Oman’s location at the crossroads of the Arabian Peninsula, East Africa, and South Asia and in proximity to larger regional markets is an attractive feature for potential foreign investors. Some of Oman’s most promising development projects and investment opportunities involve its ports and free zones, most notably in Duqm, where the government envisions a 2,000 square-kilometer free trade zone and logistics hub. With a “friends of all, enemies of none” foreign policy, Oman does not face the external security challenges of some of its neighbors. Oman’s domestic political situation remains stable, despite increasing economic pressure and the need to create employment for young Omanis.
Oman’s economy and government finances rely heavily on oil and gas revenue. High energy prices in 2022 are improving Oman’s economic prospects but will not immediately overcome the effects of years of relatively low energy prices, weak economic growth, budget deficits, and the impact of the COVID-19 pandemic. The government announced a medium-term fiscal plan in November 2020 to fix its heavily indebted finances by cutting down on spending and raising revenues, primarily through taxes. Some of the measures negatively affected capital flow, and in an economy dependent on state spending the suspension or cancellation of government projects during Oman’s economic contraction further hit the struggling private sector.
Government leadership recognizes these challenges and is working to improve Oman’s investment climate and to achieve its economic development goals under Oman’s Vision 2040 development plan. Omani Sultan Haitham bin Tarik al Said, who assumed the sultancy in January 2020, has prioritized foreign direct investment (FDI) attraction as an imperative to boost local job creation, particularly as COVID-19-related restrictions have loosened. Toward this end, Oman is in the process of developing further advantages for foreign investors, including a program of tax and fee incentives, permissions to invest in several new industries in the economy, expanded land use, increased access to capital, and labor and employment incentives for qualifying companies. In September 2021, Oman allowed expatriate residents with work visas to own residential units and offered long-term residency visas to attract investors. Five- and 10-year renewable residence visas are available to foreign investors in the tourism, real estate, education, health, information technology, and other key sectors. In March 2022, Oman announced that it would reduce the cost of foreign worker permit fees by up to 85 percent, reversing a hike in the fees it had implemented in June 2021 that some businesses had found problematic.
The success of Oman’s reform efforts will depend on its ability to open key sectors to private sector competition and foreign investment, minimize bureaucratic red tape, pay off its overdue bills, balance its desire for “Omanization” with the realities of training and restructuring its work force, and translate its promises of economic reform into increased FDI flows and job creation. The government also needs to undertake more fundamental reforms for investment such as making its tender system transparent, increasing access to credit, and speeding up approvals for new businesses.
Sultan Haitham and his government are actively courting FDI into many of its sectors. In February 2021, the Ministry of Finance signed three memoranda of understanding with the Saudi Fund for Development to finance several projects amounting to about $244 million. In January 2022, Oman also signed a Sovereign Investment Partnership with the United Kingdom, its largest FDI partner, to facilitate joint investments in both countries.
Sultan Haitham and his government are also seeking to make fuller use of the 2009 U.S.-Oman Free Trade Agreement (FTA), under which U.S. businesses and investors have the right to 100-percent ownership of their companies and can import their products to Oman duty-free. U.S. companies operating in Oman sometimes raise concerns over a lack of clarity and consistency on business license and visa renewal criteria, as well as an increase in associated costs.
The top complaints of businesses relate to requirements for hiring and retaining Omani national employees and a heavy-handed application of “Omanization” quotas. Payment delays to companies that completed work on government infrastructure projects are also a problem across various sectors. Smaller companies without in-country experience or a regional presence face considerable bureaucratic obstacles conducting business here. Beginning in 2020, the government also temporarily ceased the issuance of most new project awards and purchases to curb expenditures.
Companies created under Oman’s new Foreign Capital Investment Law (FCIL), promulgated in 2020, have come under the government’s radar and the Ministry of Commerce, Industry and Investment Promotion (MOCIIP) is re-evaluating investor visas that it issued in 2020. The FCIL removed minimum-share capital requirements and limits on the amount of foreign ownership in an Omani company.
1. Openness To, and Restrictions Upon, Foreign Investment
Oman actively seeks foreign direct investment and is in the process of improving the regulatory framework to encourage such investments. The Foreign Capital Investment Law (FCIL) allowed 100-percent foreign ownership in most sectors and removed the minimum capital requirement. The law effectively provided all foreign investors with an open market in Oman, privileges already extended to U.S. nationals due to the provisions in the 2009 U.S.-Oman Free Trade Agreement (FTA), although the FTA goes further in providing American companies with national treatment.
The Omani government’s “In-Country Value” (ICV) policy seeks to incentivize companies, both Omani and foreign, to procure local goods and services and provide training to Omani national employees. The government includes bidders’ demonstration of support for ICV as one factor in government tender awards. While the government initially applied ICV primarily to oil and gas contracts, the principle is now embedded in government tenders in all sectors, including transportation and tourism. New-to-market foreign companies, including U.S. firms, may find the bid requirements related to ICV prohibitive.
With the implementation of the FTA in 2009, U.S. firms may establish and fully own a business in Oman without a local partner. Although U.S. investors are provided national treatment in most sectors, Oman has an exception in the FTA for legal services, limiting U.S. ownership in a legal services firm to no more than 70 percent. Foreign lawyers may not represent cases in Omani courts at any level. The government also has a “negative list” that restricts foreign investment to safeguard national security interests. The list includes some services related to radio and television transmission as well as air and internal waterway transportation. MOCIIP further extended this list to include approximately 70 sectors when the FCIL came into effect.
Since late 2021, the government is employing stringent screening requirements for the issuance and renewals of investor visas, criteria which the government has not made public. U.S. investors raise concerns that these rules are neither consistent nor transparent, and result in a significant increase in renewals costs.
Oman bans non-Omani ownership of real estate and land in various governorates and in some restricted areas. Non-Omanis can buy property only in designated areas called “Integrated Tourism Complexes” and in certain Ministry of Housing-designated multi-story, commercial and residential real estate buildings in Muscat, subject to eligibilities. Oman permits the establishment of real estate investment funds (REIFs) to encourage new inflows of capital into Oman’s property sector. Foreign investors, as well as expatriates in Oman, may own property units in REIFs.
The World Trade Organization (WTO) conducted a Trade Policy Review of Oman in November 2021. The 2021 report is not yet publicly available. The previous WTO Trade Policy Review was in April 2014 (Link to 2014 report: https://www.wto.org/english/tratop_e/tpr_e/tp395_e.htm.)
