that although the country will participate in a GCC VAT system with other gulf states, some different categories of items will be exempt and subject to a zero rate. Meanwhile, sites like this one at ExpatFocus break down the KSA’s lack of an income tax on foreigner’s salaries.
There’s also the inherent vibrance in the Saudi Arabian system, based on the oil wealth that has traditionally kept the country flush. Although there are challenges in moving away from oil, the Saudis are doing it quickly, for instance, boosting tourism with elegant resorts and making plays in all sorts of other industries to shore up the country’s financial system. The diversification is happening at a lightning speed, and experts agree this is going to be the deciding factor in the Saudis’ continued financial health.
In fact, another draw for Saudi Arabia is the modern technologies in play. With driverless vehicles providing public transit in cities, and pending innovations like Hyperloop travel in the region, the Saudis are ahead of the curve when it comes to many of the world’s newest cutting-edge technologies. This in turn contributes to the general business environment there.
Ease of doing business is also a big reason that a lot of business people want to start a business in Saudi Arabia. International agencies rank the country high in terms of ease of doing business and with the privatization of some sectors, foreign consultants are becoming more and more in demand. There’s a feeling of “open arms” attitudes toward foreign capital, and a cosmopolitan ethos in Saudi Arabian business that many outside investors value a great deal.
Others who take advantage of opportunities to work in Saudi Arabia mention the friendly character of the Saudi people and the value of family in Saudi culture. In a sense, the openness that the Saudis have toward cosmopolitan investors also fosters more economic growth and more foreign investment in the country. Seeing Saudi as a “nice place to live” can make a big difference, as in the concept of flag theory, where the perpetual traveler makes capital choices partly based on available lifestyle.
Healthcare and education are also cited as some key elements that attract people to working in Saudi Arabia. The country’s healthcare system is modern and is sometimes even a destination for medical tourism. The education system is fittingly modern and well supported by the national government.
In addition, foreigners are also often housed in closed compounds and protected areas in order to maximize their safety. The combination of access to the greater Saudi culture and a haven to acclimate to that culture is another reason people consider the advantages of doing business in Saudi Arabia.
There are many excellent guides online with more information about the attractions of the Saudi Kingdom and details about where to go, what to see and what to do. The modernization of the KSA has brought quite a bit of tourism as well as international business.
All of the above brings business to Saudi. These are some of the major factors in the popularity of Saudi Arabia when it comes to investing in gulf states. Along with partners in the region, the Saudi Arabian leadership is re-making communities for a modern twenty-first century world. That’s exciting to a wide range of investors – it signals that now is the time to get in on the ground floor and participate in the Saudi grand plan for growth.
Doing Business in Saudi Arabia
Saudi Arabia has many opportunities for foreign investors in different key sectors. In a way, foreign investors can pick and choose from the different types of investments they want to pursue.
Although the country is diversifying from oil and gas, the petrochemical industry is still an excellent place to invest within Saudi Arabia. National estimates show a need for investment in traditional energy and natural-gas-related energy products at tens of billions of dollars each. There are also major opportunities in the field of water desalination which according to recent estimates is an $80 billion industry.
Another major area of opportunity is education – because the Saudi’]s understand that nationals must have the skills and experience to attract job offers, there’s a major push to develop education, especially higher education in Saudi. This includes the promotion of international schools and degrees for Saudi nationals, along with hosting Western teachers to help Saudi nationals to learn English. All of this generates significant amounts of capital and provides another avenue for foreign investors.
As mentioned above, Saudi Arabia is also investing heavily in its healthcare system. This national industry that attracts travelers from around the region also needs its own influx in cash – from modernizing facilities to innovating equipment and procedures, foreign investors can look at chances to participate in the Saudi’s grand plan for medical systems that rival the best systems elsewhere in the world
Foreign investors in Saudi Arabia can also get involved in the country’s finance and technology sector. The Saudi stock market is the largest such market in the region. The Saudi sovereign wealth fund, as mentioned, is also extremely active. Saudis are looking at ways to modernize and improve their financial system with new technologies. The “fintech” industry that is so new all around the world is taking root in Saudi Arabia. Financial players who understand the global landscape often mark Saudi Arabia as one of the global hot spots for doing business. As another prime example, Saudi Arabia’s space program and its public transit program are also quickly advancing in technology.
Another major opportunity in Saudi Arabia is to invest in tourism, as the country seeks to attract visitors. Recent estimates mark the contribution of tourism to the country’s GDP as around 3%. Meanwhile, as part of the kingdom’s Vision 2030 plan, the Saudis keep trying to add new tourist infrastructure, all of which attracts capital and foreign investment. Part of this also involves building travel infrastructure, which is another way to cash in on the Saudi economy. Regional air carriers are quickly ramping up to provide a global clientele with attractive travel options. Then, on the ground, a boom in restaurants and hotels corresponds to the growth in air travel in and out of Saudi hubs.
