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Investment Climate

 

 

Saudi Arabia EMPLOYMENTSaudi Arabia Investment ClimateSaudi Arabia EMPLOYMENT

Also See
The Saudi Business Center

 

Author - U.S. Department of Commerce

Source:
STAT-USA on the Internet
US Department of Commerce
(202) 482-1986

Openness to Foreign Investment

The Saudi Government generally encourages foreign direct

investment, particularly in the case of foreign investment in

joint ventures with Saudi partners.  Though Saudi Arabia

technically allows wholly foreign-owned firms to operate, such

ventures are rare.  With an eye to stimulating greater foreign

investment to strengthen the non-oil private sector, Saudi Arabia

is revising its 30-year-old investment code and tax code.  These

revisions may enhance the attractiveness of Saudi Arabia to

foreign investors.      
The Government and the private sector actively promote investment

opportunities in Saudi Arabia, particularly partnerships with

Saudi businessmen that bring industry or transfer technology to

the Kingdom.  Currently the Government is focusing on attracting

investment in infrastructure, such as electric power generation,

but has yet to make such investments financially attractive.

Disincentives include a high tax rate on a foreign partner's

corporate profits, a Government policy of forced hiring of

Saudis, the practical requirement for a foreign investor to have

a Saudi partner, an ultraconservative cultural environment, and

an extreme desert climate.      
The Ministry of Industry and Electricity periodically identifies

investment opportunities, as do the Saudi Chambers of Commerce

and Industry and private consulting houses.  Other Government

bodies, such as the Royal Commission for Jubail and Yanbu and the

Arriyadh Development Authority, have also been active in

promoting opportunities in Saudi Arabia's industrial cities and

other regions.  In addition to the majority Government-owned

Saudi Arabian Basic Industries Corporation (SABIC), private

investment companies, such as the National Industrialization

Corporation, the Saudi Venture Capital Group, the Saudi

Industrial Development Company, and the Arabian Industrial

Development Company, have also become increasingly active in

project development and in seeking out foreign joint venture

partners.      
One sector closed to foreign investment is upstream oil

exploration and development, as the Saudi Government considers

this sector to be of strategic national interest.  All oil

exploration and development is conducted by the national oil

company, Saudi Aramco.  Conversely, the greatest foreign

investment in the Kingdom is found in a related sector--petrochemicals, where several major foreign firms have partnered

with Saudis to build world-scale petrochemical plants.      
The Government uses its purchasing power to encourage foreign

investment.  In 1985, the Saudi Government reached an agreement

with American contractors under the Peace Shield defense

procurement program for "offset" joint venture investments

equivalent to 35 percent of the program's value.  One Peace

Shield offset program, the Al-Salam Aircraft Company in Riyadh,

which performs maintenance on civilian and military aircraft,

received FAA certification in September 1994.  AT&T (now Lucent

Technologies) undertook the first nondefense offset project in

connection with the $4 billion Sixth Telephone Expansion Project

(TEP-6).  British and French defense firms also have offset

requirements.  Offset requirements are likely to remain

components of major defense purchases.

Rules and Regulations Governing Investment

The current foreign capital investment code specifies three

conditions for foreign investments:      
     1.  The undertaking must be a "development project."

     2.  The investment must generate technology transfer.

     3.  A Saudi partner should own a minimum of 25 percent

equity (although this last stipulation can be waived).      
"Development projects" were defined in Ministry of Industry and

Electricity Resolution 11/k/w of February 12, 1990, to include

industrial, agriculture, health, contracting and specialized

service projects.

In an important development, the Minister of Industry and

Electricity issued a decree in September 1997 that declared

electric power generation to be an "industrial development

activity," and thus open to foreign investment in accordance with

existing foreign investment guidelines.      
High technology projects are generally given priority, while

projects in construction, general operations, and maintenance are

discouraged.      
The Saudi Government is considering revisions to the foreign

investment code with a stated aim of attracting more foreign

direct investment.  Although considerable attention is currently

being paid to these issues, the timing, scope, and content of the

revisions remain uncertain.      
Corporate Organization and Liability

While Saudi law permits a variety of corporate structures, joint

ventures almost always take the form of limited liability

partnerships.  This form or organization does confer limited

liability (see below).  However, there are disadvantages.