The Ministry of Commerce, Industry, and Investment Promotion (MOCIIP) works to attract foreign investors and smooth the path for business formation and private-sector development. It works closely with government organizations and businesses in Oman and abroad to provide a range of business support. MOCIIP also offers a range of business investor advice geared to support foreign companies considering investment in Oman, based on company-specific needs and key target sectors that the country’s diversification program identifies. Oman’s “Invest in Oman” website (https://investinoman.om) provides information on Oman as a business location.
MOCIIP has an online business registration site, known as “Invest Easy” (business.gov.om), through which businesses can obtain a Commercial Registration certificate from MOCIIP. MOCIIP can normally complete most registrations in approximately three or four business days; however, some commercial registration and licensing decisions may require the approval of multiple ministries and could take longer. The “Invest Easy” portal integrates several government agencies into a single portal and serves as a single window for businesses in Oman.
The government neither promotes nor provides incentives for outward investment but does not restrict its citizens from investing abroad.
2. Bilateral Investment Agreements and Taxation Treaties
Although Oman does not have a bilateral investment treaty (BIT) with the United States, the FTA contains a chapter governing investment. Oman has 28 BITs, with the following countries:Algeria, Austria, Belarus, Bulgaria, China, Croatia, Egypt, Finland, France, Germany, Iran, Italy, Japan, Jordan, Republic of Korea, Lebanon, Morocco, Netherlands, Pakistan, Singapore, Sudan, Sweden, Switzerland, Tunisia, Turkey, United Kingdom, Uzbekistan, and Yemen. Oman does not have a bilateral taxation treaty with the United States, but it has signed double taxation treaties with 35 countries. More information can be found on Oman’s Tax Authority’s website: https://tms.taxoman.gov.om/portal/double-tax-agreements.
Oman is a member of the Organization for Economic Cooperation and Development’s (OECD) Inclusive Framework on Base Erosion and Profit Shifting. In October 2021, Oman agreed that certain multinational enterprises (MNEs) will be subject to a minimum 15% tax rate, effective from 2023.
4. Industrial Policies
Oman offers several incentives to attract foreign investors such as competitive lease rates for certain types of companies established in recognized industrial estates, free zones, and specific locations, but only on a case-by-case basis. Oman has no personal income tax or capital gains tax. However, some of Oman’s investment incentives, such as for reductions in utility rates, have diminished in recent years. Most industrial and commercial consumers now pay cost-reflective tariffs for utilities. Oman in recent years has also eliminated many tax exemptions for foreign investors. Oman taxes corporate earnings at 15 percent.
The Public Authority for Special Economic Zones and Free Zones (OPAZ) oversees the Special Economic Zone at Duqm, Almazuna Free Zone, Salalah Free Zone, Sohar Free Zone, and any other special zone or free zone in Oman to complement its port development projects in Duqm, Salalah, and Sohar. These areas include strategically located ports and are well connected with modern infrastructure and facilities. An incentive package for investors includes a tax holiday, duty-free treatment of all imports and exports, and tax-free repatriation of profits. Additional benefits include streamlined business registration, processing of labor and immigration permits, assistance with utility connections, and lower “Omanization” employment quota requirements. Foreign-owned firms have the same investment opportunities as Omani entities.
Oman’s labor market policy of Omanization includes minimum employment quotas for Omani nationals. These quota targets vary depending on the sector; they can be as low as 10 percent in the Special Economic Zone at Duqm (SEZAD) and as high as 90 percent in the banking sector. Most government ministries have achieved Omanization rates at or near 100 percent.
Omanization targets are prevalent throughout the private sector, but the government enforces them inconsistently. In practice, each company in Oman submits an Omanization plan to the Ministry of Labor (MoL), which has the authority to adjust required Omanization percentages. In response to the economic fallout from the COVID-19 pandemic, the MoL adopted stronger measures to force companies to increase their employment of Omanis and to retain their Omani employees.
Employers seeking to hire expatriate workers must seek a visa allotment from the MoL and Royal Oman Police (ROP). The MoL and ROP scrutinize visa allocations, often using opaque criteria. Foreign investors complain of the difficulty in hiring expatriates to the point that it deters companies from investing or expanding in Oman. The ROP allows expatriate workers to switch employers upon completion or termination of their employment contracts without the need to obtain a “no-objection” certificate (NOC) from their current employers.
The MoL imposes a six-month ban on visas for expatriates in 87 job categories across 10 private sector industries. The MoL has extended the dates for this ban several times and periodically adds job categories to the visa ban.
Oman has no requirements for companies to turn over source code or to provide access to surveillance. However, the Telecommunications Regulatory Authority (TRA) requires service providers to house servers in Oman if they are to provide services in Oman. The TRA is the lead agency on establishing data quotas in Oman.
5. Protection of Property Rights
Oman does not recognize or enforce securitized interests in property, both moveable and real. Mortgages and liens exist in the country. Foreign nationals are generally not able to own real estate in Oman, other than residential property in so-called “integrated tourism complexes” — zoned areas that permit foreign nationals to own property on a freehold basis. The Ministry of Housing and Urban Planning (MHUP) allows foreign nationals to purchase units in multi-storied commercial and residential buildings under the usufruct system, with limitations. Individuals record their interest in property with the Land Registry at the MHUP. The legal system, in general, facilitates the acquisition and disposition of property rights.
Certain lands are reserved for tribal use and ownership, but no clear definitions or regulations governing these lands prevail. These tribes legally own the land, as opposed to the government owning the land, and they therefore control access and any commercial activities on it.
According to the World Bank, it takes 18 days on average to register property in Oman, and the cost of the registration process as a percentage of the property value (six percent) is on par with elsewhere the region. In 2019, the World Bank ranked Oman 57th in the world for registering property.
Oman has a relatively robust legal and regulatory framework for intellectual property rights (IPR) protection. Oman is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.
U.S. stakeholders have reported difficulty encouraging appropriate agencies, including the Consumer Protection Authority (CPA), the Public Prosecution, Ministry of Commerce, Industry and Investment Promotion (MOCIIP), and the Royal Oman Police, to take IPR enforcement action. Confusion sometimes exists over which government agencies are responsible for investigating different types of IPR violations.
CPA officials have told U.S. officials that they do not accept responsibility for complaints arising from brand-owners; rather, they only act on consumer complaints. Ministry of Justice and Legal Affairs officials have also confirmed that the Law of Copyrights and Neighboring Rights (Royal Decree No. 65/2008) stipulates that the MOCIIP shall be responsible for IPR enforcement at the retail level, including for inspections and seizures.
