Saudi Arabia boosts transparency to attract foreign investment
Saudi Arabia has announced new regulations to improve transparency and simplify the investment process in its local market, with the aim of attracting more foreign capital and supporting economic diversification under the Vision 2030 agenda.
As reported by Al Arab, the Council of Ministers approved an updated investment regime that strengthens investors' rights, ensuring the rule of law, fair treatment and the freedom to transfer funds without delay. The change comes in response to Saudi leaders' efforts to raise billions of dollars in new capital to reduce the country's reliance on fossil fuels.
In addition, the Ministry of Investment stressed in a statement through the Saudi Press Agency that the new system lays the foundation for the future of investment in Saudi Arabia. Aimed at attracting global investment, it focuses on clarifying rights, strengthening fair competition and facilitating the regulatory environment in line with the country's vision. This move comes against a backdrop of strong regional competition, especially with the United Arab Emirates, and in particular Dubai, which has established itself as a key business hub in the Middle East.
The system unifies investors' rights and duties under a common framework, providing greater transparency, flexibility and trust. It promotes a level playing field, simplifies procedures and contributes to effective dispute resolution. It also allows investors to resort to alternative means of dispute resolution, such as arbitration, mediation and conciliation, while providing incentives to both local and foreign investors.
Saudi Arabia stressed that the updated law is aligned with international best practices, and was developed in consultation with global investors and international organisations. Khalid Al-Falih, Minister of Investment, said that "the new system confirms the Kingdom's commitment to providing an attractive, secure and supportive environment for investors". Al-Falih stressed that this effort to strengthen the competitiveness and attractiveness of the investment environment, especially in regulatory and legislative aspects, is based on the economic principles guaranteed by the Basic Law of Governance and international best practices. This prompted the revision of the foreign investment system, issued some 25 years ago, to create an integrated framework that benefits both Saudi and foreign investors.
Moreover, in 2023, foreign direct investment (FDI) inflows reached 19 billion dollars, surpassing the annual average of 17 billion recorded between 2017 and 2022, although below the target of 22 billion set for that year. In the first quarter of this year, FDI inflows reached 4.5 billion dollars, with a government target of reaching 29 billion by 2024 and exceeding 100 billion annually by 2030.
The new reforms will also eliminate foreign investor licensing, which will be replaced by a "simplified" registration process, and dedicated service centres will be set up to streamline investment. These reforms will come into effect in early 2025.
The updated system will allow investment in all activities, based on the principle of freedom of enterprise, although a list of exempt activities requiring prior approvals for investment will be maintained. This list will be published and regularly updated by the relevant ministry.
Since the launch of Vision 2030 in April 2016, Saudi Arabia has implemented several measures to attract foreign investment, including the issuance of special visas for investors, the creation of special economic zones with lower tax rates, and the introduction of new laws related to civil transactions and bankruptcy.
In December 2023, the new Saudi civil code replaced a system in which judges had full discretion to resolve commercial disputes based on Islamic law. The code is part of the reform plan under Vision 2030, which aims to transform the Saudi economy away from the oil and gas sector.
Five years after the bankruptcy system came into force, which began to change the nature of investment in the country, Saudi Arabia has implemented more than 800 economic reforms. These reforms have contributed to a 74% increase in total fixed capital formation, reaching 300 billion dollars in 2023, compared to 2017. Foreign direct investment also increased by 61% during the same period, reaching approximately 215 billion dollars.
In a historic milestone, Saudi Arabia led Middle Eastern and North African countries for the first time in terms of total value of venture capital investment in 2023, according to the Magnitt platform . Saudi Arabia captured around 52% of total venture capital investment in Arab markets last year, up from 31% the previous year. This 33% growth over 2022 reaffirms the competitiveness of the Saudi market and consolidates its position as the largest economy in the Arab region and its prominent global position as a member of the G20 and the BRICS group, one of the world's most influential economic blocs.