Foreign partners in service and contracting ventures organized as

limited liability partnerships must pay in cash or kind 100

percent of their contribution to authorized capital.      
Industrial projects normally require 25 percent capitalization,

although it may be higher for some industries.  Additionally, 10

percent of profits must be set aside each year in a statutory

reserve until it equals 50 percent of the venture's authorized

capital.      
The Ministry of Industry and Electricity licenses direct foreign

investment, except for mineral concessions, which are governed by

separate agreements.  Otherwise, all proposals for new

investments, reinvestment, mergers, or acquisitions must go

through that Ministry's licensing process.  For ventures with

Government participation, the process is usually only a

formality.  On the other hand, for a purely private venture, the

process can involve a considerable amount of time and effort,

although this may vary depending on the Saudi partner's

involvement in the process.      
Operating under the Foreign Capital Investment Regulations, the

Ministry of Industry and Electricity's "Foreign Capital

Investment Committee" screens all license applications and

counsels prospective investors.  License applications must be

accompanied by a formidable array of documents including a

feasibility study, an outline of the venture's proposed capital

structure and legal form, the partnership agreement, plans to

train Saudi nationals for technical and managerial positions, and

procurement plans for machinery and other equipment.  Applicants

must also submit permits to use specific patents, the foreign

partner's foreign certificate of registration, and authorization

from the foreign partner's board of directors.      
Following the initial screening, the Foreign Capital Investment

Committee evaluates applications.  The Committee is chaired by

the Deputy Minister of Industry and Electricity and includes

representatives from other relevant ministries, including the

Ministries of Commerce, Finance, Agriculture, Planning and

Petroleum.  License applications approved by the Committee then

require the approval of the Minister of Industry and Electricity.      
The new joint venture must apply for a commercial registration

number from the Ministry of Commerce.  Depending on the type of

business, additional approvals may be needed, such as from the

Ministry of Health in the case of a health care business.      
The Foreign Capital Investment Committee evaluates projects using

a variety of factors.  Foremost is the project's compatibility

with Saudi Arabia's basic economic goals:      
     1.  Economic diversification.

     2.  Access to modern technology.

     3.  Development of a trained Saudi labor force to reduce

         dependence on foreign labor.      
The Committee looks with a special favor on projects involving

the transfer of high technology, preferring firms with experience

in the proposed field of investment.  The Committee evaluates

royalty arrangements and the price of equipment to be supplied by

the foreign partner.  Additionally, while there is no minimum

foreign equity requirement for joint ventures, more than nominal

investment is encouraged.  Intangible property is not counted

toward this investment, and a Saudi accountant must evaluate the

monetary worth of any contributions in kind.      
The Embassy has heard reports that the Foreign Capital Investment

Committee will not license a second joint venture in a specific

industry sector until the Committee agrees the first venture is

"established."  While this would be beneficial to initial

licensees, it would also allow individual companies to tie up

industrial and commercial opportunities for extended periods

while they mobilized support for their own ventures.      
Professionals, including architects, consultants and consulting

engineers, are required to register with and be certified by the

Ministry of Commerce in accordance with the requirements defined

in the Ministry of Commerce's resolution 264, published in 1982.      
These regulations, in theory, permit the registration of

Saudi/foreign joint ventures.  However, according to business

sources, the regulations have never been fully implemented.  As a

result, most foreign consulting firms work as adjuncts to

established Saudi firms.      
Foreign investors are denied national treatment in the following

sectors:  catering, cleaning, maintenance and operations of

facilities, power generation, trading, transportation, and

businesses that affect national security.      
Saudi privatization efforts are embryonic, and the treatment of

foreign investors has not yet been decided.  In May 1998, the

Council of Ministers announced the establishment of the Saudi

Telecommunications Corporation (STC), the first phase of

privatization of telecommunications services.  STC will operate

as a wholly state-owned corporation for two years before starting

to offer shares to the public in stages.  It remains unclear

whether foreigners will be permitted to own shares and whether

STC will seek a foreign strategic partner in the privatization.

