As the fastest growing economy in the Middle East, with $624 billion earmarked in diverse projects by the year 2020, never before has the Kingdom focused on its diversification progress so assertively. Assisted by positive economic indicators and international rankings such as the World Bank’s comprehensive ‘Doing Business 2008’ that ranks Saudi Arabia: 23rd out of 178 countries for ease of doing business, 7th for ease of paying taxes, 3rd for ease of registering property and 1st in the MENA region for ease of attracting Foreign Direct Investment (FDI); bold and innovative measures are in place to assist business practice and make the Kingdom an appealing destination for foreign investors.

Having already risen from 67th to 11th in the World Bank / International Finance Corporation’s Ease of Doing Business rankings in the span of five short years, Saudi Arabia is committed to becoming one of the world’s most competitive economies for the attraction of FDI (Foreign Direct Investment)

Attracting investors to participate in economic expansion, SAGIA was established by the Saudi Government in 2000. Designed to propel economic liberalization through various targeted measures, it is responsible for the management of the Kingdom’s investment environment. With an objective to achieve swift and sustainable economic growth through the creation of a pro-business environment, it nurtures investment with a range of services to investors. Saudi Arabia offers excellent business opportunities in key sectors of the economy such as energy, transportation, ICT and knowledge-based industries, with SAGIA guiding the drive for competitiveness; a bright future is coming to life in the Kingdom.

What challenges does SAGIA face in ensuring that its model serves the truest interests of your stakeholders and of Saudi socio economic diversification overall?

SAGIA has been entrusted with the task of formulating and implementing policies for enhancing local as well as foreign investments, issue of licenses to foreign investors, facilitating to complete all formalities, issue of various documents to foreign investors to enable them to obtain visas and other permits etc. Towards this end, SAGIA has established three Investment Service Centers at Riyadh, Dammam and Jeddah, which serves as “one stop shops” for prospective investors from pre-investment assistance up to the beginning of the project.

SAGIA, the nodal agency for investment promotion in Saudi Arabia was established to promote Saudi Arabia as an investment destination for domestic entrepreneurs as well as to attract foreign direct investment.

The Kingdom’s oil boom in the seventies paved the way for the establishment of one of the most thriving and fastest growing economies worldwide. Holding 25 percent of all known global oil reserves and as the vastest free market in the Middle East, Saudi Arabia accounts for 25 percent of total Arab GDP. With a domestic market powered by a youthful population with strong buying power, the opportunities are endless.

Salient features of the FIL are:

• Right of full (100 %) ownership to foreign investors of their projects, including land, plant and buildings (residential as well as commercial)
• Right to foreign investors to receive the full benefits and incentives normally available for Saudi investors, including favourable funding from the Saudi Industrial Development Fund (SIDF).
• Right to foreign investors to hire and sponsor foreign employees
• Right to full repatriation and prohibition of confiscation or expropriation of investment projects.
• Right to allocate financial losses of foreign joint ventures to future financial years, with a free hand to companies in determining the number of years those losses can be allocated.

With several other government investment vehicles already in existence, in what specific ways does the SAGIA offer critical differentials?

While there are several government initiatives, agencies and commissions in Saudi Arabia that are seeking investors, their wider promotion to international investors is the sole responsibility of SAGIA. It is SAGIA’s role to market and position Saudi Arabia overall as an attractive destination for foreign investment. SAGIA remains independent and plays the role of a facilitator for these investment flows to specific projects within Saudi Arabia. One of the critical mechanisms in this facilitation is through regulatory reform and improving the competitiveness of Saudi Arabia. In addition to this role as the foreign investment promotion agency for Saudi Arabia, SAGIA has also led the establishment of the Economic Cities, which are in of themselves locations for potential investment.

An entity such as SAGIA finds itself in many ways, in an enviable position: with copious liquidity to move forward and a strong mandate to develop the future of KSA ís economy through multi pronged investments, does it actually need a USP and does it have regional competitors?

The recent global financial crisis has had a significant impact on global flows of foreign investment since the volume of flows have decreased and competition has increased as countries are increasingly reliant on foreign investment to drive economic expansion in their domestic economies. Despite the strong liquidity position of Saudi Arabia, foreign capital and know-how are an integral component of its economic diversification. Therefore, it is imperative that Saudi Arabia offer investors a compelling value proposition for investment in key projects and sectors to effectively attract this know-how and capital. While it is natural to assume that other regional markets (UAE, Oman, Iraq) are competitors, increasingly Saudi Arabia’s true competitors are the fast emerging markets of China, India, Brazil and Northern Africa. These markets represent tremendous growth potential for foreign companies and each have a unique offering relative to Saudi Arabia. SAGIA is currently developing its 2010-2015 Strategy that will clearly outline the value proposition for Saudi Arabia as a whole but more specifically the value proposition associated with investment in a range of key sectors.

