Policies Towards Foreign Direct Investment

Over the past few years, the government of Qatar enacted reforms to incentivize foreign investment. As Qatar finalizes major infrastructure developments in preparation for hosting the 2022 FIFA World Cup, the government has allocated $15 billion for new, non-oil sector projects to be awarded between 2021 and 2023, including for developing new residential land, setting up drainage networks, and building new public hospitals. As of 2021, the government plans to increase LNG production by 64 percent by 2027 and Qatari government officials expect significant investment opportunities for international companies in the upstream and downstream sectors. In 2019, Qatar’s national oil and gas company, Qatar Petroleum, announced localization initiative “Tawteen,” which provides incentives to local and foreign investors willing to establish domestic manufacturing facilities for oil and gas sector inputs. The government established in 2019 the Investment Promotion Agency to further attract foreign direct investment to Qatar. These economic spending and promotion plans should create additional opportunities for foreign investors.

In 2019, the government enacted a new foreign investment law (Law 1/2019) to ease restrictions on foreign investment. The law’s executive regulations permit full foreign ownership of businesses in most sectors with the possibility of fully repatriating the foreign owner’s profits, protecting the owner from expropriation, in addition to several other benefits. Excepted sectors include banking, insurance, and commercial agencies, where foreign capital investment remains limited to a maximum of 49 percent ownership, barring special dispensation from the Cabinet. In 2020, the government also enacted long-awaited Public-Private Partnership Law 12/2020, to further develop the domestic private sector and improve the government’s ability to manage and finance projects. The government is currently in the process of publishing regulations for the implementation of this new law, which should include rules governing foreign participation. Qatar’s primary foreign investment promotion and evaluation body is the Invest in Qatar Center within the Ministry of Commerce and Industry. Qatar is also home to the Qatar Financial Centre, Qatar Science and Technology Park, and the Qatar Free Zones Authority, all of which offer full foreign ownership and repatriation of profits, tax incentives, and investment funds for small- and medium-sized enterprises.

The government extends preferential treatment to suppliers who use local content in their bids on government contracts. Participation in tenders with a value of QAR five million ($1.37 million) or less is limited to local contractors, suppliers, and merchants registered with the Qatar Chamber of Commerce and Industry. Higher-value tenders sometimes in theory do not require any local commercial registration; in practice, certain exceptions exist.

Qatar maintains ongoing dialogue with the United States through both official and private sector tracks, including the annual U.S.-Qatar Strategic Dialogue and official trade missions. Qatari officials have repeatedly emphasized a desire to increase both American investments in Qatar and Qatari investments in the United States.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government recently reformed its foreign investment legal framework. As noted above, full foreign ownership is now permitted in all sectors except for banking, insurance, and commercial agencies. Law 1/2019 on Regulating the Investment of Non-Qatari Capital in Economic Activity (replacing Law 13/2000) grants foreign investors the ability to invest either through partnership with a Qatari investor owning 51 percent or more of the enterprise, or by applying to the Ministry of Commerce and Industry for up to 100 percent foreign ownership. The Invest in Qatar Center within the Ministry of Commerce and Industry is the entity responsible for vetting full foreign ownership applications. The law includes provisions on the protection of foreign investment from expropriation, the exemption of some foreign investment projects from income tax and customs duties, and the right to transfer profits and ownership without delay.

Law 16/2018 on Regulating Non-Qatari Ownership and Use of Properties allows foreign individuals, companies, and real estate developers freehold ownership of real estate in 10 designated zones and ‎usufructuary rights up to 99 years in 16 other zones. Foreigners may also own villas within residential complexes, as well as retail outlets in certain commercial complexes. Foreign real estate investors and owners are eligible for residency in Qatar for as long as they own their property. The Ministry of Justice created a Committee on Non-Qatari Ownership and Use of Real Estate in December 2018 to regulate non-Qatari real estate ownership and use.

Other FDI incentives exist, including ones extended by the Qatar Financial Centre, the Qatar Free Zones Authority, and the Qatar Science and Technology Park. A Public-Private Partnership legislation (Law 12/2020) was enacted in May 2020 to facilitate direct foreign investment in national infrastructure development (currently focused on hospitals, land development, and drainage networks). In part due to these reforms, Qatar’s World Bank’s Doing Business ranking improved in 2020 from 83rd to 77th position. Nonetheless, Qatar’s World Bank ranking in more than half of its annual categories continues to be lower than 100th, including in the categories of starting a business, getting credit, protecting minority investors, trading across borders, enforcing contracts, and resolving insolvency.

U.S. investors and companies are not disadvantaged by existing ownership or control mechanisms, sector restrictions, or investment screening mechanisms more than other foreign investors.

Other Investment Policy Reviews

Qatar underwent a World Trade Organization (WTO) policy review in April 2014. Qatar is due for another review in 2021. The reviews may be viewed on the WTO website: https://www.wto.org/english/tratop_e/tpr_e/tp396_e.htm 

Business Facilitation

Recent reforms have further streamlined the commercial registration process. Local and foreign investors may apply for a commercial license through the Ministry of Commerce and Industry’s (MOCI) physical “one-stop shop” or online through the Invest in Qatar Center’s portal. Per Law 1/2019, upon submission of a complete application, the Ministry will issue its decision within 15 days. Rejected applications can be resubmitted or appealed. For more information on the application and required documentation, visit: https://invest.gov.qa 

The World Bank’s 2020 Doing Business Report estimates that registering a small-size limited liability company in Qatar can take eight to nine days. For detailed information on business registration procedures, as evaluated by the World Bank, visit: http://www.doingbusiness.org/data/exploreeconomies/qatar/ 

For more information on business registration in Qatar, visit:

• Ministry of Commerce and Industry’s Invest in Qatar Center: https://invest.gov.qa
• Qatar Financial Centre: http://www.qfc.qa/
• Qatar Free Zones Authority: https://fza.gov.qa/
• Qatar Science and Technology Park: https://qstp.org.qa/
• Qatar Petroleum Tawteen Program: https://www.tawteen.com.qa/

Outward Investment

Qatar does not restrict domestic investors from investing abroad. According to the latest foreign investment survey from the Planning and Statistics Authority, Qatar’s outward foreign investment stock reached $109.9 billion in the second quarter of 2019. In 2018, sectors that accounted for most of Qatar’s outward FDI were finance and insurance (40 percent of total), transportation, storage, information and communication (33 percent), and mining and quarrying (18 percent). As of 2018, Qatari investment firms held investments in about 80 countries; the top destinations were the European Union (34 percent of total), the Gulf Cooperation Council (GCC, 24 percent), and other Arab countries (14 percent).

Qatar has 59 bilateral investment treaties (BITs), according to the United Nations Conference on Trade and Development (UNCTAD). Twenty-six BITs are in force, namely with Armenia, Azerbaijan, Belarus, Belgium-Luxembourg Economic Union, Bosnia and Herzegovina, China, Costa Rica, Cyprus, Egypt, Finland, France, Gambia, Germany, Indonesia, Iran, Italy, Jordan, Montenegro, Morocco, Portugal, Romania, Russia, Singapore, South Korea, Switzerland, and Turkey. The most recent BIT was signed with Rwanda in November 2018 but has not yet come into force. A full list of current BITs with the State of Qatar can be found at: https://investmentpolicy.unctad.org/international-investment-agreements/countries/171/qatar 

While Qatar has not entered into a bilateral investment or trade treaty with the United States, the two nations established a Trade and Investment Framework Agreement (TIFA) in 2004. Additionally, as part of the GCC, Qatar has signed 12 treaties with investment provisions (TIPs), including one between the GCC and the United States in 2012, but this treaty has not yet entered into force.

Qatar does not have a double taxation treaty with the United States. In 2015, Qatar became the first GCC country to sign a Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement with the United States. In total, Qatar has over 80 agreements for the Avoidance of Double Taxation, including, most recently, with Somalia (2020), Morocco (2020), and China (2020).

Qatar has recently improved its taxation regime. In 2019, the government established the General Tax Authority as the central tax collection and compliance body of the government. In the same year, the government implemented the GCC 2016 Excise Tax Framework Agreement, imposing consumption-based excise taxes on select goods deemed harmful to human health, including tobacco (100 percent excise tax), sweetened carbonated drinks (50 percent), energy drinks (100 percent), and “special-category goods,” including alcoholic beverages (100 percent), and pork (100 percent). The decision was promulgated in Law 25 of 2018 and applies to both locally produced and imported goods in those categories. On April 1, the government of Qatar removed the excise tax from “special purpose goods.” As a GCC member state, Qatar has agreed to introduce a common value-added tax (VAT) of five percent. In 2017, Qatar approved a draft law on the proposed VAT, but has not committed to an implementation timeline.

Transparency of the Regulatory System

The World Trade Organization recognizes Qatar’s legal framework as conducive to private investment and entrepreneurship and enabling of the development of an independent judiciary system. Qatar has taken measures to protect competition and ensure a free and efficient economy. In addition to the National Competition Protection and Anti-Monopoly Committee, regulatory authorities exist for most economic sectors and are mandated to monitor economic activity and ensure fair practices.

Nonetheless, according to the World Bank’s Global Indicators of Regulatory Governance, Qatar lacks a transparent rulemaking mechanism, as government ministries and regulatory agencies do not share regulatory plans or publish draft laws for public consideration. An official public consultation process does not exist in Qatar. Laws and regulations are developed by relevant ministries. The 45-member Shura Council (which should statutorily have at least 30 publicly elected officials, is in practice comprised solely of direct appointees by the Amir) must reach consensus to pass draft legislation, which is then returned to the Cabinet for further review and to the Amir for final approval. Shura Council elections are planned for October 2021. The text of all legislation is published online and in local newspapers upon approval by the Amir. All Qatari laws are issued in Arabic and eventually translated to English. Qatar-based legal firms provide translations of Qatari legislation to their clients. Each approved law explicitly tasks one or more government entities with implementing and enforcing legislation. These entities are clearly defined in the text of each law. In some cases, the law also sets up regulatory and oversight committees consisting of representatives of concerned government entities to safeguard enforcement. Qatar’s official legal portal is http://www.almeezan.qa .

Qatar’s primary commercial regulator is the Ministry of Commerce and Industry. Commercial Companies’ Law 11/2015 requires that publicly traded companies submit financial statements to the Ministry in compliance with the International Financial Reporting Standards (IFRS) and the International Accounting Standards (IAS). Publicly listed companies must also publish financial statements at least 15 days prior to annual general meetings in two local newspapers (in Arabic and English) and on their websites. All companies are required to prepare accounting records according to standards promulgated by the IAS Board.

The Qatar Central Bank (QCB) is the main financial regulator that oversees all financial institutions in Qatar, per Law 13/2012. To promote financial stability and enhance regulatory coordination, the law established a Financial Stability and Risk Control Committee, which is headed by the QCB Governor. According to Law 7/2005, the Qatar Financial Centre (QFC) Regulatory Authority is the independent regulator of the QFC firms and individuals conducting financial services in or from the QFC, but the QCB also oversees financial markets housed within QFC. QFC regulations are available at http://www.qfcra.com/en-us/legislation/ .

The government of Qatar is transparent about its public finances and debt obligations. QCB publishes quarterly banking data, including on government external debt, government bonds, treasury bills, and sukuk (Islamic bonds).

International Regulatory Considerations

Qatar is a member of the Gulf Cooperation Council (GCC), a political and economic regional union. Laws based on GCC regulations must be approved through Qatar’s domestic legislative process and are reviewed by the Qatari Cabinet and the Shura Council prior to implementation. Qatar has been a member of the World Trade Organization (WTO) since 1996 and usually notifies its draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Qatar’s legal system is based on a combination of civil and Islamic Sharia laws. The Constitution takes precedence over all laws, followed by legislation and decrees, and finally ministerial resolutions. All judges are appointed by the Supreme Judicial Council, under Law 10/2003. The Supreme Judicial Council oversees Qatari courts and functions independently from the executive branch of the government, per the Constitution. Qatari courts adjudicate civil and commercial disputes in accordance with civil and Sharia laws. International agreements have equal status with Qatari laws; the Constitution ensures that international pacts, treaties, and agreements to which Qatar is a party are respected.

Qatar does not currently have a specialized commercial court, but in 2019, the Cabinet approved a draft decision to set up a court for investment and trade disputes. Pending the establishment of the new court, domestic commercial disputes continue to be settled in civil courts. Contract enforcement is governed by the Civil Code Law 22/2004. Decisions made in civil courts can be appealed before the Court of Appeals, or later the Court of Cassation.

Companies registered with the Ministry of Commerce and Industry are subject to Qatari courts and laws—primarily the Commercial Companies’ Law 11/2015—while companies set up through Qatar Financial Center (QFC) are regulated by commercial laws based on English Common Law and the courts of the QFC Regulatory Authority, per Law 7/2005. The QFC legal regime is separate from the Qatari legal system—with the exception of criminal law—and is only applicable to companies licensed by the QFC. Similarly, companies registered within the Qatar Free Zones Authority are governed by specialized regulations.

Laws and Regulations on Foreign Direct Investment

Over the past few years, the Amir enacted Law 1/2019 on Regulating the Investment of Non-Qatari Capital in Economic Activity and Law 16/2018 on Regulating Non-Qatari Ownership and Use of Properties. These aim to encourage greater foreign investment in the economy by authorizing, incentivizing and protecting foreign ownership.

The MOCI’s Invest in Qatar Center is the Ministry’s main investment promotion body. It has a physical “one-stop-shop” and an online portal. It gives preference to investments that add value to the local economy and align with the country’s national development plans. For more information on investment opportunities, commercial registration application and required documentation, visit: https://invest.gov.qa .

Separate laws and regulations govern foreign direct investment at the Qatar Financial Centre ( http://www.qfc.qa/ ), the Qatar Free Zones Authority ( https://fza.gov.qa/ ), the Qatar Science and Technology Park ( https://qstp.org.qa/ ), and Manateq ( https://www.manateq.qa/ ).

Competition and Antitrust Laws

Certain sectors are not open for domestic or foreign competition, such as public transportation, as well as fuel distribution and marketing. In those sectors, semi-public companies maintain a predominant role. Law 19/2006 for the Protection of Competition and Prevention of Monopolistic Practice established the Competition Protection and Anti-Monopoly Committee in charge of receiving complaints about anti-competition violations. The law protects against monopolistic behavior by entities outside the state, if it is deemed they would impact the Qatari market; instead, the law affords state institutions and government-owned companies full or predominant role in those sectors.

Qatari laws allow international law firms with at least 15 years of continuous experience in their countries of origin to operate in Qatar, however, they can only be licensed in Qatar if Qatari authorities deem their fields of specialization useful to Qatar. Cabinet Decision Number 57/2010 stipulates that the Doha office of an international law firm can practice in Qatar only if its main office in the country of origin remains open.

Expropriation and Compensation

Under current legislation (Law 1/2019 and Law 16/2018), the government protects foreign investment and property from direct or indirect expropriation, unless for public benefit, in a non-discriminatory manner, and after providing adequate compensation. The same procedures are applied to expropriated property of Qatari citizens. Law 13/1988 covers the rules of expropriation for public benefit.

There were no Cabinet-approved expropriation decisions in 2020, and one decision in 2019. Expropriation is unlikely to occur in the investment zones in which foreigners may purchase or obtain rights to property, although the law does not restrict the power to expropriate in these areas.

Dispute Settlement

ICSID Convention and New York Convention

Qatar has been party to the 1958 New York Convention since 2011 and a member of the International Center for the Settlement of Investment Disputes (ICSID) since 2002. Qatar enforces foreign arbitral decisions concluded in states that are party to the New York Convention.

Investor-State Dispute Settlement

The government accepts binding international arbitration in the event of investment disputes; nevertheless, Qatari courts will not enforce judgments or awards from other courts in disputes emanating from legal proceedings or arbitrations made under the jurisdictions of other nations/systems.

According to the United Nations Conference on Trade and Development, over the past 10 years, Qatar was involved in 10 investment disputes, nine of which were initiated by Qatari investors against foreign governments. Three of the 10 disputes have been discontinued, and the remaining seven are still outstanding.

International Commercial Arbitration and Foreign Courts

The Qatar Financial Centre (QFC) features an Alternative Dispute Resolution Center. Although primarily concerned with hearing commercial matters arising within the QFC itself, the QFC has expanded the center’s jurisdiction to accept other disputes at its discretion. The Qatar International Court and Dispute Resolution Center adjudicates disputes brought by firms associated with the QFC in accordance with English common law.

Qatar’s arbitration law (Law 2/2017) based on the United Nations Commission on International Trade Law gives Qatar’s International Court and Dispute Resolution Centre the jurisdiction to oversee arbitration cases in Qatar in line with recent local and international developments. The purpose of this law is to stimulate and strengthen Qatar’s investment and business environment.

There is no set duration for dispute resolution and the time to obtain a resolution depends on the case. The Qatar International Court and Dispute Resolution Centre publishes past judgments on its website ( https://www.qicdrc.com.qa/the-courts/judgments ).

In order to protect their interests, U.S. firms are advised to consult with a Qatari or foreign-based law firm when executing contracts with local parties.

Bankruptcy Regulations

Two concurrent bankruptcy regimes exist in Qatar. The first is the local regime, the provisions of which are set out in Commercial Law 27/2006 (Articles 606-846). The bankruptcy of a Qatari citizen or a Qatari-owned company is rarely announced, and the government sometimes plays the role of guarantor to prop up domestic businesses and safeguard creditors’ rights. The law aims to protect creditors from a bankrupted debtor whose assets are insufficient to meet the amount of the debts. Bankruptcy is punishable by imprisonment, but the length of the prison sentence depends on violations of other penal codes, such as concealment or destruction of company records, embezzlement, or knowingly contributing to insolvency.

The Qatar Central Bank (QCB) established the Qatar Credit Bureau in 2010 to promote credit growth in Qatar. The Credit Bureau provides QCB and the banking sector with a centralized credit database to inform economic and financial policies and support the implementation of risk management techniques as outlined in the Basel II Accord.

The second bankruptcy regime is encoded in QFC’s Insolvency Regulations of 2005 and applies to corporate bodies and branches registered within the QFC. There are firms that offer full dissolution bankruptcy services to QFC-registered companies.

The World Bank’s Doing Business Report for 2020 gave Qatar a score of 38 out of 100 on its Resolving Insolvency Indicator (123rd in the world) due to the high cost associated with the process and the long time it takes to complete foreclosure proceedings (2.8 years, on average).

Investment Incentives

Qatar does not impose a personal income tax and the new foreign investment law (Law 1/2019) offers a variety of other incentives to foreign investors, which may include the following:

• Exemption from 10 percent corporate tax for a period of up to 10 years.
• Exemption from customs duties on imports of necessary machinery and equipment.
• Exemption from customs duties on imports of raw materials or half-manufactured goods necessary for production and not available in the local market, for industrial projects.
• Up to 100 percent foreign ownership and no limit on repatriation.

Legislation provides for the establishment of some industrial projects in designated industrial zones under the Qatar Free Zones Authority; those projects receive the following incentives:

• Exemption from 10 percent corporate tax for a period of up to 20 years.
• Zero custom duties on imports.
• Potential access to a $3 billion government-backed fund.
• 100 percent foreign ownership and no limit on repatriation.
• Opportunities for joint ventures with local companies.
• Potential access to a backed investment fund.

Qatar Petroleum determines the amount of foreign equity and the extent of incentives for industrial energy-related projects; Law 8/2018 regulates the process.

In February 2020, and in line with the government’s efforts to improve the ease of doing business and enhance the investment environment for owners of small and medium-size enterprises (SMEs), MOCI, in partnership with Qatar Development Bank, launched the ‘Land and Industrial Loan’ initiative, offering loans and industrial land to SMEs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Qatar has several free zones and business facilitation options, namely the Qatar Financial Center, Qatar Science and Technology Park, and Qatar Free Zones Authority:

• Qatar Financial Centre (QFC) is an onshore business platform that allows international financial institutions and professional service companies to establish offices in Qatar with 100 percent foreign ownership and full repatriation of profits. Locally sourced profits are subject to a 10 percent corporate tax. The QFC has its own independent regulatory regime based on English common law. The QFC Regulatory Authority acts as the regulator for financial firms operating the QFC’s umbrella. The QFC Regulatory Tribunal and Qatar International Court hear and adjudicate cases. Judgments issued though these bodies are only of value if enforced by Qatari courts against persons and/or Qatar-based assets. Goldman Sachs International, Mastercard Gulf, Uber, and Oracle are among the companies registered with QFC.