In a related development, the Saudi Government in May 1998 also

authorized private operation of postal services.  As of July 1998

there were already over 100 private postal offices across the

Kingdom, including some with foreign participation.  Saudi ports

have since 1997 begun "privatizing" port services by signing

long-term contracts with private providers.  Although foreign

companies have entered this market through joint ventures, so

far, no U.S. firms have taken part.  The Government has also

raised the prospect of privatizing the national airline, Saudi

Arabian Airlines (previously Saudia), although no clear decisions

have been made.      
There is a clear hierarchy of privileges and preferences in Saudi

Arabia that favors Saudi companies and joint ventures with Saudi

participation.  For instance, only firms with at least 25 percent

Saudi ownership are eligible for tax holidays and interest-free

loans from Government credit institutions such as the Saudi

Industrial Development Fund.  Similarly, only foreign-owned

corporations and the foreign-owned portion of joint ventures are

subject to the corporate income tax, which can range up to 45

percent of net profits.      
Only Saudi companies or citizens, or those from the other Gulf

Cooperation Council (GCC) countries (Kuwait, Bahrain, Qatar, UAE

and Oman) may own land or engage in internal trading and

distribution activities.  Similarly, only joint ventures with at

least 51 percent GCC ownership interest are permitted to export

duty-free to other GCC countries.      
Taken together, the above represent a formidable array of

privileges and preferences which can severely disadvantage a

foreign investor attempting to operate his wholly-owned company

in Saudi Arabia.  The formerly common practice of Saudis

illegally lending their names to a foreign-owned and operated

business, so-called "cover-ups," was curtailed by Royal Decree

m/49 of May 21, 1989.  Saudis and foreigners who engage in such

"cover-ups" to evade Saudi commercial regulations are now subject

to severe penalties, including imprisonment, stiff fines, and

deportation for the foreigner.      
While, theoretically, American and other foreign firms are able

to participate in Saudi Government financed and/or subsidized

research and development programs on a national treatment basis,

the Embassy is not aware of any examples.      
One of the leading obstacles for foreign investors is restrictive

Saudi visa requirements, although the Saudi Government announced

new, more streamlined measures in May 1998 for business

travelers.  Investors or potential investors wishing to visit

Saudi Arabia must have a Saudi sponsor to obtain the necessary

business visa.  On rare occasions the Saudi Embassy or Consulates

may grant, at their discretion, sponsorless business visas to

employees of prominent American firms, but this practice is

unpredictable.  Business visas are currently valid for only one

entry for up to three months, although the U.S. Government is

hopeful that Saudi authorities will very soon agree to issuance

of two-year, multiple-entry visas to U.S. citizens on a

reciprocal basis.  Under existing rules, if a businessperson went

to Saudi Arabia, then departed to reenter Saudi Arabia, he or she

would need to reapply for a new visa including a new sponsorship

letter.  Businesswomen and naturalized Americans of Arab descent

often face difficulties when requesting visas.      
To work in Saudi Arabia, a Saudi company must formally petition

the Ministry of Foreign Affairs on behalf of the American.  The

Saudi firm then sends the approved petition to the Saudi Embassy

in Washington or to the Saudi consulates in New York, Los

Angeles, or Houston.  The American would then would obtain the

visa either from the Embassy or one of the consulates.      
Within three days of arrival in Saudi Arabia, the American must

go to the Ministry of Interior Passports Office and apply for a

residence permit called an "igama."  The Saudi employer holds the

American's passport while the American uses the igama for

identification purposes.  Whenever the American wants to leave

Saudi Arabia, the sponsor must get an exit/re-entry or exit visa;

then the American exchanges his or her igama for the passport.      
Since the Saudi firm holds the passport, it has the potential to

exert great influence on the foreign employee's movements.

Americans who come to Saudi Arabia cannot directly bring their

families with them.  The employee can apply for his or her

family's visas only in Saudi Arabia and then must return to the

United States to accompany the family.      
Conversion and Transfer Policies

There are no restrictions on converting or transferring funds

associated with an investment (including remittances of

investment capital, earnings, loan repayments, and lease

payments) into a freely usable currency and at a legal market

clearing rate.  There have been no recent changes, nor are there

plans to change remittance policies.  There are no delays in

effect for remitting investment returns such as dividends, return

of capital, interest and principal on private foreign debt, lease

payments, royalties and management fees through normal legal

channels.  There is no need for a legal parallel market for

investor remittances.      
There is no limitation on the inflow or outflow of funds for

remittances of profits, debt service, capital, capital gains,

returns on intellectual property, imported inputs, etc.  There

is, however, a heavy tax (up to 45 percent) on corporate profits

and capital gains of the foreign partner in a joint venture.