King Abdullah Economic city 

In some regards it could be perceived that the SAGIA is competing with the private sector instead of empowering it?

SAGIA serves two key stakeholder groups; the government and the private sector. For the government, SAGIA serves as the coordinating and promotion agency for foreign investment. For the private sector SAGIA’s activities are strongly focused on enabling and facilitating the flow of investment into Saudi Arabia. SAGIA remains independent and objective to where a foreign investor makes investments within Saudi Arabia, hence there is no overlap or areas of potential competition with the private sector. In the case of the Economic Cities, SAGIA served as the catalyst to their establishment and through the newly established Economic City Agency will coordinate and setup the regulatory environment and government services in these new cities.

Does SAGIA need to offer an alternative to the existing government investment culture, or are the prevalent systems fine as they are?

SAGIA is currently taking two approaches to enhance the investment climate in Saudi Arabia. Firstly over the last five years, SAGIA has led a regulatory reform program entitled ‘10 by 10’, which aims to establish Saudi Arabia as one of the 10 most ‘competitive’ economies in the world. This initiative serves as a platform for regulatory reform that has resulted in an increase in Saudi Arabia ranking in the World Bank Ease of Doing Business Report from 67 in 2005 to 11 in 2010. In parallel to these efforts for broader reforms that will fundamentally change the investment climate, SAGIA has led the establishment of the ‘Economic Cities’ which will serve as pilot locations for new approaches at delivering government services that if successful could be rolled out across the Kingdom.

Please describe the success of the “Economic Cities “programme led by SAGIA

Investors in Saudi Arabia enjoy increasingly well-developed business clusters and value chains that set the nation apart from its neighbours and from other emerging economies.

Forget everything you know about ‘industrial parks’ and ‘free zones’. Saudi Arabia’s four new Economic Cities – fully planned and under construction – are exactly that: new cities, where up to five million residents will live, work and play. Each will be an exciting metropolis, designed to maximise investment potential and deliver huge advantage to businesses located there.

At a cost of more than $60 billion, Saudi Arabia’s economy is being propelled onto a whole new level with the construction of four integrated Economic Cities. This visionary development project will promote economic diversification, create over a million new job opportunities, homes for 4-5 million residents – and, most significantly, contribute $150 billion to Saudi’s GDP.

Saudi Arabia’s Ease of Doing Business Ranking

Saudi Arabia was ranked by the 2006-2007 report as the 35th most competitive economy. In the most recent, the kingdom jumped to 11th spot.

1. The jewel in the crown of KSA’s Economic City development scheme, King Abdullah Economic City (KAEC) is the largest private sector project in the region. Located off the Red Sea, between the two Holy Cities of Mecca and Medina and the commercial hub of Jeddah, KAEC is a dazzling metropolis that’s set to become one of the most important cities in Saudi Arabia. Home to two million people, when completed, it will be the size of Washington, DC

The city, costing US$ 27 billion is being built by a consortium headed by global real estate giant Emaar Properties and a select number of Saudi investors.

KAEC is made up of six integrated elements, a seaport, industrial zone, central business district , residences and resorts, education zone and light industry based on low-cost feedstock.

Elsewhere, the city’s state of the art port will make KAEC a global hub for light industries. With its close proximity to resource-rich Africa and the Middle East, the presence of innovative foreign and domestic industries and exceptional access to consumer markets in Europe, Africa and Asia, the city offers a wealth of opportunity.

2. Located in the northern-central region of Hail, the Prince AbdulAziz bin Mousaed Economic City (PABMEC) representing an investment of US$8 billion, the city is expected to create 55,000 new jobs. PABMEC will be designed on clusterbased principles with an emphasis on transportation, logistics and supply chain centres.. A new international airport is expected to serve three million passengers per year while the city’s railway station will serve two million passengers annually.

As well as being a crucial transport hub for the region, PABMEC will play host to an agro-industrial zone, petrochemical and mining centres and processing and construction materials zones. In addition to its industrial zones, the city will also offer business, residential and recreational sectors and a knowledge centre.

3. Situated to the east of Al-Madinah, the Knowledge Economic City (KEC) will be a cultural landmark for visitors and a national centre for knowledge-based industries. It will focus on centres of excellence for education and training , as well as hosting new medical and bio –industries.

4. Located 60km northwest of Jizan City, Saudi’s most important port on the Red Sea, Jazan Economic City (JEC) is a state of the art industrial city that is geared to become an important logistics hub, a major destination for regional raw materials and an export platform for global consumer markets. As such, it’s expected to attract more than SAR 100 billion in investment and create 100,000 new jobs.

The city will benefit from two key advantages; its location, close to the main trade routes between Europe, Asia and Africa, means it will have excellent access to these export markets plus it will become a strategic point for receiving raw materials from surrounding countries that currently lack processing facilities.