Under its obligations as a signatory to the 2009 U.S.-Oman FTA (FTA), Oman offers IPR protection for copyrights, trademarks, trade secrets, geographical indications, and patents. FTA-related revisions to IPR protection in Oman are strengthened by Oman’s passage of World Trade Organization-consistent intellectual property laws on copyrights, trademarks, industrial secrets, geographical indications, and integrated circuits. The FTA’s chapter on IPR can be found at: https://om.usembassy.gov/business/u-s-oman-free-trade-agreement/texts-free-trade-agreement/.
Oman is a member of the World Intellectual Property Organization (WIPO) and is registered as a signatory to the Madrid, Paris, and Bern conventions on trademarks and intellectual property protection. Oman has signed the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Oman is a signatory to the International Convention for the Protection of New Varieties of Plants.
Trademark laws in Oman are compliant with Trade Related Aspects of Intellectual Property Rights (TRIPs). MOCIIP registers trademarks and notes them in the Official Gazette. Local law firms can assist companies with the registration of trademarks. Oman’s copyright protection law extends protection to foreign copyrighted literary, technical, or scientific works; works of the graphic and plastic arts; and sound and video recordings. In order to receive protection for a foreign-copyrighted work, the rights holder must register the work with the Omani government by depositing a copy of it with the government and paying a fee. Trademarks are valid for 10 years while patents are generally protected for 20 years. Literary works, software and audiovisual content receive protection for 50 years.
United States Trade Representative
IPR Director for the GCC
Tel: +1 (202) 395-9564
U.S. Department of Commerce – International Trade Administration
International Trade Specialist
6. Financial Sector
Oman has no restrictions on the flow of capital and the repatriation of profits. Foreigners may invest in the Muscat Stock Exchange so long as they do so through an authorized broker. Access to Oman’s limited commercial credit and project financing resources is open to Omani firms with foreign participation. As of 2022, the market does not have sufficient liquidity to allow for the entry and exit of sizeable amounts of capital. According to the 2020 annual report on exchange arrangements and exchange restrictions of the International Monetary Fund, Article VIII practices are reflected in Oman’s exchange system.
The Commercial Companies Law requires the listing of joint stock companies with capital in excess of $5.2 million. The law also requires companies to exist for two years before their owners can float them for public trading. Publicly traded firms in Oman are still a relatively rare phenomenon; most businesses are private family enterprises.
The banking system is sound and well capitalized with low levels of non-performing loans and generally high profits. Oman’s banking sector consists of 16 licensed local and foreign commercial banks, two specialized banks and eight Islamic commercial banks. Bank Muscat, the largest domestic bank operating in Oman, has $32.7 billion in assets. The Central Bank of Oman (CBO) is responsible for maintaining the internal and external value of the national currency. It is also the single integrated regulator of Oman’s financial services industry. The CBO issues regulations and guidance to all banks operating within Oman’s borders. Foreign businesspeople must have a residence visa or an Omani commercial registration to open a local bank account. Oman imposes no restrictions for foreign banks to establish operations in the country so long as they comply with CBO instructions.
The Oman Investment Authority (OIA) is Oman’s principal Sovereign Wealth Fund. OIA is a full member of the International Forum of Sovereign Wealth Funds and follows the Santiago Principles. Omani law does not require sovereign wealth funds to publish an annual report or submit their books for an independent audit.
The OIA focuses on two main investment categories: tradable public markets assets that include global equity, fixed income bonds and short-term assets; and non-tradable private markets assets, which include private investments in real estate, logistics, services, commercial, and industrial projects.
7. State-Owned Enterprises
State-owned enterprises (SOEs) are active in many sectors in Oman, including oil and gas extraction, oil and gas services, oil refining, liquefied natural gas processing and export, manufacturing, telecommunications, aviation, infrastructure development, and finance. The government does not have a standard definition of an SOE but tends to limit its working definition to companies wholly owned by the government and more frequently refers to companies with partial government ownership as joint ventures. Almost all SOEs in Oman fall under the Oman Investment Authority (OIA). The government does not publish a complete list of companies in which it owns a stake.
In theory, the government permits private enterprises to compete with public enterprises under the same terms and conditions with access to markets, and other business operations, such as licenses and supplies, except in sectors deemed sensitive by the Omani government such as mining and telecommunications. SOEs purchase raw materials, goods, and services from private domestic and foreign enterprises. Public enterprises, however, have comparatively better access to credit. Board membership of SOEs is traditionally composed of various government officials, with a cabinet-level senior official usually serving as chairperson. Especially since the government reorganization began in August 2020, the government is making efforts to include private-sector officials on SOE boards.
OIA has made efforts to enhance the efficiency and governance of SOEs, including by publishing audited financial statements, assessing each entity’s business strategy and public policy considerations, and mitigating financial exposures. OIA is developing a code of governance for SOEs. It restructured several companies under its supervision and formed new boards of directors drawing from both the public and private sectors. SOEs receive operating budgets, but, like budgets for ministries and other government entities, the budgets are flexible and not subject to hard constraints. The information that the Omani government published about its 2022 budget did not include allocations to and earnings from most SOEs.
The Omani government has indicated that it hopes to reduce its budget deficits by privatizing or partially privatizing some state-owned enterprises. Although the plan for privatization is not publicly available, the Omani government has already reorganized some of its holdings for public offerings. In March 2020, for example, State Grid Corporation of China acquired a 49-percent stake in the Oman Electricity Transmission Company from Nama Holding, a government-owned holding company for five electricity transmission and distribution companies. The government’s divestment of a portion of its ownership in telecommunications firm Omantel is also an example of a partial privatization. In this case, the government in 2014 offered 19 percent of Omantel’s ownership as stock on the Muscat Stock Exchange, but only to Omani investors. The government today owns a 51-percent share of Omantel, according to the company’s website.
The government allows foreign investors to participate fully in some privatization programs, including in drafting public-private partnership frameworks. In December 2021, the Ministry of Finance, which has the mandate to procure projects and services via the Public–Private Partnership (PPP) route, initiated the bidding process for its first PPP infrastructure project under the Law of Partnership between Public and Private Sectors (the PPP Law).
8. Responsible Business Conduct
Corporate social responsibility (CSR) is becoming increasingly prevalent among local and foreign companies operating in Oman, and several companies have dedicated CSR departments and programs. While CSR programs may differ, they invariably seek to engender goodwill in the communities they serve and to provide a social benefit. Examples include competitions in elementary and secondary schools for academic performance and artistic skill; sponsorship of charitable, academic, and social events; training programs; entrepreneurship incubators; and the organization of women’s or tribal empowerment events.
