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.

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.

* 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.