Foreign investment in Saudi Arabia is anticipated to become easier following an announcement of a significant relaxation of ownership rules in the Kingdom which will enable foreign investors to own 100% of wholesale and retail businesses.

The relaxation announcement was made by the Saudi Arabian General Investment Authority (“SAGIA”) to US businessmen in Washington indicating that US investors may be one of the key focal points of the proposed new laws.

Current legislation in the Kingdom imposes a maximum limit of 75% on foreign investment in wholesale and retail businesses. This results in foreign investors requiring a Saudi partner who owns, and profits from, a 25% share of the company.

In anticipation of a potential increase in the level of foreign investment, SAGIA is developing new rules relating to investments which are expected to enter into force in 2016.

By softening the existing rules SAGIA is aiming to attract investment in the retail sector, introduce new technology, create professional and technical jobs for Saudi citizens and boost economic growth. The new regulations should also help the Kingdom’s aspirations of becoming an international player in the distribution, sale and re-export of goods.

Saudi Arabia, the world’s biggest oil exporter, is keen to encourage more investment into the country and to attract sophisticated businesses to diversify its economy during the period of continued low oil prices. The Kingdom is dependent on oil and needs to boost revenues to reduce its growing budget deficit which has resulted from the decline in oil prices and rising government spending.

No official date has been set for the proposed changes to the existing regulations but we will issue another client update in due course.