The press covers consumer rights violations, mostly the sale of expired food or counterfeit medicine or car parts. A general culture of accountability is prevalent, as is a sense that companies who violate CSR tenets will suffer in business and market share.
No independent consumer organizations that promote CSR exist. However, many business associations, including the Oman American Business Center (the local U.S. Chamber of Commerce affiliate), pursue CSR initiatives as a part of their annual activities. Companies generally follow CSR guidelines set forth by the Organization for Economic Cooperation and Development. Oman’s Council of Ministers directs state-owned companies to allocate a portion of their CSR budgets to support training programs and the employment of Omani citizens. Additionally, each government ministry has a department dedicated to facilitating CSR compliance and initiatives. The government has not waived regulations promoting CSR to attract foreign investment. In December 2021, MOCIIP issued a mandate instructing private companies to allocate 20 percent of their CSR budgets to the state-funded charitable organization, the Oman Charitable Association.
Oman does not have a “net zero” greenhouse gas emissions goal. Oman in 2019 adopted a National Strategy for Adaptation and Mitigation to Climate Change: 2020-2040. Oman has also included environmental indicators, such as the Environmental Performance Index, in its Vision 2040. Oman joined the UN Convention on Biological Diversity in 1994 and maintains and regularly updates a National Biodiversity Strategy and Action Plan.
In July 2021, Oman submitted its second nationally determined contribution to the Paris Agreement on climate change (NDC). In the NDC, Oman targets a seven-percent reduction of greenhouse gas emissions below projected levels by 2030. Oman’s second NDC does not explicitly reference private sector contributions, although some actions, such as reducing gas flaring and increasing renewable energy generation capacity, will fall on state-owned and private enterprise.
Oman’s public procurement policies do not factor in any environmental considerations. Investment projects with the potential to cause pollution must conduct an environmental impact assessment and obtain a permit from the Environment Authority. Oman has several laws regulating pollution, including Ministerial Decree 41/2017 for air quality and Royal Decree 34/74 on marine pollution.
U.S. businesses do not generally identify corruption as one of the top concerns of operating in Oman.
The Sultanate has the following legislation in place to address corruption in the public and private sectors:
1) The Law for the Protection of Public Funds and Avoidance of Conflicts of Interest (the “Anti-Corruption Law” promulgated by Royal Decree 112/2011). The law predominantly concerns employees working within the public sector. It is also applicable to private-sector companies if the government holds at least a 40-percent share in the company, or in situations where a private-sector company engages in punishable offenses with government bodies or officials.
2) Minimum sentencing guidelines for public officials guilty of embezzlement are three years, per the Omani Penal Code. The definition of “public officials” includes officers of parastatal corporations in which the Omani government has at least a 40-percent controlling interest. The new penal code may make Oman seem more investment friendly, by virtue of modern references to corporations as legal entities, as an example. However, its language on money laundering remains ambiguous and descriptions of licit and illicit banking are unclear, potentially contributing to confusion about investment regulations.
A lack of domestic whistleblower-protection legislation in Oman has resulted in the private sector taking the lead in enacting internal anti-bribery and whistleblowing programs. Omani and international companies doing business in Oman that plan to implement anti-corruption measures will likely find it difficult to do so without also putting in place an effective whistleblower-protection program and a culture of zero tolerance.
Ministers are not allowed to hold offices in public shareholding companies or serve as the chairperson of a closely held company. However, many influential figures in government maintain private business interests and some are also involved in public-private partnerships. These activities either create or have the potential to create conflicts of interest. Oman’s Tender Law precludes Tender Board officials from adjudicating projects involving interested relatives to “the second degree of kinship.”
Oman has stiff laws, regulations, and enforcement against corruption, and authorities have pursued several high-profile cases. The Courts have signaled that they will not tolerate corruption. In its annual report released in February 2021, the State Audit Institution (SAI) reported that, pursuant to its annual audit of government departments, Oman’s Public Prosecution sentenced several government employees to imprisonment, fines, dismissal from jobs and permanent bans on holding further public jobs due to charges of bribery. SAI reported 2,767 cases of administrative and financial irregularities in 2020, a 51-percent increase over 2019.
Oman joined the United Nations Convention Against Corruption (the “UNCAC”) in 2013. Oman is not a party to the OECD Convention on Combating Bribery.
Oman has no “watchdog” organizations that monitor corruption.
10. Political and Security Environment
Oman is stable, and politically motivated violence is rare. Oman’s first head of state transition since 1970 occurred on January 11, 2020, with the peaceful rise to power of Sultan Haitham bin Tarik, in accordance with Oman’s Basic Law of the State. Omani law provides for limited freedom of assembly, and the government allows some peaceful demonstrations to occur. Oman experienced Arab Spring-related demonstrations in 2011. These were far smaller than in other Arab countries, although demonstrations in the northwestern Omani city of Sohar resulted in casualties, property destruction, and the blocking of pedestrian and vehicle access to the city’s port. In recent years, high youth unemployment has been among the Omani government’s most significant concerns, and the government prioritizes providing employment opportunities for Omani nationals. On regional security, Oman is committed to securing its border with Yemen, ensuring that Yemen’s instability does not affect Oman, countering illicit trade and terrorist travel, and supporting freedom of navigation through its strategic territorial waters in the Strait of Hormuz.
11. Labor Policies and Practices
Oman’s labor market is a significant factor for foreign business and investors to consider. Sultan Haitham made clear in his first royal decrees and nationally televised speeches that addressing unemployment among Omani nationals would be a top priority.
Unemployment figures in Oman vary, but the most severely impacted demographic is young men and women. No statistics about employment in the informal economy are available, but this sector is primarily limited to agriculture and fishing in rural areas.
Omani national private sector employees often work in administrative or managerial roles carved out for them through Omanization. Most drivers and secretaries are required to be Omanis across all sectors. In general, a surplus of workers exists in desirable fields, such as information technology and engineering. A shortage of workers prevails in labor-intensive sectors, particularly construction, due to Omanization laws curbing the number of foreign workers who can be brought in to fill these roles. Foreign workers play a significant role in the Omani economy. Indians and Bangladeshis alone constitute approximately half of the workforce.
Omani citizens enjoy a high degree of protection, making labor dispute resolution very difficult and lengthy. Both the Ministry of Labor (MoL) and the courts have broad powers to reinstate Omani national employees or mandate a severance package that provides pay for several months or, in some cases, several years. Foreign workers may also appeal termination to the MoL but they have less legal protection than Omani nationals.