• The Qatar Science and Technology Park (QSTP) is a hub designed to conduct research and development and facilitate the transfer of expertise and technology. The hub offers grants and incubators to foreign and local innovators. QSTP permits licensed foreign companies to own up to 100 percent and full capital and income repatriation. Companies operating at the QSTP can import goods and services duty free and export goods produced at the park tax-free. Firms at the park are also exempt from all taxes, including the 10 percent income tax. The property of these businesses cannot be seized under any circumstance, but capital and other cash may be seized on the orders of a local court. Microsoft, ExxonMobil, GE, Cisco, and ConocoPhillips are among QSTP member companies.

• The Qatar Free Zones Authority (QFZ) oversees two free zones in Qatar: Ras Bufontas near the country’s international airport and Um Alhoul adjacent to the country’s largest commercial seaport. Companies operating in these free zones are permitted 100 percent foreign ownership, corporate tax exemption for 20 years, full repatriation of profits, custom duties exemption on all imports, and a range of other incentives. Google, DHL, and Volkswagen are notable examples of multinational companies operating at the QFZ.

In May 2020, the Amir approved Law 12/2020 on Organizing the Partnership between the Public and Private Sector. This law is the government’s most recent attempt to further attract foreign investors and develop the private sector.

Performance and Data Localization Requirements

There are no laws that obligate the private sector to hire Qatari nationals, but the public sector and institutions working closely with the government on projects and joint ventures (such as energy companies operating in Qatar) are required to hire Qatari nationals. Workforce localization policy (known as “Qatarization”) in the public sector is a main focus of the country’s National Vision 2030 and foreign investors wishing to operate fully owned companies will be required to submit a “Qatarization” plan. In 2020, the Cabinet approved a new Ministerial Decree that will mandate that Qataris should make up at least 60 percent of the workforce of state-owned companies or companies where the government is a majority investor. Children of Qatari women are considered Qataris for purposes of calculating this localization ratio. The new provision also states that Qataris should make up 80 percent of the human resources workforce in state-owned companies. The government allocates employers visa slots for hiring nationals of specific countries based on preset quotas; such slots are non-transferable without obtaining approval from the Ministry of Administrative Development, Labor, and Social Affairs.

While Qatar does not follow a forced localization policy, the government provides preferential treatment to suppliers that use local content in bids when competing for government contracts. The government of Qatar also gives a 10 percent price preference to goods produced with Qatari content. As a rule, participation in government tenders with a value of QAR 5,000,000 or less (equivalent to approximately $1.37 million) is limited to local contractors, suppliers, and merchants registered with the Qatar Chamber of Commerce; tenders involving higher valuations do not in theory require any local commercial registration; however, in practice, certain exceptions exist.

In 2019, Qatar’s national oil and gas company, Qatar Petroleum, announced a localization initiative, Tawteen, which, among other things, would require all Qatar Petroleum suppliers, as well as bidders for select contracts, to undergo assessment by a third-party auditor to determine their In-Country Value (ICV) score. Qatar Petroleum and its subsidiary companies would assess bidders’ ICV score in addition to technical and commercial criteria when evaluating bids. The formula for calculating a company’s ICV score can be found at https://www.tawteen.com.qa/In-Country-Value-Policy/ICV-Formula-Calculation .

No specific performance requirements exist for Qatar-based-foreign investment. While disclosure of financial and employment data is required, proprietary information is not. There are no known formalized requirements for foreign IT providers to turn over source code or provide access to the authorities for surveillance. The information and communications technology (ICT) sector is regulated by Qatar’s Communications Regulatory Authority, established as an independent body by Amiri Decree 42/2014, under the Ministry of Transport and Communications. Qatar is the first Gulf nation to enact a Data Protection Law 13/2016, which requires companies to comply with restrictions related to the collection, disclosure, and safekeeping of personal data. The regulator responsible for enforcing the Data Protection Law is the Ministry of Transport and Communications.

Real Property

A set of laws, ministerial decrees, and resolutions make up the country’s jurisprudence on property rights and ownership. Law 16/2018 designates 10 zones in which foreign investors, companies, and real estate developers are permitted full property ownership. The law also allows foreign investors usufructuary right of real estate of up to 99 years in 16 other zones. Additionally, foreigners may own villas within residential complexes, as well as retail outlets in certain commercial complexes. In October 2020, the government announced that more zones will be open to foreign ownership in the near future. The government will grant non-Qatari real estate owners’ residency in Qatar for as long as they own their properties. Following the release of the law, the Ministry of Justice formed a committee to regulate foreign real estate ownership and use.

Law 6/2014 regulates real estate development and stipulates that non-Qatari companies should have at least 10 years of experience and be headquartered in Qatar as a precondition for carrying out real estate development activities at selected locations.

The government of Qatar enforces property leasehold rights. Qatar’s Rent Law 4/2008 tends to extend more protections to the lessee while regulating lessors. The government grants a number of enforceable rights to the lessee, including protection from rent hikes during the lease period and enforcement of the terms of the lease contract should the lessor transfer ownership. The government protects lessors against tenants’ violations of lease agreements. Qatar’s Leasing Dispute Settlement Committee enforces these regulations. The committee hears and issues binding decisions and requires all lessors register their lease agreements with this committee. The Ministry of Municipality and Environment oversees the preparation of all records related to the selling, leasing, waiver, and bequeathing of real estate. A reliable electronic database exists to check for encumbrances, including liens, mortgages, and restrictions, as well as keeping all titles and deed records in digital format.

The World Bank’s 2020 Doing Business Report ranked Qatar first globally under the Ease of Registering Property’s category http://www.doingbusiness.org/data/exploreeconomies/qatar#registering-property 

Intellectual Property Rights

While Qatar’s intellectual property (IP) legal regime is still under development, it is robust and includes a wide range of legislation that protects different types of IP rights. Qatar has signed many international IP treaties, and Qatari laws and regulations guarantee the implementation of those treaties. Qatar’s IP legislation includes the Trademark and Copyright Law (enacted in 2002), the Protection of Trade Secrets and Protection of Layout Design law (2005), the Patent Law (2006), and most recently, the Protection of Industrial Design law (2020). These laws grant foreign applicants the same rights as Qataris, provided they are nationals of a state that grants Qatar reciprocal treatment.

Intellectual property owners can apply for IP rights at MOCI, which is mandated, by Law 20/2014, to enforce IP laws and regulations. Within the ministry, an IP Protection Department has been set up with offices focusing on trademarks, copyrights, patents, industrial designs, and innovations. The following are the periods of validity for the different types of registered IP:

• Patents: Valid for 20 years from date of filing.
  • The Ministry of Public Health (MOPH) requires the registration of all imported pharmaceutical products and refuses to register unauthorized copies of products patented in other countries. Qatar also recognizes GCC patents on pharmaceutical products.
  • The GCC Patent Office used to provide an affordable and efficient option for companies seeking intellectual property protection throughout the six GCC member states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE). Effective January 2021, the office stopped accepting new patent filings. The decision will force companies seeking patent registration in the GCC region to file separate applications in each country, pay six separate fees, and endure substantial waiting period before their patents are registered in all six states.
• Copyrights: Protected for 50 years after the author’s death.
  • Per Qatari law, failure to register at MOCI will not affect protection of the copyright. While the law does not protect unpublished works and does not criminalize end-user piracy, Qatar is party to the Berne and Paris Conventions and abides by their mandates regarding unpublished works. The IP Protection Department works with law enforcement authorities to prosecute resellers of unlicensed video and software.
• Trademarks: Valid for 10 years but can be renewed indefinitely; trademarks unused for five consecutive years are subject to cancellation.
  • The GCC Customs Union, the GCC approved a common trademark law; Qatar is taking steps to enact it.
• Industrial Designs: Valid for five years from submission date but can be renewed twice more.
  • This law covers the visual design rather than the functional or technical aspects of an original product. Law 10/2020 on the Protection of Industrial Design was enacted in May 2020.

The law on Intellectual Property Border Protection (Law 17/2011) forbids the importation of any products that infringe on any intellectual property rights protected in Qatar and obligates the General Authority of Customs to take measures to prevent the entry of infringing products into Qatar. The law also permits IP right holders to block the release of imported products that infringe on their rights, given sufficient evidence. In 2017, the General Authority of Customs launched an electronic system to detect counterfeit goods coming into the country. The system is accredited by the World Customs Organization and has been introduced to limit importation of counterfeit goods.

The existing Penal Code imposes hefty fines on individuals dealing in counterfeit products and prescribes prison terms for offenders convicted of counterfeiting, imitating, fraudulently affixing, or selling products, or offering services of a registered trademark, or other IP violations. The General Authority of Customs, the Consumer Protection and IP Protection Departments at the Ministry of Commerce and Industry, and the Ministry of Interior conduct surveys, search shops, and seize and destroy counterfeit products.

The United States Trade Representative Office (USTR) does not consider Qatar a market that engages in, turns a blind eye to, or benefits from piracy and counterfeit products, nor is Qatar listed in USTR’s Special 301 Report.

Qatar is a member of the World Trade Organization and the World Intellectual Property Organization (WIPO), and is a signatory of several WIPO treaties. For additional information on national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

U.S. Patent & Trademark Office
Regional IP Attaché
Peter C. Mehravari, Intellectual Property Attaché for the Middle East & North Africa
U.S. Department of Commerce Foreign Commercial Service, U.S. Patent & Trademark Office
U.S. Embassy, Abu Dhabi, United Arab Emirates
+965 2259 1455
Peter.mehravari@trade.gov 
Web: https://www.uspto.gov/learning-and-resources/ip-policy/intellectual-property-rights-ipr-attach-program/intellectual 

United States Trade Representative
IPR Direc
tor for the GCCJacob Ewerdt
+1-202-395-3866
Jacob.p.ewerdt@ustr.eop.gov 
Web: http://www.ustr.gov 

Companies and individuals seeking assistance on pursuing IP protections and enforcement claims in Qatar can consult a list of local attorneys posted on the U.S. Embassy Doha website: https://qa.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Capital Markets and Portfolio Investment

The government of Qatar has permitted foreign portfolio investment since 2005. There are no restrictions on the flow of capital in Qatar. Qatar Central Bank (QCB) adheres to conservative policies aimed at maintaining steady economic growth and a stable banking sector. It respects IMF Article VIII and does not restrict payments or transfers for international transactions. It allocates loans on market terms, and essentially treats foreign companies the same way it does local ones.

Existing legislation currently limits foreign ownership of Qatari companies listed on the Qatar Stock Exchange to 49 percent. The law permits foreign capital investment up to 100 percent in most sectors upon approval of an application submitted to MOCI’s Invest in Qatar Center. Foreign portfolio investment in national oil and gas companies or companies with the right of exploration of national resources cannot exceed 49 percent.

Almost all import transactions require standard letters of credit from local banks and their correspondent banks in the exporting countries. Financial institutions extend credit facilities to local and foreign investors within the framework of standard international banking practices. Creditors typically require foreign investors to produce a letter of guarantee from their local sponsor or equity partner.

In accordance with QCB guidelines, banks operating in Qatar give priority to Qataris and to public development projects in their financing operations. Additionally, banks usually refrain from extending credit facilities to single customers exceeding 20 percent of the bank’s capital and reserves. QCB does not allow cross-sharing arrangements among banks. QCB requires banks to maintain a maximum credit ratio of 90 percent.

Qatar has become an important banking and financial services hub in the Gulf region. Qatar’s monetary freedom score is 80.7 out of 100 (“free”) and ranks third in the Middle East and North Africa region (after the United Arab Emirates and Israel) in terms of economic freedom.

Money and Banking System

There are 17 licensed banks in Qatar, seven of which are foreign institutions. Qatar also has 20 exchange houses, six investment and finance companies, 16 insurance companies, and 17 investment funds. Other foreign banks and financial institutions operate under the Qatar Financial Center’s platform, but they are not licensed by QCB; they are regulated by the Qatar Financial Center Regulatory Authority and are not allowed to have retail branches in Qatar. Qatar National Bank is the largest financial institution by assets in the Middle East and Africa, with total assets exceeding $259.5 billion. To open a bank account in Qatar, foreigners must present proof of residency.

As the main financial regulator, QCB continues to introduce incentives for local banks to ensure a strong financial sector that is resilient during times of economic volatility. QCB manages liquidity by mandating a reserve ratio of 4.5 percent and utilizing treasury bonds, bills, and other macroprudential measures. Banks that do not abide by the required reserve ratio are penalized. QCB uses repurchase agreements, backed by government securities, to inject liquidity into the banks. According to QCB data, total domestic liquidity reached $164.8 billion in December 2020, and only 2.2 percent of Qatar’s bank loans in 2019 were nonperforming. International ratings agencies have expressed confidence in the financial stability of the country’s banks, given liquidity levels strong earnings and the support of the Central Bank to the banking industry.

Cryptocurrency trading is illegal in Qatar, per a 2018 Qatar Central Bank circular. In January 2020, the Qatar Financial Centre Regulatory Authority (QFCRA) announced that firms operating under QFC are not permitted to provide or facilitate the provision or exchange of crypto assets and related services.

Foreign Exchange and Remittances

Foreign Exchange

Due to minimal demand for the Qatari riyal outside Qatar and the national economy’s dependence on gas and oil revenues, which are priced in dollars, the government has pegged the riyal to the U.S. dollar. The official peg is QAR 1.00 per $0.27 or $1.00 per QAR 3.64, as set by the government in June 1980 and reaffirmed by Amiri decree 31/2001.

Per the provisions of Law 20/2019 on Combating Money Laundering and Terrorism Financing and following the issuance of Cabinet Resolution 41/2019, starting February 2020, travelers to or from Qatar are required to complete a declaration form upon entry or departure, if carrying cash, precious metals, financial instruments, or jewelry, valued at QAR 50,000 or more ($13,736).

Remittance Policies

Qatar neither delays remittance of foreign investment returns nor restricts transfer of funds associated with an investment, such as return on dividends, return on capital, interest and principal payments on private foreign debt, lease payments, royalties, management fees, proceeds generated from sale or liquidation, sums garnered from settlements and disputes, and compensation from expropriation to financial institutions outside Qatar.

In accordance with Law 20/2019 on Combating Money Laundering and Terrorism Financing, QCB requires financial institutions to apply due diligence prior to establishing business relationships, carrying out financial transactions, and performing wire transfers. Executive regulations for this law promulgate that originator information should be secured when a wire transfer exceeds QAR 3,500 ($962). Similarly, due diligence is required when a customer is completing occasional transactions in a single operation or several linked operations of an amount exceeding QAR 50,000 ($13,736).

Qatar is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Qatar is currently undergoing its second round FATF Mutual Evaluation and is tentatively scheduled to have its onsite assessment in summer 2021. In July 2017, Qatar signed a counterterrorism Memorandum of Understanding with the United States, which provides for information sharing, joint training, enhanced cooperation, and other deliverables related to combating money laundering and terrorism financing.

Sovereign Wealth Funds

The Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, was established by Amiri Decree 22/2005. Chaired by the Amir, the Supreme Council for Economic Affairs and Investment oversees QIA, which does not disclose its assets (independent analysts estimate QIA’s holdings to be around $295 billion). QIA pursues direct investments and favors luxury brands, prime real estate, infrastructure development, and banks. Various QIA subsidiaries invest in other sectors, as well. In 2015, QIA opened an office in New York City to facilitate its $45 billion commitment of investments in the United States. QIA’s real estate subsidiary, Qatari Diar, has operated an office in Washington, D.C. since 2014.

QIA was one of the early supporters of the Santiago Principles, and among the few members that drafted the initial and final versions of the principles and continues to be a proactive supporter of their implementation. QIA was also a founding member of the IMF-hosted International Working Group of Sovereign Wealth Funds. QIA supported the establishment of the International Forum of Sovereign Wealth Funds and helped create the Forum’s constitution.

The State Audit Bureau oversees state-owned enterprises (SOEs), several of which operate as monopolies or with exclusive rights in most economic sectors. Despite the dominant role of SOEs in Qatar’s economy, the government has affirmed support for the local private sector and encourages small and medium-sized enterprise development as part of its National Vision 2030. The Qatari private sector is favored in bids for local contracts and generally receives favorable terms for financing at local banks. The following are Qatar’s major SOEs:

Energy and Power:

• Qatar Petroleum (QP), its subsidiaries, and its partners operate all oil and gas activities in the country. QP is wholly owned by the government. Non-Qataris can invest in its stock exchange listed subsidiaries, but shareholder ownership is limited to two percent and total non-Qatari ownership to 49 percent.
• Qatar General Electricity and Water Corporation (Kahramaa) is the main utility provider in the country and is majority-owned by Qatari government entities. To privatize the sector, the Qatar Electricity and Water Company (QEWC) was established in 2001 as a separate and private provider that sells its desalinated water and electricity to Kahramaa. Other privatization efforts included the Ras Laffan Power Company, established in 2001, and 55 percent owned by a U.S. company.

Aerospace:

• Qatar Airways is the country’s national carrier and is wholly owned by the state.

Services:

• Qatar General Postal Corporation is the state-owned postal company. Several other delivery companies compete in the courier market, including Aramex, DHL Express, and FedEx Express.

Information and Communication:

• Ooredoo Group is a telecommunications company founded in 2013. It is the dominant player in the Qatari telecommunications market and is 70 percent owned by Qatari government entities. Ooredoo (previously known as Q-Tel) dominates both the cell and fixed line telecommunications markets in Qatar and partners with telecommunications companies in 13 markets in the Middle East, North Africa, and Asia. Ooredoo Group is listed on the Qatari Stock Exchange.
• Vodafone Qatar is the only other telecommunications operator in Qatar, with the quasi-governmental entity Qatar Foundation owning 62 percent of its shares. Other Qatari government entities and Qatar-based investors own the remaining 38 percent. Vodafone Qatar is listed on the Qatari Stock Exchange.

Qatari SOEs may adhere to their own corporate governance codes and are not required to follow the OECD Guidelines on Corporate Governance. Some SOEs publish online corporate governance reports to encourage transparency, but there is no general framework for corporate governance across all Qatari SOEs. SOEs listed on the stock exchange must publish financial statements at least 15 days before annual general meetings in two local newspapers (in Arabic and English) and on their websites. When an SOE is involved in an investment dispute, the case is reviewed by the appropriate sector regulator (for example, the Communications Regulatory Authority for the information and communication sector).

Privatization Program

There is no ongoing official privatization program for major SOEs.

There is a general awareness in Qatar of responsible business conduct. In 2007, Qatar created the Corporate Social Responsibility (CSR) Network, a research and reporting entity that publishes annual reports highlighting best practices and honoring CSR leaders in the country. Many companies in Qatar publicize their CSR initiatives.

Sustainability is the focus of the National Development Strategy 2018-2022, released in March 2018; it is also an important goal of the National Vision 2030. Law 30/2002 is the main legislation protecting the environment. It prohibits the use of polluting equipment, machineries, and vehicles, and restricts the dumping and treatment of liquid or solid wastes to certain designated areas. The law also limits emissions of harmful vapors, gases, and smoke by the energy sector. This applies to all companies working in exploration and production of crude oil and natural gas.

The Ministry of Commerce and Industry has a dedicated Consumer Protection and Combating Commercial Fraud Department which has intensified its efforts in recent years by increasing the monitoring of records and inspection of stores and factories that sell or manufacture counterfeit goods. The ministry prosecutes business misconduct and announces these violations publicly. The government of Qatar maintains a reporting regime for suspicious transactions and requirements for consumer due diligence and record keeping.

As an economy dependent on extractive industries, Qatar participates in the Extractive Industries Transparency Initiative (EITI). Nonetheless, the Qatari government has not improved transparency regarding its management of the petroleum industry, as no regulatory body oversees resources extraction or revenue management. Moreover, Qatar has no freedom of information law.

Qatari law prohibits all forms of forced or compulsory labor and reserves two percent of jobs in government agencies and public institutions for persons with disabilities. The law also prohibits employment of children under 16 years of age. The Ministry of Administrative Development, Labor, and Social Affairs (MADLSA), the Ministry of Interior, and the National Human Rights Committee (NHRC) conduct training sessions for migrant laborers to educate them on their rights while in Qatar. International media and human rights organizations continue to allege numerous abuses against foreign workers, including forced or compulsory labor, withheld wages, unsafe working conditions, and poor living accommodations.