Since 1987, the official exchange rate has been 3.7450 Saudi

riyals per U.S. dollar.  Transactions occur using rates very

close to the official rate.  The last devaluation of the Saudi

riyal occurred in 1986.  Conditions do not appear to warrant

another devaluation anytime soon.      
Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish

and own business enterprises and engage in all forms of

remunerative activity.  Private entities have the right to freely

establish, acquire, and dispose of interests in business

enterprises.  The Embassy is not aware of any private enterprises

competing with public enterprises; therefore, the concept of

"competitive equality" has not been tested with respect to access

to markets, credit, and other business operations such as

licenses and supplies.      
Expropriation and Compensation

The Embassy is not aware of the Saudi Government ever

expropriating property.  There have been no expropriatory actions

in the recent past or policy shifts which would lead the Embassy

to believe there may be such actions in the near future.      
Dispute Settlement

Saudi commercial law is still developing, but the Saudis have

recently taken positive steps such as joining the New York

Convention of 1958 on the Recognition and Enforcement of Foreign

Arbitral Awards.  Dispute settlement in Saudi Arabia continues to

be time-consuming and uncertain.  Even after a decision is

reached in a dispute, effective enforcement of the judgment can

still take years.      
The Embassy suggests that American firms investing in Saudi

Arabia include in contracts a foreign arbitration clause; but

such clauses are not allowed in Government contracts without a

decision by the Saudi Council of Ministers.      
Saudi litigants have an advantage over foreign parties in almost

any investment dispute, because of their first-hand knowledge of

Saudi law and culture and the relatively amorphous dispute

settlement processes.  Foreign partners involved in a dispute

find it advisable to hire local attorneys with knowledge of Saudi

legal practices.  Many Saudi attorneys, in turn, retain non-Saudi

(and particularly American) lawyers to facilitate the handling of

disputes involving foreign investors.      
In several cases, disputes have caused serious problems for

foreign investors.  For instance, Saudi partners have blocked

foreigners' access to exit visas, forcing them to remain in Saudi

Arabia against their will.  In cases of alleged fraud, foreign

partners may also be jailed to prevent their departure from the

country while awaiting police investigation or adjudication of

the case.      
Courts can impose precautionary restraint of personal property

pending the adjudication of a commercial dispute, according to

Royal Decree No. M/4 of October 2, 1989.  This decree has

diminished the incentive for individuals to physically detain

foreign partners pending the resolution of commercial disputes.

Thus, it is very important that foreign investors take steps to

protect themselves, by thoroughly researching the business record

of the proposed Saudi partner, retaining legal counsel, complying

scrupulously with all legal steps in the investment process, and

securing a well-drafted agreement.      
There have been few investment disputes in recent years involving

American or other foreign investors or contractors in Saudi

Arabia.  A common phenomenon of the early 1990s was that the

Government, due to fiscal constraints, fell in arrears on

payments to private contractors, both Saudi and foreign.  Some

companies carried Saudi Government receivables without being paid

for years.      
The problem was eased considerably in 1996, and the Government

appears committed to clearing remaining arrears, although in some

cases this will likely take several years.  In the current

straitened fiscal environment, some contractors are being paid in

bonds instead of cash.  Some contractors then sell these bonds at

a discount to local banks.      
The Saudi Arabian legal system is derived from the legal rules of