While unions are allowed to operate in the private sector, they are not very influential and do not engage in collective bargaining. Most unions only exist to ensure that employers provide government-mandated benefits to employees, such as required annual raises. Workers generally direct appeals for wage increases to the government. During the Arab Spring protests in 2011, the government passed a law increasing worker benefits.
In May 2021, unemployed young Omanis protested in front of MoL offices in numerous cities, though not in Muscat, over job layoffs and unemployment. The largest was in the port city of Sohar, where Omani security forces dispersed protesters with tear gas and arrests. The demonstrations were the first significant protests under Sultan Haitham. Several small-scale protests over the lack of jobs, inadequate unemployment benefits, and recruitment policies have occurred outside MoL headquarters in Muscat and Salalah in past years. The Omani government takes public concern about unemployment very seriously.
Oman is a member of the International Labor Organization (ILO). Oman has ratified four of the eight core ILO standards, including those on forced labor, abolition of forced labor, minimum working age, and the worst forms of child labor. Oman has not ratified conventions related to freedom of association, collective bargaining, equal remuneration, or the conventions related to the elimination of discrimination with respect to employment and occupation.
The issue of forced labor remains a problem in Oman, but the government continues to demonstrate increasing efforts to combat trafficking in persons. Expatriate workers can switch employers upon completion or termination of their employment contracts without the need to obtain a “no-objection” certificate (NOC) from their current employers. Government guidelines in place since 2020 bolster Omani nationals’ employment and authorize the termination of expatriate laborers in response to the economic slowdown. Oman’s new labor law, initially expected to be issued in April 2021, is delayed. Government officials have not shared publicly the contents of any proposed draft.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
According to the Oman’s National Centre for Statistics and Information (NCSI) — the only host-country source of foreign direct investment (FDI) data — total FDI in the Sultanate through the third quarter of 2021 was RO 16.43 billion, representing a 5.6-percent increase over the same period in 2020. FDI inflow at the end of the third quarter of 2020 stood at RO 0.88 billion ($2.29 billion). The United Kingdom remains by far the biggest investor in FDI (RO 8.3 billion – $21.6 billion), followed by the United States (RO 2 billion – $5.2 billion), UAE (1.2 billion – $3 billion), Kuwait (RO 914 million – $2.4 billion), and China (RO 773.4 million – $2 billion).
Major foreign investors that have entered the Omani market that include SV Pittie Textiles (India), Moon Iron & Steel Company (India), Sebacic Oman (India), BP (UK), Sembcorp (Singapore), Daewoo (Korea), LG (Korea), Veolia (France), Huawei (China), SinoHydro (China), DEME (Belgium), ACME Group (India), Equinix (United States), Oracle (United States), and Vale (Brazil).
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)
* Source for Host Country Data: National Centre for Statistics and Information (NCSI).
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment*
Outward Direct Investment**
“0” reflects amounts rounded to +/- USD 500,000.
*Source for Host Country Data: National Centre for Statistical Analysis, 2021 Q3 (Inward). **2017 Q4 (Outward). Data on Oman from the IMF’s Coordinated Direct Investment Survey is not available.
14. Contact for More Information
Economic & Commercial Officer
U.S. Embassy, P.O. Box 202, Postal Code 115, MSQ, Muscat, Sultanate of Oman +968-2464-3623, email@example.com
The State of Qatar is one of the world’s largest exporters of liquefied natural gas (LNG) and has one of the highest per capita incomes in the world. Despite a decrease in the gross domestic product (GDP) in 2020, which stemmed from depressed hydrocarbon sales and the COVID-19-induced economic slowdown, Qatar’s real GDP recovered by the second quarter of 2021 and is expected to grow by four percent in 2022, according to the International Monetary Fund’s (IMF) projections. This positive outlook is driven mainly by Qatar Energy’s ambitious plans to expand LNG production by more than 60 percent over the next five years. To maintain high-level government spending on projects in preparation for the 2022 FIFA World Cup, Qatar projects a modest $2.2 billion budget deficit in 2022, based on an oil price assumption of $55 per barrel.
The government remains the dominant actor in the economy, though it encourages private investment in many sectors and continues to take steps to encourage more foreign direct investment (FDI). The dominant driver of Qatar’s economy is the energy sector, which has attracted tens of billions of dollars in FDI. In line with the country’s National Vision 2030’sgoal of establishing a knowledge-based and diversified economy, the government of Qatar has recently introduced reforms to its foreign investment and foreign property ownership laws. These recent legislations allow up to 100 percent foreign ownership of businesses in most sectors and real estate in newly designated areas. In 2020, the government also enacted legislation to regulate and promote public-private partnerships.
There are significant opportunities for foreign investment in infrastructure, healthcare, education, tourism, energy, information and communications technology, and services. The government allocated $20 billion for major projects in these sectors in 2022. Measured by the amount of inward FDI stock, manufacturing, mining and quarrying, finance, and insurance are the primary sectors that attract foreign investors. The government provides various incentives to attract local and foreign investments, including exemptions from customs duties and certain land-use benefits. The corporate tax rate is 10 percent for most sectors, and there is no personal income tax. One notable exception is the corporate tax of 35 percent on foreign firms in the extractive industries, including but not limited to those in natural gas extraction.
Although the government of Qatar took recent measures to prosecute human rights violations, including improving its human trafficking legislation, addressing forced labor, and setting minimum wages, the country continues to face significant challenges that may affect foreign businesses. These include but are not limited to restrictions on free expression and peaceful assembly, restrictions on labor unions, discrimination against women in law and practice, and reports of forced labor.
To curb corruption and anti-competitive practices, the government created a regulatory regime consisting of various enabled government agencies, including the Transparency Authority, the National Competition Protection Authority, and the Anti-Monopoly Committee. To improve transparency, the government streamlined its procurement processes in 2016, creating an online portal for all government tenders. Nonetheless, personal connections reportedly play a significant role in business deals.
In recent years, Qatar has significantly bolstered its U.S. investments through its sovereign wealth fund, the Qatar Investment Authority (QIA), and its subsidiaries, notably Qatari Diar. In 2019, QIA pledged to allocate $45 billion to U.S. investments, after it opened an office in New York City in 2015 to facilitate its U.S. investments. The November 2021 fourth annual U.S.-Qatar Strategic Dialogue further strengthened strategic and economic partnerships and addressed obstacles to investment and trade. The fifth round of strategic talks is expected to take place in Doha in 2022.
