The Kingdom of Saudi Arabia has announced an update to its investment system, set to take effect at the beginning of 2025. This update aims to attract global investments, enhance the competitiveness of its investment environment, support economic diversification, and create job opportunities in alignment with “Vision 2030” and the objectives of the National Strategy. The Kingdom has garnered attention with its updated investment system, which seeks to improve transparency and streamline the investment process, as it aims to draw more foreign capital to reinforce the centrality of the Saudi economy in the region and further its economic diversification goals.
The updated investment system, which has been approved by the Council of Ministers, is a cornerstone of the National Investment Strategy launched by Crown Prince Mohammed bin Salman, Deputy Prime Minister, and Chairman of the Council of Ministers. This strategy is designed to accelerate development and diversify the local economy, with a goal of attracting over $100 billion in annual foreign direct investment by 2030.
This approach has contributed to Saudi Arabia rising to the 16th position globally among 67 of the most competitive countries, according to the Global Competitiveness Report published by the Global Competitiveness Center of the International Institute for Management Development in June. Saudi Arabia is expected to advance to the 15th position this year, bolstered by improved business regulations and infrastructure, enhancing its standing among the G20 nations to the 4th position.
Since the launch of Vision 2030, Saudi Arabia has introduced numerous regulatory and legislative reforms related to its investment environment. These reforms operate in conjunction with the investment system and include regulations on civil transactions, privatization, companies, bankruptcy, and the establishment of special economic zones.
In recent years, Saudi Arabia has undertaken several steps to attract foreign investment, including issuing special visas for investors, creating special economic zones with lower tax rates, and introducing new laws related to civil transactions and bankruptcy.
The Kingdom aims to attract over $100 billion in foreign direct investment annually by 2030 as part of its efforts to develop new industries that will create job opportunities and generate new revenue streams beyond the oil sector. These efforts have resulted in an updated investment system that simplifies procedures. The new system, set to be implemented at the beginning of 2025, eliminates foreign investor licenses and replaces them with a “simplified” registration process. Dedicated service centers will be established to expedite the investment process in Saudi Arabia.
Key features of the updated investment system include:
Enhanced Protection and Flexibility: The updated system offers numerous advantages, such as enhanced investor rights through fair treatment, intellectual property protection, smooth management of investments, and transparent procedures, aligning with leading practices to create a reliable investment environment.
Reduced Regulatory Constraints and Streamlined Procedures: The simplified registration process replaces the previous investment license, providing investors with greater protection, confidence, and flexibility in conducting their business, fostering a dynamic and stimulating investment environment.
Comprehensive Service Center: The Comprehensive Service Center and the Saudi Business Center will facilitate governmental procedures and investment processes, enhancing investors’ ability to expand their businesses and create new opportunities.
Fair Treatment of Investors: The updated system ensures equitable treatment of both local and foreign investors and addresses dispute resolution efficiently in collaboration with the Saudi Center for Commercial Arbitration and other relevant bodies.
Economic Principles: The system extends Saudi Arabia’s commitment to providing an attractive, supportive, and secure environment for both local and foreign investors. It builds on over 800 economic reforms implemented in recent years, significantly increasing the gross fixed capital formation by 74% from 2017 levels, reaching nearly $300 billion in 2023. These updates are expected to further stimulate economic growth and reinforce the Kingdom’s position as a premier global investment destination.
Private Sector: The updated system represents a significant step towards enhancing private sector investment opportunities and fostering a more competitive economy. It establishes a competitive investment environment that strengthens Saudi Arabia’s position as a leading global destination under Vision 2030.
Investor Definition: The updated system expands the definition of an investor to include both local and foreign investors, unlike the previous foreign investment system, which only covered foreign investors.
Capital Definition: The updated system provides a more precise and comprehensive definition of capital, encompassing:
• Shares and equity interests in companies
• Contractual rights
• Fixed or movable assets
• Intellectual property rights
• Rights granted under licenses or permits
It explicitly excludes loans, bonds, financial sukuk, and public and private debt instruments from its scope, indicating that investments in such instruments are outside the purview of the updated system.
New Features of the Updated System:
• Registration Mechanism: The updated system replaces licensing with registration, introducing greater procedural flexibility for investors.
• Investment Incentives: The system includes provisions for granting investment incentives according to established regulations.
• Dispute Resolution: Investors are allowed to use alternative dispute resolution methods such as arbitration, mediation, and conciliation.
Application Scope: The updated system applies to both local and foreign investors.
National Registry: The National Registry referred to in the updated system is an internal registry of the ministry that includes information on both local and foreign investors. Registration in this registry is required.
Steps for Foreign Investors: Foreign investors must register with the Ministry of Investment before commencing investment activities in the Kingdom. Upon receiving notification of successful registration from the ministry, foreign investors may then obtain a commercial registration and the necessary licenses from other relevant authorities.
Comprehensive Service Center: The Comprehensive Service Center is a unified center designed to streamline registration, project establishment, licensing, and coordination with relevant authorities.
Permitted Activities: The updated system generally permits investment in all activities based on the principle of investment freedom, with a list of exempted activities requiring prior approvals. The Ministry of Investment publishes and updates this list regularly.
Investment in Exempted Activities: If a foreign investor wishes to invest in exempted activities, they must apply to the ministry for approval, which will then be reviewed by the relevant authority. Detailed procedures will be outlined in the regulations.
Investor Rights: The updated system explicitly guarantees investor rights, including:
• Equal treatment between local and foreign investors under similar conditions
• Protection from total or partial expropriation except by final judicial decision, and non-seizure of property directly or indirectly, except for public interest and with fair compensation
• Protection of intellectual property and confidential business information
• Facilitation of administrative procedures and provision of necessary support
Protection Against Asset Seizure: The updated system clearly states that investments cannot be seized wholly or partially without a final judicial ruling, and property cannot be directly or indirectly confiscated except for public interest and with fair compensation. It ensures no assets can be seized without following due legal procedures.
Special Economic Zones: The updated system applies to investors within special economic zones, without prejudice to specific regulations applicable to them. However, it guarantees that investors will receive the minimum rights specified in the investment system, in addition to any extra rights or benefits provided by other regulations.
Dispute Resolution Rights: The updated system allows both local and foreign investors to resort to the competent court to resolve disputes with governmental entities unless an alternative dispute resolution method is agreed upon. Investors may agree to settle disputes between themselves or with governmental entities using alternative methods, including arbitration, mediation, and conciliation.
With this overview, we have addressed the key points of the updated investment system and highlighted the major benefits for investors within the Kingdom. For those interested in starting their own investment in Saudi Arabia and seeking further legal information, please feel free to contact Al-Haqban Law Firm and Legal Consultants.
