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Investment
in Arriyadh
or was bringing to fruition foreign and domestic investments
worth SR 500 billion ($133 billion) in the energy, information
technology and communications, health, education and life sciences
sectors.
It is a regulatory requirement that local counsel is engaged
by foreign investors. There is a wide choice between Saudi and
international law firms that have set up their offices in the capital.
There is also a full range of tax and accountancy services available
in Arriyadh, including local offices of all the major international
accountancy firms. The maximum corporate tax rate in the
Kingdom is 20 percent, there are no personal income taxes and
there is no restriction on the repatriation of profits. There is
also availability and eligibility to apply for loans from the Saudi
Industrial Development Fund (SIDF).
New foreign investors generally call on the Riyadh Chamber
of Commerce and Industry (RCCI), where besides being given
formal briefings by officials, there is the opportunity to talk to
other outside investors and pick up their view of the best way to
promote and grow a business operation in Arriyadh. The Chamber
has consciously modelled itself on the American Chamber of
Commerce (AmCham). It is therefore highly proactive, launching
its own studies and analyses while lobbying the government to
improve existing and projected legislation and regulation. As such
its influence has reached throughout the country.
The Chamber is also a promoter and keen supporter of the
biennial Riyadh Economic Forum whose sixth meeting was
held December 2013. The Forum is regarded by many as the
Kingdom’s pre-eminent think tank on economic and social issues.
It draws in businessmen and women from all over the country,
along with overseas investors, politicians, international opinion
formers and analysts.
Turning Opportunity into Done Deal
There are plenty of places to do business in Arriyadh. There is
wide range of well-serviced, upmarket office space. Rents are
competitive because the existing oversupply is being supplemented
by the arrival of prestigious new office space in the King Abdullah
Financial District. Given the advantages of having financial
professionals of all kinds, together with their support services,
concentrating in the KAFD, there will be tried and tested business
accommodation in premium downtown locations as banks and
other institutions move out to relocate there.
There is also a substantial choice of industrial premises
available. Arriyadh has two industrial cities run by the Saudi
Industrial Property Authority (MODON). One, in the center of
the city, already has 50 factories in a park of more than 450,000
square meters. Meanwhile the second industrial park extending
over an area of nearly 20 square kilometers, is located on the
southern outskirts of the city and already hosts more than a
thousand factories. A third and even larger industrial city is being
constructed at Al-Kharj to the East of Arriyadh which will finally
encompass no less than a 100 square kilometers for manufacturing
and offices.
It is important to remember that despite the presence of
world-class Saudi companies, especially in the construction and
logistics sectors, the wellspring of the economy continues to be
small and medium-sized entities. These firms, often family run, are
facing the classic challenges engendered by expansion. To meet
growing markets, they are discovering that they have outgrown
their traditional, largely family-based funding sources and must
have recourse to bank money or share issuance. It is at this point,
when the need for new investment and strong working capital
becomes paramount, that expanding their businesses nationals or
internationally can present constraints and challenges.
Opportunities exist in abundance for foreign investors to bring
management expertise, as well as capital and technical know-how
to such SMEs which are on the cusp of greater things. There are
no guarantees of success but the Kingdom’s commercial code is
clear, dispute resolution through the courts or arbitration is tried
and tested and there is far greater transparency at official levels
than might be expected from the often negative analyses of the
country by outside commentators.
The transparency extends to the tax breaks and funding
incentives. With few exceptions these apply equally to all
businesses, regardless of their local or foreign ownership.
Organisations such as the Saudi Industrial Development Fund
offer generous support to commercial ventures with a strong
business plan. In 2012, the Arriyadh Region and city received
SR1.5 billion in SIDF funding to create some 888 industrial
projects. There is a wide range of other discretionary funding
which is made available for two fundamental purposes; to grow the
non-oil economy and, every bit as importantly, to create productive
employment for Saudi nationals. Local employees require higher
salaries than most expatriates but they also attract support
funding from the government. In addition, they have free access
to on-the-job vocational or advanced training which boosts their
value to a business.
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