1. Openness To, and Restrictions Upon, Foreign Investment
Over the past few years, the government of Qatar enacted reforms to incentivize and attract foreign direct investment (FDI). Recent FDI-friendly legislations include Law 1/2019 permitting full foreign ownership in most economic sectors, Law 16/2018 regulating foreign real estate investment and ownership, and Law 12/2020 regulating public-private partnerships. Implementing regulations for some of these laws is still pending. In 2019, the Ministry of Commerce and Industry set up the Investment Promotion Agency-Qatar to further attract inward FDI. Other FDI facilitating bodies include 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’s economic spending plans are also expected to create additional opportunities for foreign investors. For 2022, the government has allocated $20 billion for new non-oil sector projects, including new residential land development and the improvement of public services. The government also plans to increase LNG production, its primary source of revenue, to 126 million metric tons by 2027, and Qatari officials expect significant investment opportunities for international companies in the upstream and downstream sectors.
The government extends preferential treatment to suppliers who use local content in their bids on government contracts. Participation in tenders with a value of five million Qatari riyals ($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, in theory, do not require any local commercial registration; in practice, certain exceptions exist.
Qatar maintains an 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 American investments in Qatar and Qatari investments in the United States.
Although 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 in Qatar – either by partnering 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 – not all sectors are open to foreign investment. Law 1/2019 limits foreign ownership to 49 percent in the sectors of banking, insurance, and commercial agencies, barring a special dispensation from the Cabinet. Some sectors, such as telecommunications, are monopolized by local state-owned enterprises and are closed off to domestic or foreign competition.
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 but limits ownership to nine designated zones and usufructuary rights up to 99 years in 16 other zones. Foreigners may also own villas within selected residential complexes and retail outlets in specific 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.
The Invest in Qatar Center within the Ministry of Commerce and Industry is the entity responsible for vetting full foreign ownership applications. 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.
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 physical one-stop-shop or online through the Invest in Qatar Center’s portal. Per Law 1/2019, upon submitting a complete application, the Ministry will issue its decision within 15 days. Rejected applications can be resubmitted or appealed. Upon approval, registering a small-size limited liability company in Qatar is estimated to take eight to nine days. For more information on the application and required documentation, visit: https://invest.gov.qa
Domestic and foreign companies may also opt to register in one of Qatar’s economic zones:
Qatar does not restrict domestic investors from investing abroad. According to the World Bank, Qatar’s outward foreign investment stock reached $2.7 billion in 2020. Sectors that accounted for most of Qatar’s outward FDI are finance and insurance, transportation, storage, information and communication, and mining and quarrying. Per the latest statistics, Qatari investment firms held investments in over 80 countries, the top destinations being the European Union, the Gulf Cooperation Council, and other Arab countries.
3. Legal Regime
Qatar has taken measures to protect competition and ensure a free and efficient economy. The World Trade Organization recognizes Qatar’s legal framework to be conducive to private investment and entrepreneurship and enabling the development of an independent judiciary system. 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.
According to the World Bank’s Global Indicators of Regulatory Governance, Qatar lacks a transparent rulemaking mechanism. 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. Relevant ministries develop Laws and regulations. The 45-member Shura Council (30 of which are publicly elected officials) must reach a consensus to pass draft legislation, which is then returned to the Cabinet for further review and to the Amir for final approval. 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 before annual general meetings in two local newspapers (in Arabic and English) and on their websites. All companies must prepare accounting records according to standards promulgated by the IAS Board.
Since joining the United Nations’ initiative on sustainable development (SSEI) in 2016, the Qatar Stock Exchange (QSE) has encouraged, but not required, publicly traded companies to report on environmental, social, and governance issues (ESG). In November 2021, the QSE launched an ESG Index listing the top 20 securities with the best ESG profile, indicating that ESG disclosures may soon become a requirement of all listed companies.
The Qatar Central Bank (QCB) is the primary financial regulator that oversees all financial institutions in Qatar, per Law 13/2012, which established a Financial Stability and Risk Control Committee to promote financial stability and enhance regulatory coordination, 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. Still, the QCB also oversees financial markets housed within QFC. QFC regulations are available at http://www.qfcra.com/en-us/legislation/.
Qatar is a member of the Gulf Cooperation Council (GCC) – a political and economic regional bloc. 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 before 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).
Qatar’s legal system is based on civil and Islamic Sharia laws. The Constitution takes precedence over all laws, followed by legislation, decrees, and ministerial resolutions. The Supreme Judicial Council appoints all judges under Law 10/2003, oversees Qatari courts, and functions independently from the executive branch of the government, per the Constitution. Qatari courts adjudicate civil and commercial disputes per 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 party are respected. Contract enforcement is governed by the Civil Code Law 22/2004.
Law 21/2021 promogulated the establishment of an Investment and Commerce Court to oversee all commercial lawsuits and disputes. Pending the establishment of the new court, domestic and commercial disputes continue to be settled in civil courts. Decisions made in civil courts and the new Investment and Commerce Court can be appealed before the Court of Appeals or later the Court of Cassation. Law 20/2021 on Mediation in the Settlement of Civil and Commercial Disputes is applied when parties agree to mediate and settle commercial disputes.
Companies registered with the Ministry of Commerce and Industry are subject to Qatari courts and laws, primarily the Commercial Companies Law 11/2015. Meanwhile, 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. The QFC legal regime is separate from the Qatari legal system—except for 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.
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 aim to encourage greater foreign investment in the economy by authorizing, incentivizing, and protecting foreign ownership. The MOCI’s Invest in Qatar Center is Qatar’s main investment registration body. It gives preference to investments that add value to the local economy and align with the country’s national development plans. It has a physical “one-stop-shop” and an online portal. For more information on investment opportunities, commercial registration application, and required documentation, visit https://invest.gov.qa.
Specific sectors are not open for domestic or foreign competition, such as public transportation and fuel distribution and marketing. In such 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 to receive complaints about anti-competition violations. The law protects against monopolistic behavior by entities outside the state if deemed to impact the Qatari market. The law also allows state institutions and government-owned companies absolute or predominant roles in some sectors.
Qatari laws permit 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 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.
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. Law 13/1988 covers the rules of expropriation for public benefit. The same procedures are applied to the expropriated property of Qatari citizens. Expropriation is unlikely to occur in the investment zones where foreigners may purchase or obtain rights to property. However, the law does not restrict the expropriation power in these areas. There were two Cabinet-approved expropriation decisions in 2021 and one decision in 2020.