Islam, known as the Shari'a.  The Ministry of Justice oversees

the Shari'a-based judicial system, but most ministries have

committees to rule on matters under their jurisdiction.  The

Board of Grievances generally speaking has jurisdiction over

disputes with the Government and commercial disputes.  Of

principal interest to investors who have disputes with private

individuals are the Committees for Labor Disputes (under the

Ministry of Labor, see below), and the Committee for Tax Matters

(under the Negotiable Instruments Committee, also called the

Commercial Paper Committee).  The Ministry of Finance has

jurisdiction over disputes involving letters of credit and

checks, while the Banking Disputes Committee of the Saudi Arabian

Monetary Agency (SAMA) adjudicates disputes between bankers and

their clients.  Judgments of a foreign court are not yet accepted

and enforced by the local courts, but the Saudis' signature of

the New York Convention may change this.  Monetary judgments are

based on the terms of the contract; i.e., if the contract is in

dollars, the judgment would be in dollars; if unspecified, the

judgment is denominated in Saudi riyals.      
Saudi Arabia has a written commercial law that is generally

applied consistently.  The country has a written bankruptcy law

which was enacted by Royal Decree No. N/16 dated 4/9/1416 H

(1/24/96).  Articles contained in the law allow debtors to

conclude financial settlements with their creditors through

committees under the Saudi Chambers of Commerce and Industry or

through the Board of Grievances.  Designated as the Regulation on

Bankruptcy Protective Settlement, the law is open to ordinary

creditors except in the case of debts of expenditures, privileged

debts and debts which arise pursuant to the settlement

procedures.  In mid-June 1994, Saudi Arabia deposited Articles of

Acceptance to the New York Convention of 1958 on the recognition

and enforcement of foreign arbitral awards.  Saudi Arabia is a

member of the International Center for the Settlement of

Investment Disputes (ICSID--also known as the Washington

Convention).      
Since 1996, Saudi Arabia has actively pursued its application for

accession to the WTO.      
Performance Requirements/Incentives

Under the 1969 labor and workman regulations, 75 percent of a

firm's work force and 51 percent of its payroll must be Saudi,

unless an exemption has been obtained from the Ministry of Labor

and Social Affairs.  The Saudi Government recently implemented a

regulation requiring each company employing over 20 workers to

include a minimum of five percent Saudi nationals.  Companies not

complying with the five percent rule (which will increase in

annual increments of five percent) will not be given visas for

expatriate workers.      
However, Saudis represent only about a quarter of the estimated 8

million workers in Saudi Arabia, so few firms have been able to

meet these requirements.  Foreign firms are under constant

pressure to employ more Saudis.      
Investors are not currently required to purchase from local

sources or export a certain percentage of output, and their

access to foreign exchange is unlimited.  There is no requirement

that the share of foreign equity be reduced over time.  The

Government does not impose conditions on investment such as

locating in a specific geographical area, a specific percentage

of local content or local equity, substitution for imports,

export requirements or targets, or financing only by local

sources.  Investors are not required to disclose proprietary

information to the Saudi Government as part of the regulatory

approval process.      
The Saudi Government is currently considering changes to the

Foreign Capital Investment Code.  There are reports that the

revised regulations will include new performance requirements--possibly including export incentives, import substitution

incentives, and local content requirements-- but no details have

been made public.      
Protection of Property Rights

The Saudi legal system protects and facilitates acquisition and

disposition of private property, consistent with strong Islamic

dogma respecting private property.  Non-Saudis are not allowed,

however, to purchase real estate in Saudi Arabia, except in

extremely rare situations.  Other foreign-owned corporate and

personal property is protected, and the Embassy knows of no cases

of Government expropriation or nationalization of foreign-owned

assets in the Kingdom.  Regarding intellectual property rights,

the Saudi Arabian Government has acceded to the Universal

Copyright Convention; implementation began July 13, 1994.      
Saudi Arabia has had a Patent Law since 1989, and the Patent

Office accepts applications, but it has only issued a few

patents.  Protection is available for product and product-by-process.  Product-by-process protection is accorded in the

pharmaceutical sector.  There are provisions in the Patent Law

for compulsory licenses for non-working and dependent patents.