In January 2018, the United States and Qatar signed a government-to-government memorandum of understanding on exchanging expertise and fostering capacity building in combating human trafficking. In March 2019, the Department of Labor and MADLSA signed a Memorandum of Understanding on labor, which focused on two pillars: labor inspections and protecting domestic workers’ rights in Qatar. Some non-governmental organizations (NGOs) in Qatar focus on labor rights and often work in conjunction with the government. Researchers from international NGOs such as Amnesty International and Human Rights Watch continue to visit and report on the country with limited interference from authorities. International labor NGOs have been able to send researchers to Qatar under the sponsorship of academic institutions and quasi-governmental organizations such as the NHRC.

Private security companies cannot operate in Qatar without an appropriate license granted by the Ministry of Interior, per Law 19/2009 on Regulating the Provision of Private Security Services. As of 2009, Qatar has been signatory to the Montreux Document on Private Military and Security Companies.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor.
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Corruption in Qatar does not generally affect the conduct of business, although the power of personal connections plays a major role in business culture. Qatar ranked as the second least corrupt country in the Middle East and North Africa, according to Transparency International’s 2020 Corruption Perceptions Index and ranked 30th out of 180 nations globally with a score of 63 out of 100, with 100 indicating full transparency.

Qatari law imposes criminal penalties to combat corruption by public officials and the government actively implements these laws. In recent years, corruption and misuse of public money has been a focus of the executive office. Decree 6/2015 restructured the Administrative Control and Transparency Authority, granting it juridical responsibility, its own budget, and direct affiliation with the Amir’s office. The objectives of the authority are to prevent corruption and ensure that ministries and public employees operate with transparency. It is also mandated with investigating alleged crimes against public property or finances perpetrated by public officials.

Law 22/2015 imposes hefty penalties for corrupt officials and Law 11/2016 grants the State Audit Bureau more financial authority and independence, allowing it to publish parts of its findings (provided that confidential information is removed), a power it did not have previously. Individuals convicted of embezzlement are subject to prison terms of no less than five and up to ten years. The penalty is extended to a minimum term of seven and a maximum term of fifteen years if the perpetrator happens to be a public official in charge of collecting taxes or exercising fiduciary responsibilities over public funds. Qatar State Security Bureau and the Office of the Public Prosecutor handle investigations of alleged corruption. The Criminal Court makes final judgments.

Bribery is a crime in Qatar, and the law imposes penalties on public officials convicted of taking action in return for monetary or personal gain, and on other parties who take actions to influence or attempt to influence a public official through monetary or other means. The current Penal Code (Law 11/2004) governs corruption law and stipulates that individuals convicted of bribery may be sentenced up to ten years in prison and a fine equal to the amount of the bribe but no less than $1,374.

To promote a fairer, more transparent, and more expeditious public-sector tendering process, the government issued Procurement Law 24/2015, which abolished the Central Tendering Committee and established in its stead a Procurement Department within the Ministry of Finance that has oversight over the majority of government tenders. The new department has an online portal that consolidates all government tenders and provides relevant information to interested bidders, facilitating the process for foreign investors ( https://monaqasat.mof.gov.qa ).

Qatar is not a party to the Organization for Economic Cooperation and Development’s (OECD) Convention on Combating Bribery of Foreign Public Officials. However, Qatar ratified the UN Convention for Combating Corruption (by Amiri Decree 17/2007) and established a National Committee for Integrity and Transparency (by Amiri Decree 84/2007). The permanent committee is headed by the Chairman of the State Audit Bureau. In 2013, Qatar opened the Anti-Corruption and Rule of Law Center in Doha in partnership with the United Nations. The purpose of the center is to support, promote, and disseminate legal principles to fight corruption (https://rolacc.qa/).

Despite these efforts, some American businesses continue to cite lack of transparency in government procurement and customs as recurring issues when operating in the Qatari market. U.S. investors and Qatari nationals who happen to be agents of U.S. firms are subject to the provisions of the U.S. Foreign Corrupt Practices Act.

Resources to Report Corruption

The Public Prosecution’s Anti-Corruption Office encourages the public to report on corruption and bribery cases, and vows to protect the confidentiality of submitted information:

Public Prosecution
Anti-Corruption Office
+974-3353-1999 and +974-3343-1999
aco@pp.gov.qa 

The Administrative Control and Transparency Authority is also responsible for receiving complaints regarding transparency within the public sector:

Administrative Control and Transparency Authority
Al Bida St., Al Dafna, Doha
+974-40008088, +974-44648010, and +974-44648011
info@acta.gov.qa 

To file complaints: http://actadev.wpengine.com/en/complaints/ 

Qatar is a politically stable country with low rates of crime. There are no political parties, labor unions, or organized domestic political opposition. The U.S government rates Qatar as medium for terrorism, which includes threats from transnational actors.

The State Department encourages U.S. citizens in Qatar to stay in close contact with the U.S. Embassy in Doha for up-to-date threat information. The Department invites U.S. visitors to Qatar to enroll in its State Department’s Smart Traveler Enrollment Program to receive further information on safety conditions in Qatar: https://step.state.gov/step/.

Qatar has one of the world’s highest migrant workers to indigenous population ratios, with foreigners making up nearly 90 percent of the country’s population. Qatar’s resident population is estimated at 2.7 million as of December 2020, doubling in the last decade. Qatari citizens are estimated to number approximately 300,000 – around 11 percent of the total population. Qatar’s labor force consists primarily of expatriate workers. The largest group of foreign workers comes from the Indian sub-continent. Males make up around 72 percent of the population.

Unemployment rates in Qatar are among the lowest in the world, with 0.1 percent unemployment rate for men and 0.4 percent unemployment rate for women, as of 2019. In 2020, the Cabinet approved a new Ministerial Decree to Law 14/2004, mandating that Qataris shall make up 60 percent of the employees of state-owned enterprises, or companies where the government is a majority investor. Children of Qatari women are considered Qataris for purposes of calculating this localization ratio. The new provisions also mandate that Qataris constitute 80 percent of the human resources workforce in state-owned enterprises.

MADLSA regulates the recruitment of expatriate labor. Labor Law 14/2004 largely governs employment in Qatar and allows the terminating party to terminate employment without providing reasons. The law requires employers to pay employees due wages and other benefits in full, provided they have performed expected work duties during the notice period, which varies based on years of employment. Companies registered with QFC are governed by the English common law, and labor issues are administered by QFC’s Regulation 10/2006.

Law 12/2004 on Private Associations and Foundations and subsequent regulations grant Qatari citizens the right to form workers’ committees in private enterprises with more than 100 Qatari citizen workers. Qatari citizens employed in the private sector also have the right to participate in approved strikes, but the restrictive conditions imposed by the law make the likelihood of an approved strike remote. There are no labor unions in Qatar. Non-citizens are not eligible to form worker committees or go on strike, though according to an agreement between MADLSA and the International Labor Organization (ILO), joint worker committees including 50-50 representation of workers and employers exist in a small number of cases for all medium to large-sized companies. Individuals working in the public sector, regardless of nationality, are prohibited from joining unions. Over three-quarters of Qatari citizens are employed by the government. Workers at labor camps occasionally go on strike over non-payment or delayed payment of wages, however, this practice is technically illegal.

Local courts handle disputes between workers and employers though the process is widely regarded as inefficient. In an effort to speed up the process of resolving labor disputes, the government established Labor Disputes Settlement Committees headed by a judge and representatives from MADLSA. As of March 2018, there are three such committees, all of which operate outside of the traditional Supreme Judicial Committee structure and are required to address any complaints within three weeks.

In October 2020, Qatar enacted Law 17/2020 which set the minimum basic wage for works and domestic works at $275 per month, in addition to $220 for lodging and meals if not provided by the employer. To combat the problem of late and unpaid wages, the government issued Law 1/2015 amending certain provisions of Labor Law 14/2004 on wage protection and mandating electronic payment to all employees subject to the local labor law. The government requires all employers to open bank accounts for their employees and pay wages electronically through a system subject to audits by an inspection division at the MADLSA; this requirement, however, does not apply to domestic workers. Employers who fail to pay their workers face penalties of $550 – $1,650 per case and possible prison sentences. Those penalties, however, are rarely implemented. The system currently applies to over 1.4 million workers.

In an effort to eliminate forced labor, the government issued Law 19/2020 on August 2020 enabling employees to switch employers, without requiring employer’s permission. This new legislation compliments Law 13/2018, which allows workers covered by the Labor Law to leave the country without requiring exit permits from their employers. The Labor Law prohibits the withholding of workers’ passports by employers and stiffens penalties for transgressors.

To protect workers from fraudulent employment contracts, the Ministry of Interior signed an agreement with a Singaporean company in 2017 to establish Qatar Visa Centers (QVCs) with the goal of simplifying residency procedures for expat workers from India, Nepal, Sri Lanka, Pakistan, Bangladesh, and the Philippines. In partnership with both MOI and MADLSA, contracted companies established QVCs in these countries to facilitate biometric enrollment, medical records verification, and signing work contracts before contracted workers enter Qatar.

Qatar is a member of the ILO and maintains that its labor law meets ILO minimum requirements. In 2017, Qatar made commitments to address some ILO complaints by launching a comprehensive three-year ILO technical cooperation program. In 2018, the ILO opened a Doha office.

In 2018, the Qatari Minister of Foreign Affairs signed a labor-related MOU with the Department of State during the U.S.-Qatar Strategic Dialogue. The MOU laid out plans for cooperation in combating trafficking-in-persons, including strengthening the labor sector to reduce instances of forced labor. In 2019, MADLSA signed a new MOU with the Department of Labor to enhance cooperation in the fields of labor inspection and protecting domestic workers rights.

Source for Host Country Data: Qatar’s Planning and Statistics Authority https://www.psa.gov.qa/en/

Source: 2018 Data form Qatar’s Planning and Statistics Authority https://www.psa.gov.qa/en/

Table 4: Sources of Portfolio Investment
Data not available.

Economic Specialist
U.S. Embassy, Doha
22nd February Street, Al Luqta District, P.O. Box 2399, Doha, Qatar
+974-4496-6000
EskandarGA@state.gov

Policies Towards Foreign Direct Investment

The SAG seeks foreign investment that explicitly promotes economic development, transfers foreign expertise and technology to Saudi Arabia, creates jobs for Saudi nationals, and increases Saudi Arabia’s non-oil exports. As part of Vision 2030, the SAG targets increasing foreign investments in Saudi Arabia to $3 trillion. The government encourages investment in nearly all economic sectors, with priority given to chemicals, industrial, and manufacturing; transport and logistics; information and communication technology; healthcare and life sciences; water and waste management; energy; education; tourism, entertainment and sports; real estate; financial services; and mining and metals. In March 2021, the SAG announced it is seeking to attract $420 billion in foreign investments over the next 10 years in the infrastructure and transportation sectors alone.

The Ministry of Investment of Saudi Arabia (MISA), formerly the Saudi Arabian General Investment Authority (SAGIA), governs and regulates foreign investment in the Kingdom, issues licenses to prospective investors, and works to foster and promote investment opportunities across the economy. Established originally as a regulatory agency, MISA has increasingly shifted its focus to investment promotion and assistance, offering potential investors detailed guidance and a catalogue of current investment opportunities on its website (https://investsaudi.sa/en/sectors-opportunities/).

MISA promotes efforts to improve the Kingdom’s attractiveness as an investment destination: e-licenses to provide a more efficient and user-friendly process; an online “instant” license issuance or renewal service to foreign investors that are listed on a local or international stock market and meet certain conditions; a reduction in the license approval period from days to hours; a reduction in required customs documents; 100 percent foreign ownership in most sectors; a reduction in customs clearance period from weeks to hours; the launch of Saudi Center for Commercial Arbitration; and an increase in the investor license period to five years. MISA’s reforms appear to be yielding results: Saudi Arabia jumped 30 places to 62nd place in the 2020 World Bank’s Ease of Doing Business Report.

In a country where most public entertainment was once forbidden, the SAG now regularly sponsors and promotes entertainment programming, including live concerts, dance exhibitions, sports competitions, and other public performances. Significantly, the audiences for many of those events are now gender-mixed, representing a larger consumer base. In addition to reopening cinemas in 2018, the SAG has hosted Formula E races, professional golf tournaments, a world heavyweight boxing title match, and a professional tennis tournament. Saudi Arabia launched the Saudi Seasons initiative in 2019 with tourism and cultural events in each of the 11 regions of the country. The Riyadh Season included first-ever car exhibition and auction in Riyadh, which attracted 350 U.S. exhibitors. Saudi Arabia’s General Entertainment Authority announced it plans to launch the second iteration of Saudi Seasons in November 2021 after a COVID pause.

The SAG is proceeding with “economic cities” and new “giga-projects” that are at various stages of development and is seeking foreign investment in them. These projects are large-scale and self-contained developments in different regions focusing on particular industries, e.g., technology, energy, logistics (airports, railways, ports, and warehouses), tourism, entertainment, and institutional (education; medical; government entities, post offices and fire stations; religious buildings, and dams and reservoirs). Principal among these projects are:

• Qiddiya, a new, large-scale entertainment, sports, and cultural complex near Riyadh;
• King Abdullah Financial District, a commercial center development with nearly 60 skyscrapers in Riyadh;
• Red Sea Project, a massive tourism development on the archipelago of islands along the western Saudi coast, which aims to create 70,000 jobs and attract one million tourists per year;
• Amaala, a wellness, healthy living, and meditation resort on the Kingdom’s northwest coast, projected to include more than 2,500 luxury hotel rooms and 700 villas; and
• NEOM, a $500 billion long-term development project to build a futuristic “independent economic zone” in northwest Saudi Arabia. In November 2020, the SAG announced The Line; a new, 100 mile-long, $100-$200 billion development at NEOM that will have no cars, no streets, and no carbon emissions. The project aims to create 380,000 jobs and contribute $48 billon to domestic GDP by 2030.

The long term impact of the COVID-19 pandemic and sustained downturn in oil prices in 2020 on these giga-projects is not clear. While some companies working on the projects reported the ongoing availability of funding in 2020, others reported that budget cutbacks had begun to impact their operations.

In June 2020, the SAG approved a new mining investment law that aims to boost investments in the sector. The law will facilitate the establishment of a mining fund to provide sustainable finance, support geological survey and exploration programs, and optimize national mineral resources valued at $1.3 trillion. The law could increase the sector’s contribution to GDP by $64 billion, reduce imports by $9.8 billion, and create 200,000 direct and indirect jobs by 2030.

Structural impediments to foreign investment in Saudi Arabia remain.

Foreign investors must contend with increasingly strict localization requirements in bidding for certain government contracts, labor policy requirements to hire more Saudi nationals (usually at higher wages than expatriate workers), an increasingly restrictive visa policy for foreign workers, and gender segregation in business and social settings (though gender segregation is becoming more relaxed as the SAG introduces socio-economic reforms). The General Authority for Military Industries, for example, will require that all military procurements have fifty percent local content by 2030.

The SAG implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases, higher fines for traffic violations, new fees for certain billboard advertisements, and related measures. On July 1, 2020, the SAG increased the value-added tax (VAT) from five percent to 15 percent.

The SAG implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases, higher fines for traffic violations, new fees for certain billboard advertisements, and related measures. On July 1, 2020, the SAG increased the value-added tax (VAT) from five percent to 15 percent.

In February 2021, MISA and the Royal Commission for Riyadh City (RCRC) announced a new directive that companies that want to contract with the SAG must establish their regional headquarters in Saudi Arabia – preferably in Riyadh – by 2024. Companies that relocate their regional headquarters to Riyadh will receive tax breaks and other incentives. Saudi officials have confirmed that offices cannot be headquarters “in name only” but, rather, must be legitimate headquarters offices with C-level executive staff in Riyadh overseeing operations and staff in the rest of the region. Companies choosing to maintain their regional headquarters in another country will not be awarded public sector contracts – including contracts from Saudi Aramco – beginning in 2024.

Foreign investment is currently prohibited in 10 sectors on the Negative List, including:

1. Oil exploration, drilling, and production;
2. Catering to military sectors;
3. Security and detective services;
4. Real estate investment in the holy cities, Mecca and Medina;
5. Tourist orientation and guidance services for religious tourism related to Hajj and umrah;
6. Printing and publishing (subject to a variety of exceptions);
7. Certain internationally classified commission agents;
8. Services provided by midwives, nurses, physical therapy services, and quasi-doctoral services;
9. Fisheries; and
10. Poison centers, blood banks, and quarantine services.

In addition to the negative list, older laws that remain in effect prohibit or otherwise restrict foreign investment in some economic subsectors not on the list, including some areas of healthcare. At the same time, MISA has demonstrated some flexibility in approving exceptions to the “negative list” exclusions.

Limits on Foreign Control and Right to Private Ownership and Establishment

Saudi Arabia fully recognizes rights to private ownership and the establishment of private business. As outlined above, the SAG excludes foreign investors from some economic sectors and places some limits on foreign control.

With respect to energy, Saudi Arabia’s largest economic sector, foreign firms are barred from investing in the upstream hydrocarbon sector, but the SAG permits foreign investment in the downstream energy sector, including refining and petrochemicals. There is significant foreign investment in these sectors. ExxonMobil, Shell, China’s Sinopec, and Japan’s Sumitomo Chemical are partners with Saudi Aramco (the SAG’s state-owned oil firm) in domestic refineries. ExxonMobil, Chevron, Shell, and other international investors have joint ventures with Saudi Aramco and/or the Saudi Basic Industries Corporation (SABIC) in large-scale petrochemical plants that utilize natural gas feedstock from Saudi Aramco’s operations. The Dow Chemical Company and Saudi Aramco are partners in the $20 billion Sadara joint venture with the world’s largest integrated petrochemical production complex.

Saudi Aramco also maintains several contractors under its Long-Term Agreement (LTA) group for a series of offshore jobs that include engineering, procurement, construction, and installation. LTA firms are prioritized for offshore contracts typically ranging between $100 to $800 million in value. Saudi Aramco also maintains a smaller group of contractors to provide hook-up, commissioning and maintenance, and modifications and operations jobs for its offshore oil and gas infrastructure. These refurbishment contracts are usually valued under $100 million and tendered exclusively to this smaller group.

With respect to other non-oil natural resources, Saudi Arabia’s mining sector continues to expand. With an estimated $1.3 trillion of mineral resources, the sector expects to have significant opportunities in exploration and development projects. Saudi Arabia’s mining sector laws were recently updated to allow foreign companies to enter the mining sector and invest in the Kingdom’s vast mining resources. Saudi Arabia’s national mining company, Ma’aden, has a $12 billion joint venture with Alcoa for bauxite mining and aluminum production and a $7 billion joint venture with the leading American fertilizer firm Mosaic and SABIC to produce phosphate-based fertilizers.

Joint ventures almost always take the form of limited liability partnerships in Saudi Arabia, to which there are some disadvantages. Foreign partners in service and contracting ventures organized as limited liability partnerships must pay, in cash or in kind, 100 percent of their contribution to authorized capital. MISA’s authorization is only the first step in setting up such a partnership.

Professionals, including architects, consultants, and consulting engineers, are required to register with, and be certified by, the Ministry of Commerce. In theory, these regulations permit the registration of Saudi-foreign joint venture consulting firms. As part of its WTO commitments, Saudi Arabia generally allows consulting firms to establish a local office without a Saudi partner. Foreign engineering consulting companies, however, must have been incorporated for at least 10 years and have operations in at least four different countries to qualify. Foreign entities practicing accounting and auditing, architecture and civil planning, or providing healthcare, dental, or veterinary services, must still have a Saudi partner.

In recent years, Saudi Arabia has opened additional service markets to foreign investment, including financial and banking services; aircraft maintenance and repair; computer reservation systems; wholesale, retail, and franchise distribution services; both basic and value-added telecom services; and investment in the computer and related services sectors. In 2016, Saudi Arabia formally approved full foreign ownership of retail and wholesale businesses in the Kingdom. While some companies have already received licenses under the new rules, the restrictions attached to obtaining full ownership – including a requirement to invest over $50 million during the first five years and ensure that 30 percent of all products sold are manufactured locally – have proven difficult to meet and precluded many investors from taking full advantage of the reform.

Other Investment Policy Reviews

Saudi Arabia completed its third WTO trade policy review in March 2021, which included investment policies ( https://www.wto.org/english/tratop_e/tpr_e/tp507_e.htm ).

