A Brief Guide To Doing Business In Saudi Arabia
Saudi Arabia is the largest exporter of oil in the world and is a leading member of OPEC, Organisation of Islamic Co-operation and the G20 group of major economies. As an emerging economy embarking on a new economic course in line with the Crown Prince’s Vision 2030 programme, there are many opportunities to commence a successful business in Saudi Arabia. The Kingdom of Saudi Arabia(KSA) has around 20% of the world’s oil reserves and is the largest exporter. Oil revenue accounts for about 90% of KSA’s export earnings and 45% of GDP. The national language is Arabic, but English is widely spoken, especially when it comes to business. The KSA law is based on Shari’ah which is derived from the Quran and the teachings of the prophet Mohammad (PBUH). KSA has no written constitution. However, the Basic Law was adopted by Royal Decree in 1992 setting out the processes and responsibilities of government agencies. Shari’ah law goes back many centuries and the enforcement of it depends almost entirely on the way in which it is interpreted today by judges, the majority of whom are clerics. Naturally, different judges will have different interpretations, which mean that there can be uncertainty about the laws. This is why you most certainly need a Saudi lawyer to assist you in doing business in KSA. Over the years, the Shari’ah has been complemented by a growing body of legislation – in the form of Royal Decrees, Ministerial Orders and Regulations and other circulars – in order to address matters not specifically covered by the Shari’ah. All ‘secular’ legislation is subject to the Shari’ah and KSA courts are required to interpret such legislation accordingly. The most common way in which to start business in KSA, is to form a limited liability company (LLC). The areas where a foreign investor must have a Saudi partner are increasingly limited. Before a foreign investor can form an LLC, an investment licence must be obtained from the Saudi Arabian General Investment Authority (SAGIA).. An LLC can have from one to fifty shareholders; in many areas a foreign investor can own 100% of the shares through a single shareholder. The minimum capital (under the Company Law) is an amount sufficient for the operation of the business of the LLC. However, in certain areas, where a foreign investor is involved, SAGIA sets minimum capital requirements for both foreign and KSA investors. Instead of incorporating a Saudi LLC, a foreign company can do business in KSA by setting up a branch in KSA. Establishing a branch will also require an investment licence from SAGIA. If the need is to be able to provide technical support to existing KSA distributors, you can establish a Technical and Scientific Services Office (TSSO) which will also require a licence from SAGIA. TSSOs are used to provide technical support, undertake surveys and conduct product research. However, a TSSO cannot be used to engage in commercial activities – whether directly or indirectly. Recently, SAGIA has also introduced a “Fast Track” process for some foreign investors. You should be able to obtain the appropriate licence within five days if you meet the requirements which include: A multinational company. A publicly listed company whose shares are traded on an internationally recognised stock exchange. A company that manufactures products that are certified by independent international agencies, and employs authorised or licensed process technology. Small and medium size enterprises which are classified as innovative enterprises. A company proposing to establish regional centres in Saudi Arabia. A construction company classified ‘first class’ in its country, or which has implemented a project with a value of not less than SAR 500,000,000 and has manpower of not less than 2,000 employees and total assets of not less than SAR 50 million. SAGIA still maintins a list of activities which foreigner are excluded from – however this list is delining as the economy is opened up under Vision 2030. Establishing a business enterprise in KSa is complex and challenging – engaging the services of an experienced Saudi law firm is essential.