The term of protection is 15 years.  The patent holder may apply

for a five-year extension.      
Saudi Arabia has a Copyright Law.  However, this law does not

extend protection to works that were first displayed outside of

Saudi Arabia unless the author is a Saudi citizen.  The Saudi

Government has taken actions to enforce copyrights of U.S. firms,

and pirated material has been seized or forced off the shelves of

a number of stores.  Enforcement has been strongest for printed

material, recorded music, and videos.  Pirated software is still

easily obtained in Saudi Arabia, although it has been removed

from open display on store shelves.  A recent Islamic ruling, or

"fatwa" ruled software piracy to be "forbidden."  In 1996, Saudi

Arabia was moved from a "priority watch list" country to a "watch

list" country under the Special 301 provision in recognition of

its work to improve intellectual property protection.      
Trademarks are protected under the Trademark Law.  Trade secrets

are not specifically protected under any area of Saudi law,

however they are often protected by contract.      
There is no specific protection for semiconductor chip layout

design.  However, such protection would be provided under the

Patent Law and the Copyright Law.  This, and certain other

intellectual property concerns, are being addressed under the

TRIPS agenda issue, in connection with Saudi Arabia's application

to accede to the WTO.      
Transparency of Regulatory System

There are few aspects of the Saudi Government which are

transparent, although Saudi investment policy tends to be less

opaque than many other areas.      
Saudi tax and labor laws and policies tend to favor high-tech

transfers and the employment of Saudis, rather than fostering

competition.  Saudi health and safety laws and policies are not

used to distort or impede the efficient mobilization and

allocation of investments.  Bureaucratic procedures are

cumbersome, but Saudi red tape can generally be overcome with

persistence.      
Efficient Capital Markets and Portfolio Investment

Financial policies generally facilitate the free flow of private

capital.  Currency can be transferred in and out of Saudi Arabia

with no restriction.  Credit is widely available to both Saudi

and foreign entities from the commercial banks and is allocated

on market terms.  Credit is also available from several

Government credit institutions, such as the Saudi Industrial

Development Fund, which allocates credit based on Government-set

criteria rather than market conditions.      
The banking system, consisting of eleven commercial banks, nine

of which are joint ventures with Western banks, is sound.  The

legal, regulatory, and accounting systems practiced in the

banking sector are transparent and consistent with Western norms.      
The Saudi Arabian Monetary Agency (SAMA), which oversees and

regulates the banking system, generally gets high marks for its

prudential oversight of the twelve commercial banks in Saudi

Arabia.  SAMA, for example, is the only Middle Eastern central

bank that has been invited to be a member and shareholder of the

Bank for International Settlements in Basel, Switzerland.      
There is an effective, if nascent, regulatory system governing

portfolio investment in Saudi Arabia.  Saudi Arabia has a small

and thinly traded stock market established in 1985.  At the start

of 1998, total market capitalization stood at about $60 billion.

Only long buying of shares is allowed.  There is no short

selling, buying or selling of options or any other derivative

products, primary or secondary market for corporate bonds, or

secondary market for Government bonds.      
Until recently, only Saudis could buy and sell shares on the

stock market.  SAMA, which also regulates the stock market, in

early 1997 gave permission to the Saudi-American Bank to

establish a closed end mutual fund of Saudi stocks to foreigners.

The fund, named the Saudi Arabia Investment Fund (SAIF), is

dollar-based and sold through the London exchange.      
Political Violence

On November 13, 1995, a truck bomb was detonated outside a U.S.

military training headquarters in Riyadh, killing seven people,

including five Americans.  The bombing was the first act of

political violence in Saudi Arabia in over a decade and the first

terrorist incident to have specifically targeted foreigners.  The

four Saudi nationals who were apprehended and executed for the

terrorist attack claimed to be avenging the Government's

incomplete application of Islamic law and principles.  The attack

was roundly condemned by the Government, the religious

establishment, and the populace.      
In June 1996, a U.S. military housing facility was bombed in the

Eastern Province killing 19 Americans and wounding more than 100.

Since these two bombings, security has been heightened at

official U.S. installations, residential compounds, and schools;

and the U.S. Embassy, working closely with Saudi security

organizations, periodically advises American citizens of

potential security concerns.      
Other than the above events, Saudi Arabia has not been subject to

civil disturbances or political insurrections.      
Corruption

Saudi Arabia has some, albeit limited, laws aimed at limiting

corruption.  For example, the agency law limits a Saudi agent's

commission to five percent of the value of a contract.  Ministers

and other senior Government officials appointed by royal decree

are forbidden from engaging in business activities with their

Ministry or Government organization while employed there.