Business Facilitation

In addition to applying for a license from MISA, foreign and local investors must register a new business via the Ministry of Commerce (MOC), which has begun offering online registration services for limited liability companies at: https://mc.gov.sa/en/ . Though users may submit articles of association and apply for a business name within minutes on MOC’s website, final approval from the Ministry often takes a week or longer. Applicants must also complete a number of other steps to start a business, including obtaining a municipality (baladia) license for their office premises and registering separately with the Ministry of Human Resources and Social Development, Chamber of Commerce, Passport Office, Tax Department, and the General Organization for Social Insurance. From start to finish, registering a business in Saudi Arabia takes about three weeks. The country placed at 38 of 190 countries for ease of starting a business, according to the World Bank (2020 rankings). Also, improved protections for minority investors helped Saudi Arabia tie for third place globally on that World Bank indicator.

Saudi officials have stated their intention to attract foreign small- and medium-sized enterprises (SMEs) to the Kingdom. To facilitate and promote the growth of the SME sector, the SAG established the Small and Medium Enterprises General Authority in 2015 and released a new Companies Law in 2016, which was amended in 2018 to update the language vis-à-vis Joint Stock Companies (JSC) and Limited Liability Companies (LLC). It also substantially reduced the minimum capital and number of shareholders required to form a JSC from five to two. Additionally, as of 2019, women no longer need a male guardian to apply for a business license.

Outward Investment

Private Saudi citizens, Saudi companies, and SAG entities hold extensive overseas investments. The SAG has been transforming its Public Investment Fund (PIF), traditionally a holding company for government shares in state-controlled enterprises, into a major international investor and sovereign wealth fund. In 2016, the PIF made its first high-profile international investment by taking a $3.5 billion stake in Uber. The PIF has also announced a $400 million investment in Magic Leap, a Florida-based company that is developing “mixed reality” technology, and a $1 billion investment in Lucid Motors, a California-based electric car company. In 2020 and early 2021, the PIF made a number of new investments, including in Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, Carnival Cruise Lines, Reliance Retail Ventures Limited (RRVL), and Hambro Perks Ltd’s Oryx Fund, but liquidated its position in many of these within a few months. Saudi Aramco and SABIC are also major investors in the United States. In 2017, Saudi Aramco acquired full ownership of Motiva, the largest refinery in North America, in Port Arthur, Texas. SABIC has announced a multi-billion dollar joint venture with ExxonMobil in a petrochemical facility in Corpus Christi, Texas.

Transparency of the Regulatory System

Saudi Arabia received the lowest score possible (zero out of five) in the World Bank’s Global Indicators of Regulatory Governance Report, which places the Kingdom in the bottom 13 countries among 186 countries surveyed ( http://rulemaking.worldbank.org/ ). Few aspects of the SAG’s regulatory system are entirely transparent, although Saudi investment policy is less opaque than other areas. Bureaucratic procedures are cumbersome, but red tape can generally be overcome with persistence. Foreign portfolio investment in the Saudi stock exchange is well-regulated by the Capital Markets Authority (CMA), with clear standards for interested foreign investors to qualify to trade on the local market. The CMA has progressively liberalized requirements for “qualified foreign investors” to trade in Saudi securities. Insurance companies and banks whose shares are listed on the Saudi stock exchange are required to publish financial statements according to International Financial Reporting Standards (IFRS) accounting standards. All other companies are required to follow accounting standards issued by the Saudi Organization for Certified Public Accountants.

Stakeholder consultation on regulatory issues is inconsistent. Some Saudi organizations are diligent in consulting businesses affected by the regulatory process, while others tend to issue regulations with no consultation at all. Proposed laws and regulations are not always published in draft form for public comment. An increasing number of government agencies, however, solicit public comments through their websites. The processes and procedures for stakeholder consultation are not generally transparent or codified in law or regulations. There are no private-sector or government efforts to restrict foreign participation in the industry standards-setting consortia or organizations that are available. There are no informal regulatory processes managed by NGOs or private-sector associations.

International Regulatory Considerations

Saudi Arabia uses technical regulations developed both by the Saudi Arabian Standards Organization (SASO) and by the Gulf Standards Organization (GSO). Although the GCC member states continue to work towards common requirements and standards, each individual member state, and Saudi Arabia through SASO, continues to maintain significant autonomy in developing, implementing, and enforcing technical regulations and conformity assessment procedures in its territory. More recently, Saudi Arabia has moved towards adoption of a single standard for technical regulations. This standard is often based on International Organization for Standardization (ISO) or International Electrotechnical Commission (IEC) standards, to the exclusion of other international standards, such as those developed by U.S.-domiciled standards development organizations (SDOs).

Saudi Arabia’s exclusion of these other international standards, which are often used by U.S. manufacturers, can create significant market access barriers for industrial and consumer products exported from the United States. The United States government has engaged Saudi authorities on the principles for international standards per the WTO Technical Barriers to Trade Committee Decision and encouraged Saudi Arabia to adopt standards developed according to such principles in their technical regulations, allowing all products that meet those standards to enter the Saudi market. Several U.S.-based standards organizations, including SDOs and individual companies, have also engaged SASO, with mixed success, in an effort to preserve market access for U.S. products, ranging from electrical equipment to footwear.

A member of the WTO, Saudi Arabia must notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The Saudi legal system is derived from Islamic law, known as sharia. Saudi commercial law, meanwhile, is still developing. In 2016, Saudi Arabia took a significant step in improving its dispute settlement regime with the establishment of the Saudi Center for Commercial Arbitration (see “Dispute Settlement” below). Through its Commercial Law Development Program, the U.S. Department of Commerce has provided capacity-building programs for Saudi stakeholders in the areas of contract enforcement, public procurement, and insolvency.

The Saudi Ministry of Justice oversees the sharia-based judicial system, but most ministries have committees to rule on matters under their jurisdictions. Judicial and regulatory decisions can be appealed. Many disputes that would be handled in a court of law in the United States are handled through intra-ministerial administrative bodies and processes in Saudi Arabia. Generally, the Saudi Board of Grievances has jurisdiction over commercial disputes between the government and private contractors. The Board also reviews all foreign arbitral awards and foreign court decisions to ensure that they comply with sharia. This review process can be lengthy, and outcomes are unpredictable.

The Kingdom’s record of enforcing judgments issued by courts of other GCC states under the GCC Common Economic Agreement, and of other Arab League states under the Arab League Treaty, is somewhat better than enforcement of judgments from other foreign courts. Monetary judgments are based on the terms of the contract – e.g., if the contract is calculated in U.S. dollars, a judgment may be obtained in U.S. dollars. If unspecified, the judgment is denominated in Saudi riyals. Non-material damages and interest are not included in monetary judgments, based on the sharia prohibitions against interest and against indirect, consequential, and speculative damages.

As with any investment abroad, it is important that U.S. investors take steps to protect themselves by thoroughly researching the business record of a proposed Saudi partner, retaining legal counsel, complying scrupulously with all legal steps in the investment process, and securing a well-drafted agreement. Even after a decision is reached in a dispute, enforcement of a judgment can still take years. The U.S. government recommends consulting with local counsel in advance of investing to review legal options and appropriate contractual provisions for dispute resolution.

In a February 8, 2021 statement, the Crown Prince announced draft legal reforms impacting personal status law, civil transactions law, evidence law, and discretionary sentencing that aim to increase predictability and transparency in the legal system, facilitating commerce and expanding protections for women. The draft proposals, expected to be approved later in 2021, would begin to codify Saudi law to introduce transparency and help ensure consistency in court rulings and improve oversight and accountability. Details remain unclear, but if implemented effectively, the reforms would be a major step in modernizing the Saudi legal system.

Laws and Regulations on Foreign Direct Investment

In January 2019, the Saudi government established the Foreign Trade General Authority (FTGA), which aims to strengthen Saudi Arabia’s non-oil exports and investment, increase the private sector’s contribution to foreign trade, and resolve obstacles encountered by Saudi exporters and investors. The new authority monitors the Kingdom’s obligations under international trade agreements and treaties, negotiates and enters into new international commercial and investment agreements, and represents the Kingdom before the World Trade Organization. The Governor of the Foreign Trade General Authority reports to the Minister of Commerce.

Despite the list of activities excluded from foreign investment (see “Policies Toward Foreign Direct Investment”), foreign minority ownership in joint ventures with Saudi partners may be allowed in some of these sectors. Foreign investors are no longer required to take local partners in many sectors and may own real estate for company activities. They are allowed to transfer money from their enterprises out of the country and can sponsor foreign employees, provided that “Saudization” quotas are met (see “Labor Section” below). Minimum capital requirements to establish business entities range from zero to 30 million Saudi riyals ($8 million), depending on the sector and the type of investment.

MISA offers detailed information on the investment process, provides licenses and support services to foreign investors, and coordinates with government ministries to facilitate investment. According to MISA, it must grant or refuse a license within five days of receiving an application and supporting documentation from a prospective investor. MISA has established and posted online its licensing guidelines, but many companies looking to invest in Saudi Arabia continue to work with local representation to navigate the bureaucratic licensing process.

MISA licenses foreign investments by sector, each with its own regulations and requirements: (i) services, which comprise a wide range of activities including IT, healthcare, and tourism; (ii) industrial, (iii) real estate, (iv) public transportation, (v) entrepreneurial, (vi) contracting, (vii) audiovisual media, (viii) science and technical office, (ix) education (colleges and universities), and (x) domestic services employment recruitment. MISA also offers several special-purpose licenses for bidding on and performance of government contracts. Foreign firms must describe their planned commercial activities in some detail and will receive a license in one of these sectors at MISA’s discretion. Depending on the type of license issued, foreign firms may also require the approval of relevant competent authorities, such as the Ministry of Health or the Ministry of Tourism.

An important MISA objective is to ensure that investors do not just acquire and hold licenses without investing, and MISA sometimes cancels licenses of foreign investors that it deems do not contribute sufficiently to the local economy. MISA’s periodic license reviews, with the possibility of cancellation, add uncertainty for investors and can provide a disincentive to longer-term investment commitments.

MISA has agreements with various SAG agencies and ministries to facilitate and streamline foreign investment. These agreements permit MISA to facilitate the granting of visas, establish MISA branch offices at Saudi embassies in different countries, prolong tariff exemptions on imported raw materials to three years and on production and manufacturing equipment to two years, and establish commercial courts. To make it easier for businesspeople to visit the Kingdom, MISA can sponsor visa requests without involving a local company. Saudi Arabia has implemented a decree providing that sponsorship is no longer required for certain business visas. While MISA has set up the infrastructure to support foreign investment, many companies report that despite some improvements, the process remains cumbersome and time-consuming.

Competition and Antitrust Laws

The General Authority for Competition (GAC) reviews merger transactions for competition-related concerns, investigates business conduct, including allegations of price fixing, can issue fines, and can approve applications for exemptions for certain business conduct.

The Competition law, as amended in 2019, applies to all entities operating in Saudi Arabia, and has a broad application covering all activities related to the production, distribution, purchase, and sale of commodities inside the Kingdom, as well as practices that occur outside of Saudi Arabia and that have an impact on domestic competition.

The competition law prohibits anti-competitive practices and agreements, which have as their object or effect the restriction of competition. This may include certain aspects of vertically-integrated business combinations. Consequently, companies doing business in Saudi Arabia may find it difficult to register exclusivity clauses in distribution agreements, but are not necessarily precluded from enforcing such clauses in Saudi courts.

Certain merger transactions must be notified to the GAC, and each entity involved in the merger is obligated to notify the GAC. GAC may approve, conditionally approve, or reject a merger transaction.

Expropriation and Compensation

The Embassy is not aware of any cases in Saudi Arabia of expropriation from foreign investors without adequate compensation. Some small- to medium-sized foreign investors, however, have complained that their investment licenses have been cancelled without justification, causing them to forfeit their investments.

Dispute Settlement

ICSID Convention and New York Convention

The Kingdom of Saudi Arabia ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1994. Saudi Arabia is also a member state of the International Center for the Settlement of Investment Disputes Convention (ICSID), though under the terms of its accession it cannot be compelled to refer investment disputes to this system absent specific consent, provided on a case-by-case basis. Saudi Arabia has yet to consent to the referral of any investment dispute to the ICSID for resolution.

Investor-State Dispute Settlement

The use of any international or domestic dispute settlement mechanism within Saudi Arabia continues to be time-consuming and uncertain, as all outcomes are subject to a final review in the Saudi judicial system and carry the risk that principles of sharia law may potentially supersede a judgment or legal precedent. The U.S. government recommends consulting with local counsel in advance of investing to review legal options and contractual provisions for dispute resolution.

International Commercial Arbitration and Foreign Courts

Traditionally, dispute settlement and enforcement of foreign arbitral awards in Saudi Arabia have proven time-consuming and uncertain, carrying the risk that sharia principles can potentially supersede any foreign judgments or legal precedents. Even after a decision is reached in a dispute, effective enforcement of the judgment can be lengthy. In several cases, disputes have caused serious problems for foreign investors. In cases of alleged fraud or debt, foreign partners may also be jailed to prevent their departure from the country while awaiting police investigation or court adjudication. Courts can in theory impose precautionary restraint on personal property pending the adjudication of a commercial dispute, though this remedy has been applied sparingly.

The SAG has demonstrated a commitment to improve the quality of commercial legal proceedings and access to alternative dispute resolution mechanisms. Local attorneys indicate that the quality of final judgments in the court system has improved, but that cases still take too long to litigate. The Saudi Center for Commercial Arbitration (SCCA) offers comprehensive arbitration services to domestic and international firms. The SCCA reports that both domestic and foreign law firms have begun to include referrals to the SCCA in the arbitration clauses of their contracts. However, it is currently too early to assess the quality and effectiveness of SCCA proceedings, as the SCCA is still in the early stages of operation. Awards rendered by the SCCA can be enforced in local courts, though judges remain empowered to reject enforcement of provisions they deem noncompliant with sharia law.

In December 2017, the United Nations Commission on International Trade Law (UNCITRAL) recognized Saudi Arabia as a jurisdiction that has adopted an arbitration law based on the 2006 UNCITRAL Model Arbitration Law. UNCITRAL took this step after Saudi judges clarified that sharia would not affect the enforcement of foreign arbitral awards. In May 2020, Saudi Arabia ratified the United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the “Singapore Convention on Mediation,” becoming the fourth state to ratify the Convention. As a result of Saudi Arabia’s ratification, international settlement agreements falling under the Convention and involving assets located in Saudi Arabia may be enforced by Saudi Arabian courts.

Bankruptcy Regulations

In August 2018, the SAG implemented new bankruptcy legislation which seeks to “further facilitate a healthy business environment that encourages participation by foreign and domestic investors, as well as local small and medium enterprises.” The new law clarifies procedural processes and recognizes distinct creditor classes (e.g., secured creditors). The new law also includes procedures for continued operation of the distressed company via financial restructuring. Alternatively, the parties may pursue an orderly liquidation of company assets, which would be managed by a court-appointed licensed bankruptcy trustee. Saudi courts have begun to accept and hear cases under this new legislation.

Investment Incentives

MISA advertises a number of financial advantages for foreigners looking to invest in the Kingdom, including custom duty drawback and exemption on selected materials, equipment and machinery; the lack of personal income taxes; and a corporate tax rate of 20 percent on foreign companies’ profits (the lowest among G20 countries). MISA also lists various SAG-sponsored regional and international financial programs to which foreign investors have access, such as the Saudi Export Program, Arab Fund for Economic and Social Development, the Arab Trade Financing Program, and the Islamic Development Bank.

On March 30, 2021, the Crown Prince announced the Shareek (Arabic for partner) program to encourage local investment. To participate in the program, companies must commit to investing a minimum of $5.2 billion by 2030 and have the ability to invest at least $106 million in each additional project. Participating companies will be eligible for loans, grants, and co-investment from the Shareek program as well as special support from the SAG on regulatory and other issues.

The Saudi Industrial Development Fund (SIDF), a government financial institution established in 1974, supports private-sector industrial investments by providing medium- and long-term loans for new factories and for projects to expand, upgrade, and modernize existing manufacturing facilities. The SIDF offers loans of 50 to 75 percent of a project’s value, depending on the project’s location. Foreign investors that set up manufacturing facilities in developed areas (Riyadh, Jeddah, Dammam, Jubail, Mecca, Yanbu, and Ras al-Khair), for example, can receive a 15-year loan for up to 50 percent of a project’s value; investors in the Kingdom’s least developed areas can receive a 20-year loan for up to 75 percent of the project’s value. The SIDF also offers consultancy services for local industrial projects in the administrative, financial, technical, and marketing fields. (The SIDF’s website is https://www.sidf.gov.sa/en/Pages/default.aspx .)

The SAG offers several incentive programs to promote employment of Saudi nationals in certain cases. The Saudi Human Resources Development Fund (HRDF) ( https://www.hrdf.org.sa/ ), for example, will pay 30 percent of a Saudi national’s wages for the first year of work, with a wage subsidy of 20 percent and 10 percent for the second and third year of employment, respectively (subject to certain limits and caps). “Tamheer” is an on-the-job training program through which the SAG provides Saudi graduates with a SAR 3,000 monthly stipend plus occupational hazard insurance for a period of three to six months.

American and other foreign firms are able to participate in SAG-financed and/or -subsidized research-and-development (R&D) programs. Many of these programs are run though the King Abdulaziz City for Science and Technology (KACST), which funds many of the Kingdom’s R&D programs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Saudi Arabia does not operate free trade zones or free ports. However, as part of its Vision 2030 program, the SAG has announced it will create special zones with special regulations to encourage investment and diversify government revenues. The SAG is considering the establishment of special regulatory zones in certain areas, including at NEOM and the King Abdullah Financial District in Riyadh. During the G20 Leaders Summit in November 2020, the SAG announced plans to launch special economic zones in 2022 that will be focused on greenfield investment in various sectors including pharmaceuticals, biotechnology, and digital industries. These zones will have a special legislative environment and include attractive incentives, according to the SAG.

Saudi Arabia has established a network of “economic cities” as part of the country’s efforts to reduce its dependence on oil. Overseen by MISA, these four economic cities aim to provide a variety of advantages to companies that choose to locate their operations within the city limits, including in matters of logistics and ease of doing business. The four economic cities are: King Abdullah Economic City near Jeddah, Prince AbdulAziz Bin Mousaed Economic City in north-central Saudi Arabia, Knowledge Economic City in Medina, and Jazan Economic City near the southwest border with Yemen. The cities are in various stages of development, and their future development potential is unclear, given competing Vision 2030 economic development projects.

The Saudi Industrial Property Authority (MODON in Arabic) oversees the development of 35 industrial cities, including some still under development, in addition to private industrial cities and complexes. MODON offers incentives for commercial investment in these cities, including competitive rents for industrial land, government-sponsored financing, export guarantees, and certain customs exemptions. (MODON’s website is https://www.modon.gov.sa/en/Pages/default.aspx .)

The Royal Commission for Jubail and Yanbu (RCJY) was formed in 1975 and established the industrial cities of Jubail, located in eastern Saudi Arabia on the Persian Gulf coast, and Yanbu, located in north western Saudi Arabia on the Red Sea coast. A significant portion of Saudi Arabia’s refining, petrochemical, and other heavy industries are located in the Jubail and Yanbu industrial cities. The RCJY’s mission is to plan, promote, develop, and manage petrochemicals and energy intensive industrial cities. In connection with this mission, RCJY promotes investment opportunities in the two cities and can offer a variety of incentives, including tax holidays, customs exemptions, low-cost loans, and favorable land and utility rates. More recently, the RCJY has assumed responsibility for managing the Ras Al Khair City for Mining Industries (2009) and the Jazan City for Primary and Downstream Industries (2015). (The RCJY’s website is https://www.rcjy.gov.sa).

Performance and Data Localization Requirements

The government does not impose systematic conditions on foreign investment. In line with its bid to diversify the economy and provide more private sector jobs for Saudi nationals, the SAG has embarked on a broad effort to source goods and services domestically and is seeking commitments from investors to do so. In 2017, the Council of Economic and Development Affairs (CEDA) established the Local Content and Private Sector Development Unit (NAMAA in Arabic) to promote local content and improve the balance of payments. NAMAA is responsible for monitoring and implementing regulations, suggesting new policies, and coordinating with the private sector on all local content matters. In December 2018, a royal decree was issued to establish the Local Content and Government Procurement Authority (LCGPA) to develop local content and to improve government procurement operation. The LCGPA is mandated to set local content requirements for individual contracts, track the amount of local content used by contractors, and obtain and audit commitments by contractors to use local content.

Government-controlled enterprises are also increasingly introducing local content requirements for foreign firms. Saudi Aramco’s “In-Kingdom Total Value Added” (IKTVA) program, for example, strongly encourages the purchase of goods and services from a local supplier base and aims to double Aramco’s percentage of locally-manufactured energy-related goods and services to 70 percent by 2021.