Want more evidence of Saudi growth and investment potential? The Saudis have created a designated “investment zone” called NOEM that is due to attract over $500 billion in funding and provide another direct alternative when it comes to investing capital in the region. What’s involved? Saudi media names energy and water, mobility and biotechnology as relevant sectors. There’s also some food production planned, along with work in technological and digital sciences, advanced manufacturing, media and entertainment . As business reports incidate, NOEM is part of a longer term strategy, and it’s also a deliberate attempt to remove some capital investment options from a “public sector” feel, with the NOEM project being billed as “separate from kingdom’s existing governmental framework .”
Lest one think that Saudi investment is all work and no play, there’s also a tremendous growth happening in the entertainment sector, and not just in the designated investment areas. Entertainment is one element of growth that reflects the Saudi Arabian changing view on things like music and movies – the Saudis are due to build the first opera house within the country, since these sorts of businesses were banned for previous decades. There’s also a growth in cinema, as Saudi Arabian culture loosens some of its traditional strictures.
All of this brings more people into the fold, as foreign investors in a quickly growing nation. It’s easy to forget that a lot of the premise of foreign investment relates to the economic “ambience” that leaders have created – how does the country embrace business? How it is evolving on a soioeconomic and cultural level? Saudi scores well in all of these areas.
Starting a Business in Saudi Arabia
Many foreign investors describe the process is fairly simple and apply the Saudi governments accommodation of entrepreneurs and those you want to move capital investing in the country.
Some of the basic ground will start with a registration process for new businesses. Business leaders should anticipate bringing documents to the Saudi consulate and submitting an application to the Saudi Arabian Gen. investment Authority
There’s also necessary interaction with the company’s Department of the Ministry of commerce and registration with the general Department of passports ministry of interior and the ministry of labor to take care of any Saudi visa requirements.
Other pieces of legwork include opening a Saudi bank account and getting the articles of Association notarized for business.
When a business has obtained a file number and gotten a certification of business, commencement, business leaders can register with the general organization of social insurance
With all of this in place, business leaders can look toward various opportunities such as direct exporting for integrating a foreign business into the national economy
In terms of Saudi banking, the central Riyadh bank provides some tips for foreign investors and business leaders including business guides that help to plan the entire process and lifecycle of business on boarding. Fern investors can go to Riyadh Bank to get professional consulting and business planning software that can help automate some of the necessary national process. There are also resources for creating a business plan.
The bottom line is that although there is a process to go through, Saudi Arabia is extremely attractive to a range of investors and entrepreneurs because of the possibilities and the way that the Saudi government reacts to foreign investment. Salaries are opening the barriers and opening the doors to more global interaction. Balancing out the aggressive foreign investment of the Saudi national wealth fund, the country is also offering those from other nations the opportunity to get involved and foster joint cooperation in that company’s national economy.
Other guidelines involve taking advantage of Saudi Arabia’s market potential where the country receives imports of around L7 billion worth of goods and services each year.
Experts describe Saudi Arabia as the biggest free economic market in MENA. It also participated in various trade agreements such as the Gulf Cooperation Council agreement and the European Free Trade Association agreement that enhance Saudi’s presence as a regional partner.
Investors can also keep on top of emerging news in the region – for instance, news of Saudi Aramco’s rise in spending over the next decade, additional privatization and a renewable energy program where the Saudi’s want to generate 95 GW of renewable electricity by 2023.
Here’s another example of Saudi opportunity when it comes to business – One of the lesser-known aspects of Saudi business culture that’s appealing to startups is a small project exclusion.
Experts on Saudi business explain that various smaller projects “do not require a local presence to be established” and that this holds true in both the government sector and the private sector. While a business may need to do tax registration, opportunities to conduct business from afar are another part of the versatility of Saudi policy that attracts foreign investment.
For the best chance of starting a successful business in Saudi Arabia, it’s important to get past some common misconceptions about business and entrepreneurship in the country. First, although there are low taxes in Saudi, the country isn’t tax-free – that’s an oversimplification, and actual taxation knowledge requires research. There’s also some trepidation on the part of outside foreign investors just because they don’t see their type of business fitting into the Saudi culture. Again, it’s important to do actual research on the ground or get more detailed information about what Saudis are doing right now, since the country is quickly changing. Understanding current policy on transportation and renewable energy will uncover some specific opportunities, as will a closer look at Saudi infrastructure and the construction industry as it is today.
Similarly, while there are Saudi visa processes and business registration processes to go through, they’re not typically seen as draconian or overcomplicated. Experts contend the Saudi government is proactive in making it easy for outsiders to do business in the country and have made resources available for entrepreneurs.
Conclusion
All in all, Saudi can be a great place to do business. Many entrepreneurs find it a welcoming place to set up a new enterprise and explore new markets. The short list of quick-growth national economies is always changing, but many people have put Saudi near the top of the list as the country moves quickly to diversify from oil and gas and puts a lot of money into development where many other nations are tightening their belts and moving towards austerity.