Nonetheless, enforcement of even these laws is rare and there are

extremely few cases of prominent citizens or Government officials

tried on corruption charges.      
U.S. firms have identified corruption as an obstacle to

investment in Saudi Arabia.  Government procurement is an area

often cited, as is de facto protection of businesses in which

senior officials or elite individuals have a stake.  Bribes,

often disguised as "commissions" are commonplace.  Giving or

accepting a bribe is not a criminal act under Saudi law.      
Bilateral Investment Agreements

The Saudi Government appears to be moving forward in its pursuit

of bilateral investment agreements.  Saudi Arabia presently has a

bilateral agreement with France and is in the process of

negotiating one with Italy.

Negotiations on bilateral agreements are likely to take place

with some other European countries.  There is no bilateral

investment treaty in force between the United States and Saudi

Arabia.  Gulf Cooperation Council (GCC) countries and their

nationals receive favorable investment treatment derived from GCC

agreements.      
OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) no longer

provides coverage in Saudi Arabia.  In 1995, OPIC removed Saudi

Arabia from its list of countries approved for OPIC coverage

because of the failure of Saudi Arabia to take steps to comply

with internationally recognized labor standards.   Details on

OPIC programs and coverage can be obtained by calling (202) 336-8575 in Washington.  The U.S. Export-Import Bank provides a

limited amount of financing and political risk insurance in Saudi

Arabia.      
Labor

Recruitment of expatriate labor is regulated jointly by the

Ministry of Interior and the Ministry of Labor and Social

Affairs.  In general, the Government encourages the recruitment

of Muslim workers, either from Muslim countries or from countries

such as India and Sri Lanka with sizable Muslim populations.  The

largest groups of foreign workers now come from Pakistan, the

Philippines, India, and Egypt.      
Westerners compose less than 2 percent of the labor force, and

the percentage is slowly dropping as they are replaced by Saudis

and less expensive expatriates from Third World countries.      
Since September 1994, the Ministry of Labor and Social Affairs

has been required to certify that there are no qualified Saudis

for a particular job before it can be filled by an expatriate

worker.  In addition, the Ministry of Interior must approve all

transfers of expatriate workers from one firm to another.  On the

other hand, bloc visas are normally available for unskilled and

some skilled workers recruited abroad.      
Saudi labor law forbids union activity, strikes, and collective

bargaining.  However, there is no forced or compulsory labor; any

required overtime, over and above the usual five and one-half to

six-day week, is compensated normally at time-and-a-half rates.

The minimum age for employment is 14.  The Saudi Government does

not adhere to the International Labor Organization Convention

protecting workers' rights.  Saudis generally prefer to invest in

labor-saving technology rather than utilize foreign labor when

given the choice.      
Foreign Trade Zones/Free Ports

Saudi Arabia does not have duty-free import zones or freeports.

It has begun to permit transshipment of goods through its ports

in Jeddah and Dammam.      

Major Foreign Investors

Investment (US$ billions, except where noted):      

1995(E) 1996(E) 1997(E)

- Total

 Foreign Direct Investment   13.3      14.5      15.0      

- U.S. Direct Investment 5.5 6.7 7.0

- Percent Share of Total

  Foreign Investment (percent)      41.3      46.2      46.7      

Major Foreign Investors

  U.S.A., Japan, United Kingdom, Switzerland, France, Germany      
Source : Ministry of Finance

 and National Economy; Saudi Arabian

Monetary Agency (SAMA); International Monetary Fund; U.S.

Department of Commerce; U.S. Embassy estimates; Ministry of

Industry and Electricity      

 

 

 

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Saudi Arabia
 Alrashid Cyber Mall, member of The Saudi Network, Trade and business informations and links to Saudi arabia, arabian gulf and middle east area.
Shopping in Saudi Arabia

Send E-mail to TSN@The-Saudi.Net with questions or comments about The Saudi Network.
1001 Arabian Network, Alrashid Cyber Mall and The Saudi Network are members of Nova* Stars* Information Services
The Saudi Network, Trade and business information and links to
Saudi Arabia, Arabian Gulf and Middle East Area.

morocco, libya, lebanon, kuwait, jordan, iraq, egypt, bahrain, algeria, yemen, uae, tunisia, syria, sudan, qatar, palestine, oman

We are Looking for Business Sponsorship or Marketing Partnership