In the defense sector, Saudi Arabia’s military is in the process of reforming its procurement processes and policies to incorporate new ambitious goals of Saudi employment and localized production. The SAG has shifted over the last two years away from offsets in favor of “localization” of purchases of goods and services and “Saudization” of the labor force. Previously, the government required offsets in investments equivalent to up to 40 percent of a program’s value for defense contracts, depending on the value of the contract. The SAG is currently mandating increasingly strict localization requirements for government contracts in the defense sector.

In 2017 the General Authority for Military Industries (GAMI) was established by the Saudi Council of Ministers to develop Saudi Arabia’s national military manufacturing capabilities. GAMI’s mandate is to localize 50 percent of Saudi Arabia’s military spending over the next decade.

Another key player in the defense sector is Saudi Arabian Military Industries (SAMI) – a wholly-owned subsidiary of the PIF launched in 2017. SAMI aims to be among the top 25 military industries companies in the ‎world by 2030 and supports the Kingdom’s localization goals by forming joint ventures to locally manufacture defense articles.

The government encourages recruitment of Saudi employees through a series of incentives (see section 11 on “Labor Policies” for details of the “Saudization” program) and limits placed on the number of visas for foreign workers available to companies. The Saudi electronic visitor visa system defaults to five-year visas for all U.S. citizen applicants. “Business visas” are routinely issued to U.S. visitors who do not have an invitation letter from a Saudi company, but the visa applicant must provide evidence that he or she is engaged in legitimate commercial activity. “Commercial visas” are issued by invitation from Saudi companies to applicants who have a specific reason to visit a Saudi company.

The cost of a single-entry business visit visa is $533. In January 2018, the SAG implemented new fees for expatriate employers ranging between $80 and $107 per employee per month and increased levies on expatriates with dependents to a $54 monthly fee for each dependent (see section 11 on “Labor Policies”). In January 2019, fees on expatriate employees increased to between $133 to $160 per month, and levies on expatriate dependents increased to $80 per month. These fees increased again in 2020 to between $186 to $212, but no additional increases are announced beyond 2020.

Data Treatment

Due to the demands of the COVID-19 pandemic in 2020, Saudi Arabia substantially accelerated its Vision 2030 digital transformation reform to move its economy to an e-services platform. Also in 2020, infrastructure supporting the information and communications technology sector and 5G network expanded significantly. Concerns about cybersecurity and data treatment regulations increased in 2020, driven in part by the roll-out of healthcare and travel applications during the pandemic that collect and track individuals’ data.

In 2020, the National Data Governance Interim Regulations were issued to deal mainly with government-related data. However, part 5 of the National Data Regulations addresses personal data protection and applies to all entities in Saudi Arabia that process personal data in whole or in part, as well as entities outside the Kingdom that possess personal data related to individuals residing in Saudi Arabia. It remains unclear if the National Data Regulations are being enforced, as no sanctions for a potential breach are specified. Personal data is also protected under general provisions of Saudi law that impose strict obligations on businesses in relation to how, who, and when personal data can be collected, used, and stored.

Saudi Arabia’s Medical Practitioners’ Law of 2005 safeguards information obtained during medical practice, including personal data. It is unclear if personal data safeguards on government software applications rolled out during the COVID-19 pandemic provide the same level of personal data protection.

The Saudi E-Commerce Law of 2019, together with its 2020 implementing regulations, covers data protection of consumers’ personal information and applies to all e-commerce providers (domestic and international) that offer goods and services to customers based in Saudi Arabia. Its provisions regulate e-commerce business practices, requiring transparency and consumer protection, as well as protection of customers’ personal data, with the goal to enhance cybersecurity and trust in online transactions. Data retention is also restricted; service providers are not allowed to retain personal data any longer than required to complete business transactions for which data was collected. Also, sharing of data and customer information with third-party providers is prohibited without express permission. In March 2021, the General Authority of Zakat and Tax released guidelines for VAT registration for store owners engaged in e-commerce activities.

With increased emphasis on data-driven technologies, such as artificial intelligence (AI), machine learning, cloud computing, blockchain, automation and robotics, the internet of things (IoT), and smart mobility, among others, it is anticipated that further developments will occur in the data protection space in the near- to mid-term. Under its Vision 2030 National Transformation Program strategy, Saudi Arabia is relying on data-driven “leapfrog” technologies to drive its 21st century economy. In 2020, Saudi Arabia announced two lynchpin policies aimed at advancing data mining to meet its ambitious digital transformation goals: the National Digital Economy Policy, and the National Strategy for Data and Artificial Intelligence (NSDAI). Recognizing the need for new data protection and cybersecurity laws and regulations for its evolving digital economy, Saudi Arabia’s Ministry of Communications and Information Technologies (MCIT) has indicated it is willing to take a more pragmatic approach to its data localization regulations, such as the 2018 Essential Cybersecurity Controls – and would provide incentives for big tech joint ventures. Saudi Arabia aims to be the region’s high-technology hub.

Saudi Arabia’s Cloud Computing Regulatory Framework (CCRF), issued in 2018 and amended in 2019 by the Saudi Communication and Information Technology Commission (CITC), applies to any cloud service provided to cloud customers with a home or business address in Saudi Arabia. The Framework governs the rights and obligations of cloud service providers, customers, businesses, and government entities, and includes data protection principles. Unless expressly allowed by Saudi law, CCRF regulations do not allow cross-border data flows by cloud service providers or customers of sensitive business content, or of highly-sensitive and secret content belonging to government agencies and institutions.

Saudi Arabia’s IOT Regulatory Framework regulates the use of all IoT services and includes data security, privacy, and protection requirements. IoT providers and implementors must comply with existing and future published laws, regulations, and requirements concerning data management, which will likely continue to focus on cybersecurity and data security. The IoT Regulatory Framework specifies data security measures, such as limited retention and data localization for IoT services and networks, which are also regulated by the CITC.

Saudi Arabia’s Electronic Transactions Law imposes obligations on internet service providers (ISPs) to maintain confidentiality of business information and personal data in electronic transactions.

Saudi Arabia’s Anti-Cyber Crime Law seeks to protect the national economy by deterring cybercrimes such as destruction or alteration of data, illegal access to bank or credit information, interruption of computer and information network transmissions, and other disruptions to ICT infrastructure. The law also requires consent from individuals whose personal data or documents are to be disclosed.

In 2018, the Saudi National Cybersecurity Authority (NCA) developed, and continues to update, the country’s Essential Cyber Controls (ECC) regulation with input from multiple Saudi cybersecurity and ICT authorities. For the first time, large American cloud, ISP, and ICT industry representatives have also provided feedback on how to protect consumer data while still enabling innovation and growth of the digital economy and cross-border trade. The ECC sets the minimum cybersecurity requirements for national organizations that are within its scope of ECC implementation.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption. Other than a requirement to retain records locally for ten years for tax purposes, there is no requirement regarding data storage or access to surveillance.

Real Property

The Saudi legal system protects and facilitates acquisition and disposition of all property, consistent with the Islamic practice of upholding private property rights. Non-Saudi corporate entities are allowed to purchase real estate in Saudi Arabia in accordance with the foreign-investment code. Other foreign-owned corporate and personal property is protected by law. Saudi Arabia has a system of recording security interests, and plans to modernize its land registry system. Saudi Arabia ranked 19th out of 190 countries for ease of registering property in the 2020 World Bank Doing Business Report.

In 2017, the Saudi Ministry of Municipal, Rural Affairs, and Housing implemented an annual vacant land tax of 2.5 percent of the assessed value on vacant lands in urban centers in an attempt to spur development. Additionally, in January 2018, in an effort to increase Saudis’ access to finance and stimulate the mortgage and housing markets, Saudi Arabia’s central bank lifted the maximum loan-to-value rate for mortgages for first-time homebuyers to 90 percent from 85 percent, and increased interest payment subsidies for first-time buyers. This further liberalized stringent down-payment requirements that prevailed up to 2016, when the central bank raised the maximum loan-to-value rate from 70 percent to 85 percent.

Intellectual Property Rights

Saudi Arabia has been on the U.S. Trade Representative’s (USTR) Special 301 Report “Priority Watch List” since 2019. In the U.S. Chamber International IP Index 2021 report, Saudi Arabia ranked 37th out of 53 countries surveyed.

In 2018, Saudi Arabia established the Saudi Authority for Intellectual Property (SAIP) to regulate, support, develop, sponsor, protect, enforce, and upgrade IP fields in accordance with the best international practices. In 2020, SAIP worked to consolidate IP protection competence, including creating a government-wide IPR respect program, establishing a specialized IP court, launching online and in-market enforcement programs, continuing market raids against counterfeit and pirated goods, and conducting significant pro-IPR awareness campaigns. SAIP has cooperated with USTR and the U.S. Patent and Trademark Office (USPTO), including the signing of a Cooperation Arrangement in October 2018 between SAIP and USPTO. Saudi Arabia Customs Authority has significantly enhanced its IP enforcement efforts and capacity, seized and destroyed 2 million counterfeit items across all ports during 2020 in coordination with SAIP, partnered closely with trademark and copyright owners, and systematically notified right holders of suspected shipments.

Since 2016, the Saudi Arabia Food and Drug Authority (SFDA), which the Minister of Health oversees, has granted marketing approval for pharmaceuticals to domestic companies relying on another company’s undisclosed test or other data for products despite the protection provided by Saudi regulations.

The United States government also continues to remain concerned about reportedly high levels of online piracy in Saudi Arabia, particularly through illicit streaming devices (ISDs), which right holders report are widely available and generally unregulated in Saudi Arabia. Industry reported in December 2020 that 32.6 percent of the 510,000 worldwide users of livehd7, a popular streaming website that violates IP laws, were from Saudi Arabia. However, in August 2019, beoutQ, a Saudi-based rampant satellite and online piracy service, ceased operations. In June 2020, the SAIP announced that it had disabled access to 231 websites that had been disseminating infringing content.

U.S. software firms report that the Saudi government continues to use unlicensed and “under-licensed” (in which an insufficient number of licenses is procured for the total number of users) software on government computer systems in violation of their copyrights. Other concerns include the lack of seizure and destruction of counterfeit goods in enforcement actions, and limits on the ability to enter facilities suspected of involvement in the sale or manufacture of counterfeit goods, including facilities located in residential areas.

In 2020, SAIP launched a copyright enforcement campaign in 2020 in Riyadh, Mecca, Jeddah, Dammam, and al-Ahsa. During the campaign, SAIP inspected 359 shops and seized 9,137 counterfeit and illicit items in marketplaces. In collaboration with the Ministry of Media, SAIP confiscated and destroyed over 3.5 million counterfeit and illicit items in 2020, including CDs, computers, and TV receivers.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Embassy point of contact:

Darin Christensen
Economic Officer+966 11 488-3800 Ext. 4097
christensends2@state.gov

Regional IPR Attaché:

Pete C. Mehravari
U.S. Intellectual Property Attaché for Middle East and North Africa
Patent Attorney
U.S. Embassy Abu Dhabi | U.S. Department of Commerce
Office: +965 2259-1455 | Cell: +965 9758-9223 | WhatsApp: +1 404-429-9986
Peter.mehravari@trade.gov 

Capital Markets and Portfolio Investment

Saudi Arabia’s financial policies generally facilitate the free flow of private capital and currency can be transferred in and out of the Kingdom without restriction. Saudi Arabia maintains an effective regulatory system governing portfolio investment in the Kingdom. The Capital Markets Law, passed in 2003, allows for brokerages, asset managers, and other nonbank financial intermediaries to operate in the Kingdom. The law created a market regulator, the Capital Market Authority (CMA), established in 2004, and opened the Saudi stock exchange (Tadawul) to public investment.

Since 2015, the CMA has progressively relaxed the rules applicable to qualified foreign investors, easing barriers to entry and expanding the foreign investor base. The CMA adopted regulations in 2017 permitting corporate debt securities to be listed and traded on the exchange; in March 2018, the CMA authorized government debt instruments to be listed and traded on the Tadawul. The Tadawul was incorporated into the FTSE Russell Emerging Markets Index in March 2019, resulting in a foreign capital injection of $6.8 billion. Separately, the $11 billion infusion into the Tadawul from integration into the MSCI Emerging Markets Index took place in May 2019. The Tadawul was also added to the S&P Dow Jones Emerging Market Index.

Money and Banking System

The banking system in the Kingdom is generally well-capitalized and healthy. The public has easy access to deposit-taking institutions. The legal, regulatory, and accounting systems used in the banking sector are generally transparent and consistent with international norms. In November 2020, the SAG approved the Saudi Central Bank Law, which changed the name of the Saudi Arabian Monetary Authority (SAMA) to the Saudi Central Bank. Under the new law, the Saudi Central Bank is responsible for maintaining monetary stability, promoting the stability of and enhancing confidence in the financial sector, and supporting economic growth. The Saudi Central Bank will continue to use the acronym “SAMA” due to its widespread use.

SAMA generally gets high marks for its prudential oversight of commercial banks in Saudi Arabia. SAMA is a member and shareholder of the Bank for International Settlements in Basel, Switzerland.

In 2017, SAMA enhanced and updated its previous Circular on Guidelines for the Prevention of Money Laundering and Terrorist Financing. The enhanced guidelines have increased alignment with the Financial Action Task Force (FATF) 40 Recommendations, the nine Special Recommendations on Terrorist Financing, and relevant UN Security Council Resolutions. Saudi Arabia is a member of the Middle East and North Africa Financial Action Task Force (MENA-FATF). In 2019, Saudi Arabia became the first Arab country to be granted full membership of the FATF, following the organization’s recognition of the Kingdom’s efforts in combating money laundering, financing of terrorism, and proliferation of arms. Saudi Arabia had been an observer member since 2015.

The SAG has authorized increased foreign participation in its banking sector over the last several years. SAMA has granted licenses to a number of new foreign banks to operate in the Kingdom, including Deutsche Bank, J.P. Morgan Chase N.A., and Industrial and Commercial Bank of China (ICBC). A number of additional, CMA-licensed foreign banks participate in the Saudi market as investors or wealth management advisors. Citigroup, for example, returned to the Saudi market in early 2018 under a CMA license.

Credit is normally widely available to both Saudi and foreign entities from commercial banks and is allocated on market terms. The Saudi banking sector has one of the world’s lowest non-performing loan (NPL) ratios, roughly 2.0 percent in 2020. In addition, credit is available from several government institutions, such as the SIDF, which allocate credit based on government-set criteria rather than market conditions. Companies must have a legal presence in Saudi Arabia to qualify for credit. The private sector has access to term loans, and there have been a number of corporate issuances of sharia-compliant bonds, known as sukuk.

The New Government Tenders and Procurement Law (GTPL) was approved in 2019. The New GTPL applies to procurement by government entities and works and procurements executed outside of Saudi Arabia. The Ministry of Finance has a pivotal role under the new GTPL by setting policies and issuing directives, collating and distributing information, maintaining a list of boycotts, and approving tender and prequalification forms, contract forms, performance evaluation forms, and other documents. In 2018, the Ministry of Finance launched the Electronic Government Procurement System (Etimad Portal) to consolidate and facilitate the process of bidding and government procurement for all government sectors, enhancing transparency amongst sectors of government and among competing entities.

In 2021, SAMA introduced the new Instant Payment System (Sarie) to facilitate instant, 24/7 money transfers across local banks.

Foreign Exchange and Remittances

Foreign Exchange

There is no limitation in Saudi Arabia on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, returns on intellectual property, or imported inputs, other than certain withholding taxes (withholding taxes range from five percent for technical services and dividend distributions to 15 percent for transfers to related parties, and 20 percent or more for management fees). Bulk cash shipments greater than $10,000 must be declared at entry or exit points. Since 1986, when the last currency devaluation occurred, the official exchange rate has been fixed by SAMA at 3.75 Saudi riyals per U.S. dollar. Transactions typically take place using rates very close to the official rate.

Remittance Policies

Saudi Arabia is one of the largest remitting countries in the world, with roughly 75 percent of the Saudi labor force comprised of foreign workers. Remittances totaled approximately $39.9 billion in 2020. There are currently no restrictions on converting and transferring funds associated with an investment (including remittances of investment capital, dividends, earnings, loan repayments, principal on debt, lease payments, and/or management fees) into a freely usable currency at a legal market-clearing rate. There are no waiting periods in effect for remitting investment returns through normal legal channels.

The Ministry of Human Resources and Social Development is progressively implementing a “Wage Protection System” designed to verify that expatriate workers, the predominant source of remittances, are being properly paid according to their contracts. Under this system, employers are required to transfer salary payments from a local Saudi bank account to an employee’s local bank account, from which expatriates can freely remit their earnings to their home countries.

Sovereign Wealth Funds

The Public Investment Fund (PIF, www.pif.gov.sa ) is the Kingdom’s officially designated sovereign wealth fund. While PIF lacks many of the attributes of a traditional sovereign wealth fund, it has evolved into the SAG’s primary investment vehicle.

Established in 1971 to channel oil wealth into economic development, the PIF has historically been a holding company for government shares in partially privatized state-owned enterprises (SOEs), including SABIC, the National Commercial Bank, Saudi Telecom Company, Saudi Electricity Company, and others. Crown Prince Mohammed bin Salman is the chairman of the PIF and announced his intention in April 2016 to build the PIF into a $2 trillion global investment fund, relying in part on proceeds from the initial public offering of up to five percent of Saudi Aramco shares.

Since that announcement, the PIF has made a number of high-profile international investments, including a $3.5 billion investment in Uber, a commitment to invest $45 billion into Japanese SoftBank’s VisionFund, a commitment to invest $20 billion into U.S. Blackstone’s Infrastructure Fund, a $1 billion investment in U.S. electric car company Lucid Motors, and a partnership with cinema company AMC to operate movie theaters in the Kingdom. Under the Vision 2030 reform program, the PIF is financing a number of strategic domestic development projects, including: “NEOM,” a planned $500 billion project to build an “independent economic zone” in northwest Saudi Arabia; “The Line,” a $100-$200 billion project to build an environmentally friendly, carless, zero-carbon city at NEOM; “Qiddiya,” a new, large-scale entertainment, sports, and cultural complex near Riyadh; “the Red Sea Project”, a massive tourism development on the western Saudi coast; and “Amaala,” a wellness, healthy living, and meditation resort also located on the Red Sea.

At the end of 2020, the PIF reported its investment portfolio was valued at nearly $400 billion, mainly in shares of state-controlled domestic companies. In an effort to rebalance its investment portfolio, the PIF has divided its assets into six investment pools comprising local and global investments in various sectors and asset classes: Saudi holdings; Saudi sector development; Saudi real estate and infrastructure development; Saudi giga-projects; international strategic investments; and an international diversified pool of investments.

In 2021, Crown Prince Mohammed bin Salman launched a new five-year strategy for the PIF. The 2021-2025 strategy will focus on launching new sectors, empowering the private sector, developing the PIF’s portfolio, achieving effective long-term investments, supporting the localization of sectors, and building strategic economic partnerships. Under the new strategy, by 2025, the PIF will invest $267 billion into the local economy, contribute $320 billion to non-oil GDP, and create 1.8 million jobs. The Crown Prince also stated that the SAG would increase the size of the PIF more than five-fold to $2 trillion by 2030. The SAG declared it is investing nearly $220 billion through PIF, the National Development Fund, and the Royal Commission for Riyadh to transform Riyadh into a global city with 15 to 20 million inhabitants by 2030 (from its current population of about 7.5 million), and expects to attract a similar amount of investment from the private sector. The PIF also plans to establish a new major airline that will complement the state-owned Saudia (formerly Saudi Arabian Airlines) and compete with other major aviation companies in the region.

The Ministry of Finance announced in 2020 that $40 billion was being transferred from the Kingdom’s foreign reserves, held by the central bank SAMA, to the PIF to fund investments. In addition to previous investments in Uber, Magic Leap, Lucid Motors, Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines, the PIF made a number of new investments in the latter half of 2020 including equity investments in CloudKitchens, Activision Blizzard, Electronic Arts, and Take-Two Interactive Software.

In practice, SAMA’s foreign reserve holdings also operate as a quasi-sovereign wealth fund, accounting for the majority of the SAG’s foreign assets. SAMA invests the Kingdom’s surplus oil revenues primarily in low-risk liquid assets, such as sovereign debt instruments and fixed-income securities. SAMA’s foreign reserves fell from $502 billion in January 2020 to $450 billion in January 2021. SAMA’s foreign reserve holdings peaked at $746 billion in mid-2014.

Though not a formal member, Saudi Arabia serves as a permanent observer to the International Working Group on Sovereign Wealth Funds.