Two concurrent bankruptcy regimes exist in Qatar. The first is the local regime, set out in Commercial Law 27/2006 (Articles 606-846). The bankruptcy of a Qatari citizen or a Qatari-owned company is rarely announced. The law aims to protect creditors from a bankrupted debtor whose assets are insufficient to meet the amount of the debts. The government sometimes plays the role of the guarantor to prop up domestic businesses and safeguard creditors’ rights. 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 second bankruptcy regime is encoded in QFC’s Insolvency Regulations of 2005 and applies to corporate bodies and branches registered within the QFC. Some firms offer full dissolution bankruptcy services to QFC-registered companies.
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.
4. Industrial Policies
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 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 imports of half-manufactured goods necessary for production and not available in the local market.
Up to 100 percent foreign ownership and no limit on repatriation.
The 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 up to 20 years.
Zero custom duties on imports.
Potential access to a $3 billion government-backed fund.
One hundred percent foreign ownership and no limit on repatriation.
Opportunities for joint ventures with local companies.
Possible access to a backed investment fund.
Qatar Energy determines the amount of foreign equity and the extent of incentives for industrial energy-related projects; Law 8/2018 regulates the process.
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 an independent regulatory regime based on English common law. The QFC Regulatory Authority acts as the regulator for financial firms operating under 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 expertise and technology transfer. The hub offers grants and incubators to foreign and local innovators. QSTP permits licensed foreign companies to own up to 100 percent and fully repatriate capital and income. Companies operating at the QSTP can import goods and services duty-free and export goods produced at the park tax-free. Firms operating at the park are also exempt from all taxes, including the 10 percent corporate 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, Cypher Learning, and ConocoPhillips are 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.
Law 12/2020 on Organizing the Partnership between the Public and Private Sector represents the government’s most recent attempt to attract foreign investors and develop the private sector.
There are no laws that obligate the private sector to hire Qatari nationals. Still, 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 central focus of the country’s National Vision 2030, and foreign investors wishing to operate wholly owned companies will be required to submit a Qatarization plan. In 2020, the Cabinet approved a new ministerial decree to mandate that Qataris make up at least 60 percent of the workforce of state-owned companies or companies where the government is a majority investor, and 80 percent of the human resources workforce. Children of Qatari women are considered Qataris for purposes of calculating this localization ratio. The government allocates visa slots for hiring nationals of specific countries based on preset quotas; such slots are non-transferable without obtaining approval from the Ministry of Labor.
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 Energy, announced a localization initiative, Tawteen, which requires all suppliers and bidders to undergo an assessment by a third-party auditor to determine their In-Country Value (ICV) score. Qatar Energy and its subsidiary companies would assess bidders’ ICV scores 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/ICV-Overview-(1).
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. Cross-border data transmission is allowed in compliance with the law. Qatar’s Communications Regulatory Authority – established as an independent body by Amiri Decree 42/2014 – regulates the information and communications technology (ICT) sector. Qatar was the first Gulf nation to enact a Data Protection Law 13/2016, which requires companies to comply with restrictions related to collecting, disclosing, and safekeeping of personal data. The regulator responsible for enforcing the Data Protection Law is the Ministry of Communications and Information Technology.
5. Protection of Property Rights
A set of laws, ministerial decrees, and resolutions make up the country’s jurisprudence on property rights and ownership. Law 16/2018 designates nine zones where foreign investors, companies, and real estate developers are permitted full property ownership. The law also allows foreign investors the usufructuary right of up to 99 years in 16 other zones. Additionally, foreigners may own villas within residential complexes and retail outlets in specific commercial complexes. The government grants non-Qatari real estate owners residency for as long as they own their properties. Meanwhile, Law 6/2014 regulates real estate development and stipulates that non-Qatari companies should have at least ten years of experience and be headquartered in Qatar to carry out real estate development activities at selected locations.
The Government of Qatar enforces property leasehold rights. Qatar’s Rent Law 4/2008 extends more protections to the lessee while regulating lessors. The government grants several enforceable rights to the lessee, including protection from rent hikes during the lease period and enforcement of the lease contract terms 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 to register their lease agreements with this committee.
The Ministry of Municipality 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, and keep all titles and deed records in digital format.
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’s IP legislation consists of 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 Designs and Models law (2020). Qatar has signed many international IP treaties, and Qatari laws and regulations guarantee the implementation of those treaties. These laws grant foreign applicants the same rights as Qataris, provided they are nationals of a state that gives Qatar reciprocal treatment.
Intellectual property owners can apply for IP rights at the Ministry of Commerce and Industry (MOCI), which is mandated, by Law 20/2014, to enforce IP laws and regulations. An IP Protection Department has been set up with offices focusing on trademarks, copyrights, patents, industrial designs, and innovations within the ministry. The following are the periods of validity for the different types of registered IP:
Patents: Valid for 20 years from the date of filing.
The Ministry of Public Health requires the registration of all imported pharmaceutical products and rejects registration requests for unauthorized copies of products patented in other countries. Qatar also recognizes pre-existing 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 the UAE). Effective January 2021, the office stopped accepting new patent filings. The decision now forces companies seeking patent registration in the GCC region to file separate applications in each country, pay six separate fees, and endure a 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 the 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. It abides by their mandates regarding unpublished works. The IP Protection Department works with law enforcement authorities to prosecute unlicensed video and software resellers.
Trademarks: Valid for ten years but can be renewed indefinitely; trademarks unused for five consecutive years are subject to cancellation.
The GCC Customs Union approved a common trademark law; Qatar is taking steps to enact it.
Industrial Designs: Valid forfive years from submission date but can be renewed two additional times.
This law covers the visual design rather than an original product’s functional or technical aspects. Law 10/2020 on the Protection of Industrial Designs 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. Given sufficient evidence, the law also permits IP rights holders to block the release of imported products that infringe on their rights. 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 the importation of counterfeit goods.
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. Qatar is not listed in USTR’s Special 301 Report. The existing Penal Code imposes hefty fines on individuals dealing in counterfeit products. It prescribes prison terms for offenders convicted of counterfeiting, imitating, fraudulently affixing, selling products, offering services of a registered trademark, or other IP violations. The General Authority of Customs, the MOCI Consumer Protection and IP Protection Departments, and the Ministry of Interior conduct surveys, search shops, and seize and destroy counterfeit products.
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/.
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/legal-assistance/
United States Trade Representative
IPR Director for the GCC
6. Financial Sector
The Government of Qatar has permitted foreign portfolio investment since 2005. There are no restrictions on the flow of capital in Qatar. The Qatar Central Bank (QCB) adheres to conservative policies to maintain 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 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. In April 2021, the Cabinet approved a draft law (still pending implementation) that will allow full foreign ownership of the capital of listed companies. Foreign portfolio investment in national oil and gas companies or companies with the right to explore 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 standard international banking practices. Creditors typically require foreign investors to produce a letter of guarantee from their local sponsor or equity partner.
