A Study on Foreign Investment Law in Saudi Arabia: Benefits and Guarantees

Abstract

Foreign Direct Investment is an essential component of most economies, given its impact on both GDP and the industries in which it is employed. As a component of its Saudi Vision 2030 programme, Saudi Arabia is seeking to reinvigorate foreign investment by engaging in a number of different legal reforms. This article seeks to examine these reforms in three ways: by considering the current legal approach and that which has gone before, by identifying the privileges and guarantees afforded to foreign investors under the law, and by examining the ways in which foreign investment is likely to impact on Saudi Arabia’s economic development in coming years. Particular emphasis is placed on the removal of joint venture requirements for foreign investors and the creation of new investment opportunities as industries are opened up to foreign investment. It is noted that ready transfer of capital in and out of the country is now permitted, that guarantees of legal parity between foreign and domestic businesses are provided, and that foreign investors now have access to a variety of dedicated investment openings, especially in novel Special Economic Zones. It is found that foreign investment is often associated with GDP benefits if paired with sufficient measures to capture incoming capital and that knowledge, skills and technology transfer is likely to be enabled by ‘Saudization’ requirements that a certain percentage of domestic workers be employed. Further, it is found that changes to the law will likely facilitate instances of commercial diplomacy and will aid in efforts to diversify the previously oil-centric economy of the Kingdom.