SOEs play a leading role in the Saudi economy, particularly in water, power, oil, natural gas, petrochemicals, and transportation. Saudi Aramco, the world’s largest exporter of crude oil and a large-scale oil refiner and producer of natural gas, is 98.5 percent SAG-owned, and its revenues typically contribute the majority of the SAG’s budget. Four of the eleven representatives on Aramco’s board of directors are from the SAG, including the chairman, who serves concurrently as the Managing Director of the PIF. In December 2019, the Kingdom fulfilled its long-standing promise to publicly list shares of its crown jewel – Saudi Aramco, the most profitable company in the world. The initial public offering (IPO) of 1.5 percent of Aramco’s shares on the Saudi Tadawul stock market on December 11, 2019 was a cornerstone of Crown Prince Mohammed bin Salman’s Vision 2030 program. The largest-ever IPO valued Aramco at $1.7 trillion, the highest market capitalization of any company at the time, and generated $25.6 billion in proceeds, exceeding the $25 billion Alibaba raised in 2014 in the largest previous IPO in history.

During the annual Future Investment Initiative conference held in January 2021, the Crown Prince announced that Saudi Aramco would launch a second offering of shares as a continuation of the historical initial public offering of 2019, but did not provide additional details. Proceeds from a second floatation will be transferred to the PIF and will be reinvested domestically and internationally.

In March 2019, Saudi Aramco signed a share purchase agreement to acquire 70 percent of SABIC, Saudi Arabia’s leading petrochemical company and the fourth largest in the world, from the PIF in a transaction worth $69.1 billion. Five of the nine representatives on SABIC’s board of directors are from the SAG, including the chairman and vice chairman. The SAG is similarly well-represented in the leadership of other SOEs. The SAG either wholly owns or holds controlling shares in many other major Saudi companies, such as the Saudi Electricity Company, Saudi Arabian Airlines (Saudia), the Saline Water Conversion Company, Saudi Arabian Mining Company (Ma’aden ), the National Commercial Bank, and other leading financial institutions.

Privatization Program

Saudi Arabia has undertaken a limited privatization process for state-owned companies and assets dating back to 2002. The process, which is open to domestic and foreign investors, has resulted in partial privatizations of state-owned enterprises in the banking, mining, telecommunications, petrochemicals, water desalination, insurance, and other sectors.

As part of Vision 2030 reforms, the SAG has announced its intention to privatize additional sectors of the economy. Privatization is a key element underpinning the Vision 2030 goal of increasing the private sector’s contribution to GDP from 40 percent to 65 percent by 2030. In April 2018, the SAG launched a Vision 2030 Privatization Program that aims to: strengthen the role of the private sector by unlocking state-owned assets for investment, attract foreign direct investment, create jobs, reduce government overhead, improve the quality of public services, and strengthen the balance of payments. (The full Privatization Program report is available online at http://vision2030.gov.sa/en/ncp .)

The program report references a range of approaches to privatization, including full and partial asset sales, initial public offerings, management buy-outs, public-private partnerships (build-operate-transfer models), concessions, and outsourcing. While the privatization report outlines the general guidelines for the program and indicated 16 targeted sectors, it does not include an exhaustive list of assets to be privatized. The report does, however, reference education, healthcare, transportation, renewable energy, power generation, waste management, sports clubs, grain silos, and water desalination facilities as prime areas for privatization or public-private partnerships

In 2017, Saudi Arabia established the National Center for Privatization and Public Private Partnerships, which will oversee and manage the Privatization Program. (The Center’s website is http://www.ncp.gov.sa/en/pages/home.aspx .) The NCCP’s mandate is to introduce privatization through the development of programs, regulations, and mechanisms for facilitating private sector participation in entities now controlled by the government.

In March 2021, Saudi Arabia approved the Private Sector Participation (PSP) Law. The PSP law aims to increase private sector participation in infrastructure projects and in providing public services by supporting Public-Private-Partnerships (PPP) and privatization of public sector assets.

There is a growing awareness of corporate social responsibility (CSR) in Saudi Arabia. The King Khalid Foundation issues annual “responsible competitiveness” awards to companies doing business in Saudi Arabia for outstanding CSR activities. In March 2021, the SAG approved the formation of a committee on corporate social responsibility in the Ministry of Human Resources and Social Development.

Additional Resources

Department of State

Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);

Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-reporabilab/resources/reports/child-labor/findings );

List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);

Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;

Comply Chain (https://www.dol.gov/ilab/complychain/).

Foreign firms have identified corruption as a barrier to investment in Saudi Arabia. Saudi Arabia has a relatively comprehensive legal framework that addresses corruption, but many firms perceive enforcement as selective. The Combating Bribery Law and the Civil Service Law, the two primary Saudi laws that address corruption, provide for criminal penalties in cases of official corruption. Government employees who are found guilty of accepting bribes face 10 years in prison or fines up to one million riyals ($267,000). Ministers and other senior government officials appointed by royal decree are forbidden from engaging in business activities with their ministry or organization. Saudi corruption laws cover most methods of bribery and abuse of authority for personal interest, but not bribery between private parties. Only senior Oversight and Anti-Corruption Commission (“Nazaha”) officials are subject to financial disclosure laws. The government is considering disclosure regulations for other officials, but has yet to finalize them. Some officials have engaged in corrupt practices with impunity, and perceptions of corruption persist in some sectors, but combatting corruption remains a priority.

Nazaha, originally established in 2011, is responsible for promoting transparency and combating all forms of financial and administrative corruption In December 2019, King Salman issued royal decrees consolidating the Control and Investigation Board and the Mabahith’s Administrative Investigations Directorate under the National Anti-Corruption Commission, and renamed the new entity as the Oversight and Anti-Corruption Commission (“Nazaha”). The decrees consolidated investigations and prosecutions under the new Nazaha and mandated that the Public Prosecutor’s Office transfer any ongoing corruption investigations to the newly consolidated commission. Nazaha reports directly to King Salman and has the power to dismiss a government employee even if not found guilty by the specialized anti-corruption court.

Since its reorganization, Nazaha has not shied away from prosecuting influential players whose indiscretions may previously have been ignored. Throughout 2020, Nazaha published monthly press releases detailing its arrests and investigations, often including high-ranking officials, such as generals and judges, from every ministry in the SAG. The releases are available on the Nazaha website ( http://www.nazaha.gov.sa/en/Pages/Default.aspx ).

SAMA, the central bank, oversees a strict regime to combat money laundering. Saudi Arabia’s Anti-Money Laundering Law provides for sentences up to 10 years in prison and fines up to $1.3 million. The Basic Law of Governance contains provisions on proper management of state assets and authorizes audits and investigation of administrative and financial malfeasance.

The Government Tenders and Procurement Law regulates public procurements, which are often a source of corruption. The law provides for public announcement of tenders and guidelines for the award of public contracts. Saudi Arabia is an observer of the WTO Agreement on Government Procurement (GPA)

Saudi Arabia ratified the UN Convention against Corruption in April 2013 and signed the G20 Anti-Corruption Action Plan in November 2010. Saudi Arabia was admitted to the OECD Working Group on Bribery in February 2021.

Globally, Saudi Arabia ranks 52 out of 180 countries in Transparency International’s Corruption Perceptions Index 2020.

Resources to Report Corruption

The National Anti-Corruption Commission’s address is:

National Anti-Corruption Commission
P.O. Box (Wasl) 7667, AlOlaya – Ghadir District
Riyadh 2525-13311
The Kingdom of Saudi Arabia
Fax: 0112645555
E-mail: info@nazaha.gov.sa 

Nazaha accepts complaints about corruption through its website www.nazaha.gov.sa  or mobile application.

Saudi Arabia is a monarchy ruled by King Salman bin Abdulaziz Al Saud. The King’s son, Crown Prince Mohammed bin Salman, has assumed a central role in government decision-making. The Department of State regularly reviews and updates a travel advisory to apprise U.S. citizens of the security situation in Saudi Arabia and frequently reminds U.S. citizens of recommended security precautions. In addition to a Global Travel Advisory due to COVID-19, the Department of State has a current travel advisory for Saudi Arabia that was updated in August 2020. The Travel Advisory urges U.S. citizens to exercise increased caution when traveling to Saudi Arabia due to terrorism and the threat of missile and drone attacks on civilian targets and to not travel within 50 miles of the Saudi Arabia-Yemen border.

Please visit www.travel.state.gov  for further information, including the latest Travel Advisory.

Due to risks to civil aviation operating within the Persian Gulf and the Gulf of Oman region, including Saudi Arabia, the Federal Aviation Administration (FAA) has issued an advisory Notice to Airmen (NOTAM).

The Ministry of Human Resources and Social Development (MHRSD) sets labor policy and, along with the Ministry of Interior, regulates recruitment and employment of expatriate labor, which makes up a majority of the private-sector workforce. About 76 percent of total jobs in the country are held by expatriates, who represent roughly 38 percent of the total population of approximately 34.2 million. The largest groups of foreign workers come from India, Pakistan, Bangladesh, Egypt, the Philippines, and Yemen. Saudis occupy about 93 percent of government jobs, but only about 24 percent of the total jobs in the Kingdom. Roughly 46 percent of employed Saudi nationals work in the public sector.

Saudi Arabia’s General Authority for Statistics estimates unemployment at 7.4 percent for the total population and 12.6 percent for Saudi nationals (Q4 2020 figures), but these figures mask a high youth unemployment rate, a Saudi female unemployment rate of 24.4 percent, and low Saudi labor participation rates (51.2 percent overall; 33.2 percent for women). With approximately 60 percent of the Saudi population under the age of 35, job creation for new Saudi labor market entrants will prove a serious challenge for years.

The SAG encourages Saudi employment through “Saudization” policies that place quotas on employment of Saudi nationals in certain sectors, coupled with limits placed on the number of visas for foreign workers available to companies. In 2011, the Ministry of Labor and Social Development (the forerunner of MHRSD) laid out a sophisticated plan known as Nitaqat, under which companies are divided into categories, each with a different set of quotas for Saudi employment based on company size.

The SAG has taken additional measures to strengthen the Nitaqat program and expand the scope of Saudization to require the hiring of Saudi nationals. The MHRSD has mandated that certain job categories in specific economic sectors only employ Saudi nationals, beginning with mobile phone stores in 2016. The ministry has likewise mandated that only Saudi women can occupy retail jobs in certain businesses that cater to female customers, such as lingerie and cosmetics shops. In 2017, Saudi Arabia began to phase in rules forbidding employment of foreigners in retail sales positions in 12 sectors, including: watches, eyewear, medical equipment and devices, electrical and electronic appliances, auto parts, building materials, carpets, cars and motorcycles, home and office furniture, children’s clothing and men’s accessories, home kitchenware, and confectioneries. Many elements of Saudization and Nitaqat have garnered criticism from the private sector, but the SAG claims these policies have substantially increased the percentage of Saudi nationals working in the private sector over the last several years and has indicated that there is flexibility in implementation for special cases.

In 2017, the SAG launched the latest phase of an ongoing campaign to deport illegal and improperly documented workers. The combination of Saudization and Nitaqat policies, new expatriate fees, increased visa and entry/exit permit fees, the increased VAT, and the COVID-19 pandemic has prompted approximately 2.2 million expatriates to depart the Kingdom over the past few years. These measures have also significantly increased labor costs for employers, both Saudi and foreign alike.

Saudi Arabia’s labor laws forbid union activity, strikes, and collective bargaining. However, the government allows companies that employ more than 100 Saudis to form “labor committees” to discuss work conditions and grievances with management. In 2015, the SAG published 38 amendments to the existing labor law with the aim of expanding Saudi employees’ rights and benefits. In March 2021, MHRSD implemented its Labor Reform Initiative (LRI) which allows foreign workers greater job mobility and freedom to exit Saudi Arabia without the need for the employer’s prior permission. Domestic workers are not covered under the provisions of either the 2015 regulations or the LRI; separate regulations covering domestic workers were issued in 2013, stipulating employers provide at least nine hours of rest per day, one day off a week, and one month of paid vacation every two years.

Saudi Arabia has taken significant steps to address labor abuses, but weak enforcement continues to result in credible reports of employer violations of foreign employee labor rights. In some instances, foreign workers and particularly domestic staff encounter employer practices (including passport withholding and non-payment of wages) that constitute trafficking in persons. The Department’s annual Trafficking in Persons Report details concerns about labor law enforcement within Saudi Arabia’s sponsorship system is available at: https://www.state.gov/j/tip/rls/tiprpt/.

Overtime is normally compensated at time-and-a-half rates. The minimum age for employment is 14. The SAG does not adhere to the International Labor Organization’s convention protecting workers’ rights. Non-Saudis have the right to appeal to specialized committees in the MHRSD regarding wage non-payment and other issues. Penalties issued by the ministry include banning infringing employers from recruiting foreign and/or domestic workers for a minimum of five years.

* Source for Host Country Data: Saudi General Authority for Statistics   

Table 3: Sources and Destination of FDI

According to the 2020 UNCTAD World Investment Report, Saudi Arabia’s total FDI inward stock was $236.2 billion and total FDI outward stock was $123.1 billion (in both cases, as of 2019).

Detailed data for inward direct investment (below) is as of 2010, which is the latest available breakdown of inward FDI by country.

*Source: IMF Coordinated Direct Investment Survey (2010 – latest available complete data)

Source: IMF’s Coordinated Portfolio Investment Survey (CPIS); data as of June 2020.

Economic Section and Foreign Commercial Service Offices
Embassy of the United States of America
P.O. Box 94309
Riyadh 11693, Saudi Arabia
Phone: +966 11 488-3800

Policies Towards Foreign Direct Investment (FDI) 

The UAE actively seeks FDI, citing it as a key part of its long-term economic development plans.  The COVID-19 pandemic accelerated government efforts to attract foreign investment to promote economic growth.  A letter issued by Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum (MbR) on January 4, 2020 outlined the ruler’s vision for the next 50 years, pledging increased government accountability and a push for greater government efficiency.  In 2015, Dubai’s Department of Economic Development launched the Dubai Investment Development Agency (Dubai FDI), an agency that provides essential information and invaluable support to foreign businesses looking to invest in Dubai’s thriving economy and take advantage of its global strategic importance.  The government of Abu Dhabi continues implementing its Economic Vision 2030, which aims at building an open, efficient, effective, and globally integrated economy.  In 2018, Abu Dhabi’s Department of Economic Development launched the Abu Dhabi Investment Office to attract foreign investments in the local economy by providing investors with clear data and information regarding the investment environment and the competitive edge of the emirate.

Federal Decree Law No. 26 of 2020 repealed the FDI Law (Federal Law No. 19 of 2018) effective January 2, 2021 and amended significant provisions of the Commercial Companies Law (Federal Law No. 2 of 2015).  As a result, onshore UAE companies are no longer required to have a UAE national or a GCC national as a majority shareholder.  UAE joint stock companies no longer must be chaired by an Emirati citizen or have the majority of its board be comprised of Emirati citizens.  Local branches of foreign companies are no longer required to have a UAE national or a UAE-owned company act as an agent.  An intra-emirate committee will recommend to the Cabinet a list of strategically important sectors requiring additional licensing restrictions, and companies operating in these sectors, likely including oil and gas, defense, utilities, and transportation, will remain subject to the above-described restrictions.  Analysts expect this list will be similar to the list of economic sectors in which foreign investment is barred under the recently abolished FDI Law.  The decree also grants emirate-level authorities powers to establish additional licensing restrictions.  These amendments will become effective six months after the publication of the law in the official gazette and require the publication of the Strategic Impact List to be implementable.  Until this happens, existing requirements for UAE or GCC majority shareholding still apply.

Federal Decree Law No. 26 of 2020 introduced provisions to protect the rights of minority shareholders.  It lowered the ownership threshold required to call for a general assembly and introduce agenda items.  It expedited the process for shareholders to assist a company in financial distress.  It extended mandates of external auditors.  It added additional flexibility in the IPO process to allow new investors to participate.  It also calls for additional regulations from the Ministry of Economy to address governance and related-party transactions.

Federal Law No. 11 of 2020 amended the Commercial Agencies Law (Federal Law No. 18 of 1981), which allowed UAE companies not fully owned by Emirati citizens to act as commercial agents.  These companies must still be majority-owned by Emirati citizens.

Non-tariff barriers to investment persist in the form of visa sponsorship and distributorship requirements.  Several constituent emirates, including Dubai, have recently introduced new long-term residency visas and land ownership rights to attract and retain expatriates with sought-after skills in the UAE.  In October 2020, Ras Al Khaimah Real estate developer Al Hamra, in partnership with Ras Al Khaimah Economic Zone, began offering investors a 12-year residence visa and a business license when they purchased a residential property in Al Hamra Village or Bab Al Bahr.

 Limits on Foreign Control and Right to Private Ownership and Establishment  

As documented above, Federal Decree-Law Number 26 annulled the requirement commercial companies be majority-owned by Emirati citizens, have a majority-Emirati board, or maintain an Emirati agent effectively allowing majority or full foreign ownership of onshore companies in many sectors.  The annulment will not apply to companies operating in strategically important sectors.

Neither Embassy Abu Dhabi nor Consulate General Dubai (collectively referred to as Mission UAE) has received any complaints from U.S. investors that they have been disadvantaged relative to other non-GCC investors.

Other Investment Policy Reviews

The UAE government underwent a World Trade Organization (WTO) Trade Policy Review in 2016.  The full WTO Review is available at:  https://www.wto.org/english/tratop_e/tpr_e/s338_e.pdf

Business Facilitation  

UAE officials emphasize the importance of facilitating business investment and tout the broad network of free trade zones as attractive to foreign investors.  The UAE’s business registration process varies by emirate, but generally happens through an emirate’s Department of Economic Development.  Links to information portals from each of the emirates are available at https://ger.co/economy/197.  At a minimum, a company must generally register with the Department of Economic Development, the Ministry of Human Resources and Emiratization, and the General Authority for Pension and Social Security, with a notary required in the process. In response to the pandemic, UAE authorities temporarily reduced fees, permits, and licenses to stimulate business formation in the onshore and free zone sectors.

In February 2021, Dubai launched the Invest in Dubai platform, a “single-window” service enabling investors to obtain trade licenses and launch their business quickly.  In August 2020, the Dubai International Financial Centre (DIFC) introduced a new license for startups, entrepreneurs, and technology firms, starting at $1,500 per year.  In October 2019, Dubai introduced a ‘Virtual Business License’ for non-resident entrepreneurs and freelancers in 101 countries.  In 2019, the Dubai Free Zone Council allowed companies to operate out of multiple free zones in Dubai through a single license under the “one free zone passport” scheme.  In 2017, Dubai’s Department of Economic Development introduced an “Instant License” program, under which investors can obtain a license valid for one year in minutes without a registered lease agreement.   In November 2020, the Abu Dhabi Department of Economic Development issued a resolution permitting non-citizens to obtain freelancer licenses allowing them to engage in 48 economic activities.  The licenses were previously limited to UAE nationals only.  In 2018, Abu Dhabi announced the issuance of dual licenses enabling free zone companies to operate onshore and to compete for government tenders.  In 2018, Sharjah announced that foreigners may purchase property in the emirate without a UAE residency visa on a 100-year renewable land lease basis.

Outward Investment  

The UAE is an important participant in global capital markets, primarily through its sovereign wealth funds, as well as through several emirate-level, government-related investment corporations.

Transparency of the Regulatory System  

The onshore regulatory and legal framework in the UAE generally favors local Emirati investors over foreign investors.

The Trade Companies Law requires all companies to apply international accounting standards and practices, generally the International Financial Reporting Standards (IFRS).  The UAE does not have local generally accepted accounting principles.

Generally, legislation is only published after it has been enacted into law and is not formally available for public comment beforehand.  Government-friendly press occasionally reports details of high-profile legislation.  The government may consult with large private sector stakeholders on draft legislation on an ad hoc basis.  Final versions of federal laws are published in Arabic in an official register “The Official Gazette,” though there are private companies that translate laws into English.  The UAE Ministry of Justice (MoJ) maintains a partial library of translated laws on its website.  Other ministries and departments inconsistently offer official English translations via their websites.  The emirates of Abu Dhabi, Dubai, and Sharjah publish official gazettes online in Arabic.  Regulators are not required to publish proposed regulations before enactment, but may share them either publicly or with stakeholders on a case-by-case basis.

International Regulatory Considerations 

The UAE is a member of the GCC, along with Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia.  It maintains regulatory autonomy, but coordinates efforts with other GCC members through the GCC Standardization Organization (GSO).  In 2020, the UAE submitted 72 notifications to the WTO committee, including notifications of emergency measures and issues relating to Intellectual Property Rights.

Legal System and Judicial Independence  

Islam is identified as the state religion in the UAE constitution, and serves as the principal source of domestic law.  The legal system of the country is generally divided between a British-based system of common law used in offshore FTZs and onshore domestic law.  Domestic law is a dual legal system of civil and Sharia laws – the majority of which has been codified.  Most codified legislation in the UAE is a mixture of Islamic law and other civil laws such as Egyptian and French civil laws.

Common law principles, such as following legal precedents, are generally not recognized in the UAE, although lower courts commonly follow higher court judgments.  Judgments of foreign civil courts are typically recognized and enforceable under local courts.  The United States District Court for the Southern District of New York signed a memorandum with Dubai International Financial Center (DIFC) courts providing companies operating in Dubai and New York with procedures for the mutual enforcement of financial judgments.  The Abu Dhabi-based financial free zone hub Abu Dhabi Global Financial Market (ADGM) signed a Memorandum of Understanding (MoU) with the Abu Dhabi Judicial Department in February 2018 allowing reciprocal enforcement of judgments, decisions, orders, and arbitral awards between ADGM and Abu Dhabi courts.

The UAE constitution stipulates each emirate can set up a local emirate-level judicial system (local courts) or rely exclusively on federal courts.  The Federal Judicial Authority has jurisdiction over all cases involving a “federal entity” with the Federal Supreme Court in Abu Dhabi, the highest court at the federal level.  Federal courts have exclusive jurisdiction in seven categories of cases:  disputes between emirates; disputes between an emirate and the federal government; cases involving national security; interpretation of the constitution; questions over the constitutionality of a law; and cases involving the actions of appointed ministers and senior officials while performing their official duties.  The federal government administers the courts in Ajman, Fujairah, Umm al Quwain, and Sharjah, including vetting, appointing, and paying judges.  Judges in these courts apply both local and federal law, as appropriate.  Dubai, Ras Al Khaimah, and Abu Dhabi administer their own local courts, hiring, vetting, and paying local judges and attorneys.  Local courts in Dubai, Ras al Khaimah, and Abu Dhabi have jurisdiction over all matters not specifically reserved for federal courts in the constitution.  Abu Dhabi operates both local (the Abu Dhabi Judicial Department) and federal courts in parallel.

Family Law:  In November 2020, the UAE government issued Federal Law Number 8 (2019), amending to the UAE Family Law.  The reforms liberalized laws related to cohabitation by unmarried couples, divorce and separation, custody, execution of wills and asset distribution, use of alcohol, suicide, and the protection of women.  The amendments stipulated that in a divorce taking place in the UAE by a couple married abroad, the legal proceedings would be governed by the laws of their home country.  The reforms also decriminalized alcohol consumption and removed the licensing requirement to purchase alcohol.

Probate:  The UAE Government announced in November 2020 that in the absence of a will, probate laws of the deceased’s country of citizenship would prevail.  Prior to this reform, Sharia law inheritance provisions determined the disposal of a UAE non-national resident’s assets on his or her death in most cases.  The new Federal decree-law no. 29 of 2020 allows each emirate to maintain a registry for non-UAE national wills.

Employment Law:  Employment in the private sector outside of financial free zones is regulated by Federal Law No. 8 of 1980.  The Labor Law defines working hours, leave entitlements, safety, and healthcare regulations.  There is no minimum wage defined by the law and trade unions, strikes, and collective bargaining is prohibited.  Expatriates’ legal residence in the UAE is tied to their employer (kafala system), but skilled labor usually has more flexibility in transferring their residency visa.  In 2009, the UAE Ministry of Human Resources and Emiratization (MOHRE) introduced a Wages Protection System (WPS) to ensure unbanked workers were paid according to the terms of their employment agreement.  Most domestic workers remain uncovered by the WPS.  In 2019, the UAE government launched a WPS pilot program for domestic workers and announced plans to extend WPS protection to include domestic workers in the future.

The constitution prohibits discrimination based on religion, race, and national origin.  Labor Law gives national preference in employment to Emirati citizens.  Federal Law No. 06 of 2020 stipulates equal wages for women and men in the private sector.  The decree came into force in September 2020.

The DIFC Employment Law No. 2 of 2019, which took effect in August 2019, addressed key issues such as paternity leave, sick pay, and end-of-service settlements.  ADGM also issued new employment regulations with effect in January 2020, which allowed employers and employees more flexibility in negotiating notice periods and introduced protective provisions for employees age 15-18.

Laws and Regulations on Foreign Direct Investment  

There are four major federal laws affecting investment in the UAE:  the Federal Commercial Companies Law, the Trade Agencies Law, the Federal Industry Law, and the Government Tenders Law.

Federal Commercial Companies Law:  As noted above, Federal Decree-Law Number 26 annulled the default requirement for commercial companies to be majority-owned by Emirati citizens, have a majority-Emirati board, or maintain an Emirati agent effectively allowing majority or full foreign ownership of onshore companies in most sectors.

Trade Agencies Law:  The Trade Agencies Law currently requires that foreign firms without a local UAE subsidiary to distribute their products in the UAE through trade agents who are either UAE nationals or through companies majority-owned by UAE nationals.  Federal Law No. 11 of 2020 amended the Trade Agencies Law, removing the requirement that UAE companies be fully owned by Emirati citizens to act as commercial agents.  However, those companies still need to be majority-owned by Emirati citizens. The Ministry of Economy handles registration of trade agents.  A foreign principal can appoint one agent for the entire UAE, or for a particular emirate or group of emirates.  It is difficult and expensive to sever a commercial agency agreement.  Federal Law No. 5 of 1985 (Civil Code) governs unregistered distribution agreements.

Federal Law No. 11 of 2020 will also allow family-owned companies to convert to public joint stock companies; to open shareholding to foreign investors; and to establish rules of governance and protection against default.  The changes also encourage UAE nationals to engage in business activities and invest in public companies and their commercial agents.  The changes offer protections for small shareholders and owners of SMEs acting as agents, granting them statutory protection in cases of termination or non-renewal of agreements without “material reasons.”

In August 2020, the Dubai ruler issued Law No. 9 (2020) regulating family-owned businesses in Dubai.  The Law enables family members with a common interest to jointly own moveable or immoveable property (other than shares in public joint-stock companies) on the tailored terms of a Family Property Contract that ensures the continuity, development, and smooth transition of family property from one generation to another.

Federal Industry Law:  Federal Law No. 1 (1979) regulates industrial projects in the UAE. Under this law, an industry advisory committee shall be established to examine issues pertaining to most industrial projects.  The law excludes projects which meet specific requirements, including projects related to petroleum exploration and mining industry; projects with fixed capital, not exceeding $68,064 or that do not have more than ten people, or that use a motor power of no more than five horses; concession projects; and projects implemented by the federal government.

Other Relevant Legislation:  According to the Central Bank Law, a bank incorporated in the United Arab Emirates must be 60 percent owned by UAE nationals.  The limit on foreign ownership of local banks is subject to approval by regulators on a case-by-case basis.  Some major banks have reached the maximum foreign ownership of 40 percent in recent years.  Foreign banks are licensed in the UAE as branches of foreign banks, with a maximum of eight local branches allowed per bank.

The Federal Industry Law stipulates industrial projects must have 51 percent UAE national ownership.  The law also requires that projects either be managed by a UAE national or have a board of directors with a majority of UAE nationals.  Exemptions from the law are provided for projects related to the extraction and refining of oil and natural gas and select hydrocarbon projects governed by special laws or agreements.

To register with the Abu Dhabi Securities Exchange, go to: https://www.adx.ae/English/Pages/Members/BecomeAMember/default.aspx

To obtain an investor number for trading on Dubai Exchanges, go to:  http://www.nasdaqdubai.com/assets/docs/NIN-Form.pdf

Competition and Anti-Trust Laws  

The Ministry of Economy’s Competition Regulation Committee reviews transactions for competition-related concerns.

Expropriation and Compensation  

Mission UAE is not aware of foreign investors subjected to any expropriation in the UAE in the recent past.  There are no federal rules governing compensation if expropriations were to occur.   Individual emirates would likely treat expropriations differently.  In practice, authorities would be unlikely to expropriate unless there were a compelling development or public interest need to do so.

Dispute Settlement

ICSID Convention and New York Convention  

The UAE is a contracting state to the International Center for the Settlement of Investment Disputes (ICSID) and a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral awards (1958 New York Convention).

Investor-State Dispute Settlement  

Mission UAE is aware of several substantial investment and commercial disputes over the past few years involving U.S. or other foreign investors and government and/or local businesses.  There have also been multiple contractor/payment disputes with the government as well as with local businesses.  Onshore dispute resolution can be difficult and uncertain, and payment following settlements is often slow.  Disputes are generally resolved by direct negotiation and settlement between the parties themselves, arbitration, or recourse within the legal system.  Firms avoid escalating payment disputes through civil or arbitral courts, particularly disputes involving politically connected local parties to preserve access to UAE markets.  Legal or dispute-resolution mechanisms that can take months or years to reach resolution, leading some firms to exit the UAE market instead of pursuing claims.  Arbitration may commence by petition to the UAE federal courts based on mutual consent (a written arbitration agreement), independently (by nomination of arbitrators), or through referral to an appointing authority without recourse to judicial proceedings.  Mechanisms for enforcing ownership of property through either offshore or domestic courts are generally effective.  There have been no confirmed reports of government interference in the court system affecting foreign investors.  Domestic courts are generally perceived as favoring Emirati nationals over foreigners.

International Commercial Arbitration and Foreign Courts  

The UAE government acceded to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards in November 2006.  An arbitration award issued in the UAE is now enforceable in all 138 member states, and any award issued in another member state is directly enforceable in the UAE.  The Convention supersedes all incompatible legislation and rulings in the UAE.  Mission UAE is not aware of any U.S. firm attempting to use arbitration under the UN convention on the recognition and enforcement of foreign arbitral awards.  Some analysts have raised concerns about delays and procedural obstacles to enforcing arbitration awards in the UAE.

In June 2018, Federal Law No. 6 (2018) on Arbitration came into force.  The Federal Law on Arbitration is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.  The new law is expected to bolster confidence in the UAE’s arbitration regime.  In October 2020, DIFC courts set up a new arbitration working group to accommodate the rising number of arbitration-related cases.  On December 23, 2020, ADGM enacted amendments to its arbitration regulations to establish itself as a venue for arbitration; codify international best practices; and accommodate the changing needs of various stakeholders to arbitration.  The amendments also allowed greater flexibility in the way the arbitration process can be conducted, particularly with the introduction of explicit provisions accommodating virtual hearings and electronic submissions.

Bankruptcy Regulations  

The bankruptcy law for companies, Federal Decree Law No. 9 (2016), was first applied in February 2019.  The law covers companies governed by the Commercial Companies Law, most FTZ companies, sole proprietorships, and companies conducting professional business.  It allows creditors owed $27,225 or more to file insolvency proceedings against a debtor 30 business days after written notification to the debtor.  The law decriminalized “bankruptcy by default,” ending a system in which out-of-cash businesspeople faced potential criminal liability, including fines and potential imprisonment, if they did not initiate insolvency procedures within 30 days.  In October 2020, the UAE Cabinet approved amendments to the law and added provisions regarding “Emergency Situations” that impinge on trade or investment, to enable individuals and business to overcome credit challenges during extraordinary circumstances such as pandemics, natural and environmental disasters, and wars.  Under the amendments, a debtor may request a grace period from creditors, or negotiate a debt settlement for a period up to 12 months.

The bankruptcy law for individuals, Insolvency Law No. 19 (2019) came into effect in November 2019.  It applies only to natural persons and estates of the deceased.  The law allows a debtor to seek court assistance for debt settlement or to enter into liquidation proceedings as a result of the inability to pay for an extended period of time.  Under this law, a debtor facing financial difficulties may apply to the court for assistance and guidance in the settlement of his financial commitments through one or more court-appointed experts, or through a court-supervised binding settlement plan.  If a debtor fails to pay any of his due debts for a period exceeding 50 consecutive business days, he shall apply to the court to commence proceedings for the liquidation of his assets.  The law offers only limited protection to individuals, and non-payment of debt remains a criminal offense.

DIFC enacted a New Insolvency Law on May 30, 2019.  The law, which applies only to DIFC companies, introduces methods to deal with insolvency situations, including a new debtor in possession regime, appointment of an administrator in cases of mismanagement, and adoption of UNCITRAL Model Law, consistent with globally recognized best practices.  In July 2020, ADGM also announced amendments to its regulations to provide greater clarity on the prescribed form and content in procedural matters and to better align with the ADGM Courts platform.

In June 2020, the UAE’s federal export credit Company, Etihad Credit Insurance (ECI) reaffirmed its commitment to support companies operating in the UAE to recover from COVID implications.  ECI has recently helped a UAE manufacturer recover payments from a U.S. firm that filed for bankruptcy.

The Federal Government’s Al Etihad Credit Bureau (AECB) is the only credit rating agency that assesses the financial strength of individuals in the UAE.  It also provides risk measures for various entities.  The AECB partnered with local institutions to collect data that assist in assessing credit risk and improve capital market efficiency.  A credit rating allows investors to make better-informed lending decisions and apply appropriate risk premiums to borrowers.  A credit report from AECB can unburden borrowers from scrutiny each time they take a loan.

Investment Incentives  

All FTZs offer incentives to foreign investors.  In 2020, the UAE introduced economic incentives to stimulate the economy and attract foreign investments, as part of the Covid-19 stimulus package, including cutting and freezing fees on certain government services, waiving fines, offering fee payment on an installment basis, and licensing businesses without physical locations for up to two years.  Outside the FTZs, the UAE provides no incentives, although the ability to purchase property as freehold in certain prime developments could be considered an incentive to attract foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation  

There are numerous FTZs throughout the UAE.  Foreign companies generally enjoy the same investment opportunities within those zones as Emirati citizens.  All FTZs provide 100 percent import and export tax exemptions, 100 percent exemptions from commercial levies, 100 percent repatriation of capital and profits, multi-year leases, easy access to ports and airports, buildings for lease, energy connections (often at subsidized rates), and assistance in labor recruitment.  In addition, FTZ authorities provide extensive support services, such as visa sponsorship, worker housing, dining facilities, and physical security.

FTZs have their own independent authorities with responsibility for licensing and helping companies establish their businesses.  Investors can register new companies in an FTZ, or license branch or representative offices.  All Abu Dhabi FTZs as well as several Dubai FTZs offer dual licensing in cooperation with local Department of Economic Development.  A dual license enables an LLC established in an FTZ to obtain an onshore license allowing the company to conduct onshore business in that emirate without partnering with an Emirati national, recruiting extra staff using the services of an onshore labor office, or to rent extra office space onshore.  FTZs offering dual licenses include ADGM, Abu Dhabi Airports Free Zone (ADAFZ), Khalifa Industrial Zone Abu Dhabi (KIZAD), Twofour54, and Masdar in Abu Dhabi; and Dubai Design District (D3), Dubai Airport Free Zone (DAFZA), DIFC, and Dubai Multi Commodities Centre (DMCC) in Dubai.

Performance and Data Localization Requirements  

The Emiratization Initiative is a federal incentive program to increase Emirati employment in the private sector.  Requirements vary by industry, but the Vision 2021 national strategic plan aims to increase the percentage of Emiratis working in the private sector from five percent in 2014 to eight percent by 2021; in 2019 the UAE reached 3.64 percent.  In August 2020, the Emirates Job Bank (EJB), a government-facilitated job portal for UAE nationals, obliged government and onshore private employers to provide an explanation for interviewed UAE citizens were not hired, before allowing the employer to hire a non-citizen.  Most Emirati citizens are employed government-related entities (GREs).

All foreign defense contractors with over $10 million in contract value over a five-year period must participate in the Tawazun Economic Program, previously known as the UAE Offset Program.  This program also requires defense contractors that are awarded contracts valued at more than USD 10 million to establish commercially viable joint ventures with local business partners, which would be projected to yield profits equivalent to 60 percent of the contract value within a specified period, usually seven years.

The UAE does not force foreign investors to use domestic content in goods or technology or compel foreign IT providers to turn over source code, but it strongly encourages companies to utilize local content.  In February 2018, the Abu Dhabi National Oil Company (ADNOC) launched the In-Country Value (ICV) strategy, which gives preference in awarding contracts to foreign companies that use local content and employ Emiratis.  In February 2020, the Abu Dhabi Department of Economic Development and ADNOC signed an agreement to standardize ADNOC’s ICV certification program across the Abu Dhabi Government’s procurement process.  Following this agreement, businesses can make a one-time application for a unified ICV certificate that will now be applicable across the Abu Dhabi government’s procurement programs.  UAE government officials have indicated plans to expand the ICV program to other sectors of the economy and to other emirates in the coming years.  In 2019, Abu Dhabi Department of Economic Development introduced the Abu Dhabi Local Content (ADLC) initiative as part of Ghadan 21, an accelerator program to encourage private sector participation in Abu Dhabi government tenders.

Real Property  

The UAE federal government allows individual emirates to decide the mechanisms through which ownership of land may be transferred within their borders.  Abu Dhabi has generally limited land ownership to Emiratis or other GCC citizens, who may then lease the land to foreigners.  The property reverts to the owner at the conclusion of the lease.  However, in 2019, the Abu Dhabi Government issued Law No. 13 (2019) amending the rules on foreign ownership of real estate in the Emirate of Abu Dhabi.  Under the law, foreign individuals and companies wholly or partially owned by foreigners are allowed to own freehold interests in land located within certain investment areas of Abu Dhabi for an unrestricted time period.  The law also extends the right for public joint stock companies to own a freehold interest in land and property anywhere in Abu Dhabi provided that at least 51 percent of the company is owned by UAE nationals.  Prior to the issuance of this law, foreign owners’ interest in land was limited to a “Musataha,” a long-term lease of up to 99 years, renewable upon the agreement of both parties.

Although Dubai has restricted ownership to UAE nationals in certain older, more established neighborhoods, traditional freeholds, also known as outright ownership, are widely available, particularly in newer developments.  Freehold owners own the land and may sell it on the open market.  The contract rights of lienholders, as well as ownership rights of freeholders, are generally respected and enforced throughout the UAE, which in some cases has employed specialized courts for this purpose.

Mortgages and liens are permitted with restrictions, and each emirate has its own system of recordkeeping.  In Dubai, for example, the system is centralized within the Dubai Land Department, and is considered extremely reliable.

In December 2020, Dubai’s ruler issued new legislation on unfinished and cancelled real estate projects in Dubai.  Law No. (19) of 2020 states that if a developer did not initiate construction on a real estate project for reasons beyond his control, or if the project was cancelled due to a decision issued by government regulators, the developer must refund the entire deposit paid by purchasers.

The World Bank Ease of Doing Business Report notes that not all privately-held land plots in the economy are formally registered in an immovable property registry.  Much of the country is unregistered desert; such land is generally owned by emirate-level governments.  Land not otherwise allocated or owned is the property of the emirate and may be disposed of at the will of its ruler who generally consults with his advisors prior to disposition.  The UAE does not have a securitization process for lending purposes.

Intellectual Property Rights 

The UAE has established a legal and regulatory framework for intellectual property rights (IPR) protection.  Moreover, in recent years IPR holders have seen marked improvement in the protection and enforcement of intellectual property.  In April 2021, the UAE was removed from the U.S. Trade Representative’s Special 301 Report “Watch List.”  Recent UAE government changes include enhancing IP protections for the innovative pharma and biotech industry; lowering previously prohibitive trademark fees; increasing transparency in the outcomes of counterfeit seizures; significantly increasing notifications, seizures, and public destructions by Dubai Customs; and creating intergovernmental and quasi-governmental groups responsive to USG and U.S. industry concerns.  While concrete steps are needed to remedy problems with music licensing and IPR enforcement in FTZs, the UAE government has taken the concerns of rights holders seriously.

The 2019-2020 Global Competitiveness Report issued by the World Economic Forum ranked the UAE 19th globally on IPR protection, up from 26th in 2018-2019.  The UAE’s legal framework for IPR is generally considered compliant with international obligations.  Emirate-level authorities such as economic development authorities, police forces, and customs authorities enforce IPR-related issues, while federal authorities manage IPR policy.

Before January 2021, inventors could receive patent protection in UAE through either the UAE national patent office or the regional Gulf Cooperation Council (GCC) Patent Office.  On January 5, 2021, the GCC Patent Office stopped accepting new patent applications as the regional patent system undergoes significant reforms.  While GCC patent applications filed before January 5th will continue to be processed, inventors will need to rely on the national UAE patent office to seek patent rights until the new regional GCC system is established.

Resources for Intellectual Property Rights Holders:

Peter Mehravari

Patent Attorney

Intellectual Property Attaché for the Middle East & North Africa

U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office

Tel: +965 2259 1455 Peter.Mehravari@trade.gov

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/

Capital Markets and Portfolio Investment  

UAE government efforts to create an environment that fosters economic growth and attracts foreign investment resulted in:  i) no taxes or restrictions on the repatriation of capital; ii) free movement of labor and low barriers to entry (effective tariffs are five percent for most goods); and iii) an emphasis on diversifying the economy away from oil, which offers a broad array of investment options for FDI.  Key non-hydrocarbon drivers of the economy include real estate, renewable energy, tourism, logistics, manufacturing, and financial services.

The UAE issued investment fund regulations in September 2012 known as the “twin peak” regulatory framework designed to govern the marketing of investment funds established outside the UAE to domestic investors and the establishment of local funds domiciled inside the UAE.  This regulation gave the Securities and Commodities Authority (SCA), rather than the Central Bank, authority over the licensing, regulation, and marketing of investment funds.  The marketing of foreign funds, including offshore UAE-based funds, such as those domiciled in the DIFC, require the appointment of a locally licensed placement agent.  The UAE government has also encouraged certain high-profile projects to be undertaken via a public joint stock company to allow the issuance of shares to the public.  Further, the UAE government requires any company carrying out banking, insurance, or investment services for a third party to be a public joint stock company.

The UAE has three stock markets:  Abu Dhabi Securities Exchange, Dubai Financial Market, and NASDAQ Dubai.  SCA, the onshore regulatory body, classifies brokerages into two groups:  those that engage in trading only while the clearance and settlement operations are conducted through clearance members, and those that engage in trading clearance and settlement operations for their clients.  Under the regulations, trading brokerages require paid-up capital of $820,000, whereas trading and clearance brokerages need $ 2.7 million.  Bank guarantees of $367,000 are required for brokerages to trade on the bourses.

In June 2020, the SCA amended the decision on issuing and offering Islamic securities, to ensure SCA legislation is in line with the principles of the International Organization of Securities Commissions (IOSCO).  In July 2020, SCA embarked on a project to restructure the legislative system for broker classification to keep pace with global practices and enhance the confidence of domestic and foreign investors.  According to the restructuring project, the following five licensing categories were introduced:  dealing in securities, dealing in investments, safekeeping, clearing and registration, credit rating, and arrangement and counseling.

The SCA’s decision on Capital Adequacy Criteria of Investment Manager and Management Company stipulates that the investment manager and the management company must allocate capital to constitute a buffer for credit risk, market risk, or operational risk, even if it does not appear as a line item in the balance sheet.

On the issue of Real Estate Investment Fund control, the SCA stipulates that a public or private real estate investment fund shall invest at least 75 percent of its assets in real estate assets.  According to the SCA, a real estate investment fund may establish or own one or more real estate services companies provided that its investment in the ownership of each company and its subsidiaries shall not be more than 20 percent of the fund’s total assets.

Credit is generally allocated on market terms, and foreign investors can access local credit markets.  Interest rates usually closely track those in the United States since the local currency is pegged to the dollar.  However, there have been complaints that GREs crowd out private sector borrowers to the detriment of mostly local SMEs.

Money and Banking System  

The UAE has a robust banking sector with 48 banks, 21 of which are foreign institutions, and six are GCC-based banks.  The number of national bank branches declined to 541 by the end of 2020, compared to 656 at the end of 2019, due to bank mergers and the transition to online banking.

Non-performing loans (NPL) comprised 6.2 percent of outstanding loans in 2019, compared with 5.7 percent in 2018, according to figures from the Central Bank of the UAE (CBUAE). Under a new reporting standard, the NPL ratio of the UAE banking system for the year-end 2018 stood at 5.6 percent, compared to 7.1 percent under the previous methodology.  The CBUAE recorded total sector assets of USD 868 billion as of December 2020.

The banking sector remains well-capitalized but has experienced a decline in lending and a rise in NPL as a result of the pandemic.  These factors have significantly reduced reported profits as banks have made greater provisions for non-performing loans.  On March 15, 2020, the CBUAE announced the USD $ 27.2 billion Targeted Economic Support Scheme (TESS) stimulus package, which included USD $13.6 billion in zero-interest, collateralized loans for UAE-based banks, and USD $13.6 billion in funds freed up from banks’ capital buffers.  In November 2020, The CBUAE extended The TESS to June 2021.

There are some restrictions on foreigners’ ability to establish a current bank account, and legal residents and Emiratis can access loans under more favorable terms than non-residents.

Foreign Exchange and Remittances  

Foreign Exchange Policies  

According to the IMF, the UAE has no restrictions on making payments and transfers for international transactions, except security-related restrictions.  Currencies trade freely at market-determined prices.  The UAE dirham has been pegged to the dollar since 2002.  The mid-point between the official buying and selling rate for the dirham (AED or Dhs) is fixed at AED 3.6725 per USD.

Remittance Policies  

The Central Bank of the UAE initiated the creation of the Foreign Exchange & Remittance Group (FERG), comprising various exchange companies, which is registered with the Dubai Chamber of Commerce & Industry.  Unlike their counterparts across the world that deal mainly in money exchange, exchange companies in the UAE are primary conduits for transferring large volumes of remittances through official channels.  According to migration and remittance data from the World Bank, in 2019, the UAE had migrant remittance outflows of USD $44.9 billion.  Exchange companies are important partners in the UAE government’s electronic salary transfer system, called the Wage Protection System.  They also handle various ancillary services ranging from credit card payments to national bonds, to traveler’s checks.

As part of its focus on improving Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) systems within the UAE, in September 2020, the CBUAE introduced a mandatory registration framework for Hawala providers or informal money transfer service providers that operate in the UAE.

Sovereign Wealth Funds  

Abu Dhabi is home to four sovereign wealth funds—the Abu Dhabi Investment Authority (ADIA) and Mubadala Investment Company are the largest—with estimated total assets of approximately USD $814.6 billion as of February 2020.  Each fund has a chair and board members appointed by the Ruler of Abu Dhabi.  President Khalifa Bin Zayed Al Nahyan is the chair of ADIA and Abu Dhabi Crown Prince Mohammed Bin Zayed Al Nahyan is the chair of Mubadala.  Other rapidly expanding Abu Dhabi sovereign funds include: ADQ, with investment portfolios in food and agriculture, aviation, financial services, healthcare, industries, logistics, media, real estate, tourism and hospitality, transport and utilities; and EDGE, which covers  weapons, cyber defense and electronic warfare and intelligence, among others.  Emirates Investment Authority, the UAE’s federal sovereign wealth fund, is modest by comparison, with estimated assets of about USD 44 billion.  The Investment Corporation of Dubai (ICD) is Dubai’s primary sovereign wealth fund, with an estimated USD $301 billion in assets according to ICD’s June 2020 financial report.

UAE funds vary in their approaches to managing investments.  ADIA generally does not actively seek to manage or take an operational role in the public companies in which it invests, while Mubadala tends to take a more active role in particular sectors, including oil and gas, aerospace, infrastructure, and early-stage venture capital.  According to ADIA, the fund carries out its investment program independently and without reference to the government of Abu Dhabi.

In 2008, ADIA agreed to act alongside the IMF as co-chair of the International Working Group of Sovereign Wealth Funds, which eventually became the International Forum of Sovereign Wealth Funds (IFSWF).  Comprising representatives from 31 countries, the IFSWF was created to demonstrate that sovereign wealth funds had robust internal frameworks and governance practices, and that their investments were made only on an economic and financial basis.

State-owned enterprises (SOEs) are a key component of the UAE economic model.  There is no

published list of SOEs or GREs, at the national or individual emirate level.  Some SOEs, such as the influential Abu Dhabi National Oil Company (ADNOC), are strategically important companies and provide a major source of revenue for the government.  Mubadala established Masdar in 2006 to develop renewable energy and sustainable technologies industries.  Some SOEs, such as Emirates Airlines and Etisalat, the largest local telecommunications firm, have in recent years emerged as internationally recognized brands.  Some, but not all, of these companies have competition.  In some cases, these firms compete against other state-owned firms (Emirates and Etihad airlines, for example, or telecommunications company Etisalat against du).  While they are not granted full autonomy, these firms leverage ties between entities they control to foster national economic development.  Perhaps the best example of such an economic ecosystem is Dubai, where SOEs have been used as drivers of diversification in sectors including construction, hospitality, transport, banking, logistics, and telecommunications.  Sectoral regulations in some cases address governance structures and practices of state-owned companies.  The UAE is not party to the WTO Government Procurement Agreement.

Privatization Programs  

There is no privatization program in the UAE.  There have been several listings of portions of SOEs, on local UAE stock exchanges, as well as some “greenfield” IPOs focused on priority projects.  However, several state-owned enterprises have allowed partial foreign ownership in their shares.  For example, Abu Dhabi National Oil Company for Distribution, many national banks, some utility operators and the telecom operators, Etisalat and du, now allow minority foreign ownership.

There is a general expectation that businesses in the UAE adhere to responsible business conduct standards, and the UAE’s Governance Rules and Corporate Discipline Standards (Ministerial Resolution No. 518 of 2009) encourage companies to apply social policy towards supporting local communities.  In February 2018, the UAE issued Cabinet Resolution No. 2 regarding Corporate Social Responsibility (CSR), which encourages voluntary contributions to a National Social Responsibility Fund.  In January 2021, the CSR UAE Fund announced that it will launch an Index as an annual performance measurement tool for CSR & Sustainability practices in the UAE.  The Emirate of Ajman made annual CSR contributions of USD $417 mandatory for all businesses.  Many companies maintain CSR offices and participate in CSR initiatives, including mentorship and employment training; philanthropic donations to UAE-licensed humanitarian and charity organizations; and initiatives to promote environmental sustainability.  The UAE government actively supports and encourages such efforts through official government partnerships, as well as through private foundations.  The 2015 Commercial Companies Law requires managers and directors to act for the benefit of the company and voids any company provisions exempting directors and managers from personal liability.

In April 2015, the Pearl Initiative and the United Nations Global Compact held their inaugural Forum in Dubai.  The Pearl Initiative is an independent, non-profit organization founded by Sharjah-based Crescent Enterprises working across the Gulf region to encourage better business practices.  The UAE has not subscribed to the OECD Guidelines for Multinational Enterprises and has not actively encouraged foreign or local enterprises to follow the specific United Nations Guiding Principles on Business and Human Rights.  The UAE government has not committed to adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas, nor does it participate in the Extractive Industries Transparency Initiative.  The Dubai Multi-Commodities Center (DMCC), however, passed the DMCC Rules for Risk-Based Due Diligence in the Gold and Precious Metals Supply Chain, which it claims are fully aligned with the OECD guidance.

Additional Resources

Department of State

Country Reports on Human Rights Practices

Trafficking in Persons Report

Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;

North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

Findings on the Worst forms of Child Labor Report

List of Goods Produced by Child Labor or Forced Labor

Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;

Comply Chain

The UAE has strict laws, regulations, and enforcement against corruption and has pursued several high-profile cases.  For example, the UAE federal penal code and the federal human resources law criminalize embezzlement and the acceptance of bribes by public and private sector workers.  The Dubai financial fraud law criminalizes receipt of illicit monies or public funds.  There is no evidence that corruption of public officials is a systemic problem.  The State Audit Institution and the Abu Dhabi Accountability Authority investigate corruption in the government.  The Companies Law requires board directors to avoid conflicts of interest.  In practice, however, given the multiple roles occupied by relatively few senior Emirati government and business officials, conflicts of interest exist.  Business success in the UAE also still depends much on personal relationships.

The monitoring organizations GAN Integrity and Transparency International describe the corruption environment in the UAE as low-risk and rate the UAE highly on anti-corruption efforts both regionally and globally.  Some third-party organizations note, however, that the involvement of members of the ruling families and prominent merchant families in certain businesses can create economic disparities in the playing field, and most foreign companies outside the UAE’s free zones rely on an Emirati national partner, often with strong connections, who retains majority ownership.  The UAE has ratified the United Nations Convention against Corruption.  There are no civil society organizations or NGOs investigating corruption within the UAE.

Resources to Report Corruption  

Contact at government agency or agencies are responsible for combating corruption:

Dr. Harib Al Amimi
President
State Audit Institution
20th Floor, Tower C2, Aseel Building, Bainuna (34th) Street,
Al Bateen, Abu Dhabi, UAE
+971 2 635 9999
info@saiuae.gov.ae , reportfraud@saiuae.gov.ae

There have been no reported instances of politically motivated property damage in recent years.

Despite a pandemic-induced economic slowdown in 2020, unemployment among UAE citizens remains low.  Labor force participation was only 47.6% among UAE citizens in 2019.  Despite significant departures of foreign workers during the pandemic, expatriates represent over 88.5 percent of the country’s 9.6 million residents, accounting for more than 95 percent of private sector workers.  As a result, there would be large labor shortages in all sectors of the economy if not for expatriate workers.  Most expatriate workers derive their legal residency status from their employment.

A significant portion of the country’s expatriate labor population consists of low-wage workers who are primarily from South Asia and work in labor-intensive industries such as construction, manufacturing, maintenance, and sanitation.  In addition, several hundred thousand domestic workers, primarily from South and Southeast Asia and Africa, work in the homes of both Emirati and expatriate families.  Federal labor law does not apply to domestic, agricultural, or public sector workers.  In 2014, the federal government implemented a law mandating a standard contract for all domestic workers.  In 2017, the UAE issued a domestic workers law, which regulates their rights and contracts.  Various regulations require businesses in certain sectors such as financial services to employ minimum quotas of Emiratis.

Under UAE labor law, employers must pay severance to workers who complete one year or more of service except in cases of termination under certain conditions described in Article 120 of the federal labor law, which relate to misconduct by workers.  Expatriate workers do not receive UAE government unemployment insurance.  Termination of UAE nationals in most situations requires prior approval from the Ministry of Human Resources and Emiratization.

The guest worker system generally guarantees transportation back to country of origin at the conclusion of employment.  Repatriation insurance costs USD 16 per year per employee.  Most employees are not subject to excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility.  Recent legislation increased an employee’s ability to voluntarily leave a job and switch employers thereby making it harder for employers to pressure workers to remain in a job by using their sponsorship of the employee to limit his or her options.

Five-year residence visas are available for investors who purchase property worth USD 1.4 million or more, and 10-year residence visas are available for individuals who invest USD 2.8 million in a business.  The government also provides visas for entrepreneurs and specialized talent in science, medicine, and specialized technical fields.  Employees who live in the UAE on a sponsored work visa can undertake part-time jobs and to work for multiple employers simultaneously to earn additional income.

In September 2020, Dubai Tourism in collaboration with the General Directorate of Residency and Foreigners Affairs (GDRFA-Dubai), introduced “Retire in Dubai,” a global retirement program that offers resident expatriates and foreigners aged 55 and above the opportunity to live in Dubai.  Eligible applicants receive a Retirement Visa, renewable every five years.  The retiree can choose between one of three financial requirements for eligibility:  a monthly income of approximately USD $5,500; savings of USD $275,000; or property in Dubai worth USD $550,000.

In October 2020, Dubai launched a visa that enables remote working professionals to live in Dubai, while serving their employers in their home country. The visa is valid for one year, costs $287 plus medical insurance and processing fees per person.  Eligibility requirements include a one-year employment contract, and a minimum salary of USD $5,000 per month.

In January 2021, the UAE Cabinet approved a measure permitting foreign university students in the UAE to sponsor their families, provided they have the financial means to do so and can afford suitable housing.

In February 2021, Abu Dhabi Department of Culture and Tourism launched the Creative Visa for individuals working in cultural and creative industries, including heritage, performing arts, visual arts, design and crafts, gaming and e-sports, media, and publishing.

Although UAE federal law prohibits the payment of recruitment fees, many prospective workers continue to make such payments in their home countries.  In 2018, the UAE government launched Tadbeer Centers, publicly regulated but privately operated agencies to improve recruitment regulation and standards.  Tadbeer Centers are meant to replace recruitment agencies by 2020.

There is no minimum wage in the UAE; however, article 63 of the federal labor law allows the minister of labor to suggest an overall minimum wage level or to a specific area or profession.  MHRE unofficially mandates an AED 5,000 (USD $1,360) minimum wage for locals at job fairs and requires job titles offered for Emiratis to be socially acceptable.  Some labor-sending countries require their citizens to receive certain minimum wage levels as a condition for allowing them to work in the UAE.  In January 2020, the UAE government introduced a salary requirement for residents seeking to directly sponsor a domestic worker, raising the minimum monthly income for the individual or entire family from USD $1,630 to $6,810, inclusive of all allowances.

Federal Law No. 8 of 1980 prohibits labor unions.  The law also prohibits public sector employees, security guards, and migrant workers from striking, and allows employers to suspend private sector workers for doing so.  In addition, employers can cancel the contracts of striking workers, which can lead to deportation.  According to government statistics, there were approximately 30 to 60 strikes per year between 2012 and 2015, the last year for which data is available.  In December 2019, construction workers in Abu Dhabi engaged in an hours-long strike, claiming they had not been paid in months and that each was owed over USD $3,400.  The police intervened to defuse the protests and arrested some of the workers for resisting.  Mediation plays a central role in resolving labor disputes.  The federal Ministry of Human Resources and Emiratization and local police forces maintain telephone hotlines for labor dispute and complaint submissions.  MOHRE manages 11 centers around the UAE that provide mediation services between employers and employees.  Disputes not resolved by the Ministry of Human Resources and Emiratization move to the labor court system.

The MOHRE inspects company workplaces and company-provided worker accommodations to ensure compliance with UAE law.  Emirate-level government bodies, including the Dubai Municipality, also carry out regular inspections.  The MOHRE also enforces a mid-day break from 12:30 p.m. – 3:00 p.m. during the extremely hot summer months.  The federally-mandated Wages Protection System (WPS) monitors and requires electronic transfer of wages to approximately 4.5 million private sector workers (about 95 percent of the total private sector workforce).  There are reports that small private construction and transport companies work around the WPS to pay workers less than their contractual salaries.  In 2020 the UAE began a pilot program to begin integrating domestic workers into the WPS.  Currently, less than one percent of domestic workers are enrolled in WPS.

Following the promulgation of similar legislation in Abu Dhabi, Dubai’s government fully implemented Law No. 11 in May 2017, which mandates employers provide basic health insurance coverage to their employees or face fines.  Dubai’s mandatory health insurance law covers 4.3 million people and applies to employees residing in other emirates but working in Dubai.

The multi-agency National Committee to Combat Human Trafficking is the federal body tasked with monitoring and preventing human trafficking, including forced labor.  Child labor is illegal and rare in the UAE.  The UAE continues to participate in the Abu Dhabi Dialogue, engage in the Colombo Process, and partner with other multilateral organizations such as the International Organization for Migration and the United Nations Office on Drugs and Crime regarding labor exploitation and human trafficking.

Section 7 of the Department of State’s Human Rights Report (http://www.state.gov/j/drl/rls/hrrpt) provides more information on worker rights, working conditions, and labor laws in the UAE.  The Department of State’s Trafficking in Persons Report (https://www.state.gov/j/tip/rls/tiprpt/2018/index.htm) details the UAE government’s efforts to combat human trafficking.

* Source for Host Country Data: Economic Report, Ministry of Economy

Table 3: Sources and Destination of FDI  

Data from the Federal Competitiveness and Statistics Center indicates that the real GDP for 2019 in constant prices (base year 2010) were approximately USD $404.6 billion, while the nominal GDP at current prices was about USD $421.1 billion in 2019.

The UAE Ministry of Economy’s Annual Economic Report 2019, cited UNCTAD statistics that net annual FDI inflows to the UAE in 2018 were $10.385 billion, compared to USD $10.354 billion in 2017.  The Emirates Centre for Strategic Studies and Research (ECSSR)  reported that according to the CBUAE statistics, the net annual FDI inflows to the UAE in 2019 were approximately USD $13.78 billion.  The largest investors in the UAE were:  India, United States, UK, Japan, China, Saudi Arabia, Germany, Kuwait, France, and the Netherlands.

Table 4: Sources of Portfolio Investment
Data not available.

Paul Prokop
Economic Officer
First Street, Umm Hurair -1
Dubai UAE
+971 (0)4 309 4918
prokoppg@state.gov