Under QCB guidelines, banks operating in Qatar give priority to Qataris and 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.
The Qatar Stock Exchange (QSE) was found in 1997, is a member of the World Federation of Exchanges, and was recently upgraded by MSCI and the S&P Dow Jones Indices. QSE has 43 listed companies and aims to include many other local SMEs in the mid-term. QSE has been appointed by the Qatar Central Bank as the main entity tasked with promoting Environment, Social and Governance (ESG) reporting among listed companies.
Qatar has a comprehensive banking sector that offers conventional and Shariah-compliant products and services. The country’s banking sector is composed of 16 banks, 9 of which are Qatari banks, and the remaining 7 are foreign financial institutions. The industry is dominated by government-owned Qatar National Bank (QNB) which enjoys around 50% of domestic market share in total assets, loans, and deposits with smaller lenders competing for the remaining opportunities. Qatar also has a state-run Development Bank created to support local SMEs. Qatari banks are well capitalized with a low non-performing loans ratio that stood at 2.3% in 2020 and is expected to remain low in 2021. The GOQ has always supported its banking sector where necessary (recent examples include during the GCC rift in 2017 and COVID-19 pandemic in 2020) and is expected to continue to do so, given the country’s substantial resources. To open a bank account in Qatar, foreigners must present proof of residency and have a minimum salary of QAR 5000 ($1300).
The Qatar Central Bank (QCB) is the primary regulator of the financial sector in the country and governs both conventional and Shariah-compliant institutions. 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 $170.1 billion in November 2021, and only two percent of Qatar’s bank loans in 2020 were nonperforming.
The Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, was established in 2005 and is chaired by the Amir. The fund does not publicly disclose the size of its investments, but they are estimated to amount to $450 billion, according to the Sovereign Wealth Fund Institute (SWFI). QIA pursued at first direct investments in luxury brands, prime real estate, and banks abroad. The fund is now looking for opportunities in healthcare, technology industry, and infrastructure investments. In 2015, QIA opened an office in New York City and is now on track to complete a $45 billion commitment of investments in the United States, in addition to a $10 billion that will be invested in infrastructure projects.
QIA’s real estate subsidiary, Qatari Diar, has operated an office in Washington, D.C., since 2014. QIA announced in May 2020 that it planned to increase its exposure in Asia and Africa, away from Europe, where the fund had invested heavily over the past decade. QIA has domestic investments including in Qatar National Bank (50%), the country’s largest lender by assets, Qatar Islamic Bank (16%) and flag carrier Qatar Airways (100%). The fund has also subsidiaries that invest locally in sports, hospitality and real estate development.
QIA was one of the early supporters of the Santiago Principles and among the few members who drafted the principles’ initial and final versions. It continues to be a proactive supporter of its implementation. QIA supported the establishment of the International Forum of Sovereign Wealth Funds and helped create the Forum’s constitution. QIA was also a founding member of the IMF-hosted International Working Group of Sovereign Wealth Funds.
7. State-Owned Enterprises
The State Audit Bureau oversees state-owned enterprises (SOEs), several operating as monopolies or holding 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. It 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 Energy, its subsidiaries, and its partners operate all oil and gas activities in the country. The government wholly owns QE. 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 sole 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, based in 2001, and 55 percent owned by a U.S. company.
Qatar Airways is the country’s national carrier and is wholly owned by the state.
Qatar General Postal Corporation is a 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. Ooredoo (previously known as Q-Tel) dominates both the cell and landline telecommunications markets in Qatar and partners with telecommunications companies in 13 Middle East, North Africa, and Asia markets. It is the dominant player in the Qatari telecommunications market and is 70 percent owned by Qatari government entities. Ooredoo Group is listed on the Qatari Stock Exchange.
Vodafone Qatar is Qatar’s only other telecommunications operator, 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).
There is no ongoing official privatization program for major SOEs.
8. Responsible Business Conduct
There is a general awareness in Qatar of responsible business conduct. Many companies publicize their Corporate social responsibility (CSR) initiatives, the majority of which cover environmental issues as well. Qatar participates in the Extractive Industries Transparency Initiative (EITI) as an economy dependent on extractive industries. Nonetheless, the Qatari government has not improved transparency regarding its petroleum industry management, as no regulatory body oversees resources extraction or revenue management. Moreover, Qatar has no freedom of information law.
The Government of Qatar maintains a reporting regime for suspicious transactions and requirements for consumer due diligence and record-keeping. The Ministry of Commerce and Industry has a dedicated Consumer Protection and Combating Commercial Fraud Department, which has intensified its efforts by monitoring records and inspection of stores and factories that sell or manufacture counterfeit goods. The ministry prosecutes business misconduct and announces these violations publicly.
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 the employment of children under 16 years of age. The Ministry of Labor (MOL), the Ministry of Interior (MOI), and the National Human Rights Committee (NHRC) conduct training sessions for migrant laborers to inform them of their rights while in Qatar. In 2018, the United States and Qatar signed a government-to-government memorandum of understanding on exchanging expertise and fostering capacity building on combating human trafficking. In 2019, the U.S. Department of Labor and MOL signed a Memorandum of Understanding on labor, focusing on labor inspections and protecting domestic workers’ rights in Qatar.
Some Qatari non-governmental organizations (NGOs) focus on labor rights and often work with the government. Researchers from international NGOs such as Amnesty International and Human Rights Watch continue to visit and report on labor developments in 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. Global 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.
Private security companies cannot operate in Qatar without an appropriate license granted by the MOI, per Law 19/2009 on Regulating the Provision of Private Security Services. As of 2009, Qatar has been a signatory to the Montreux Document on Private Military and Security Companies.
In October 2021, the Government of Qatar launched its National Environment and Climate Change Strategy. National environmental goals included achieving 25 percent reduction in greenhouse gas emissions by 2030, reaching net-zero emissions by 2060, conserving over 25 percent of the land, restoring marine biodiversity, reducing groundwater abstraction by 60 percent, promoting 100 percent use of recycled water, requiring 30 percent recycled material use in public infrastructure procurement, and increasing the rate of recycling of municipal waste to 15 percent and construction waste to 35 percent.
Sustainability has been a focus of Qatar’s National Development Strategy 2018-2022 and an important component of the Qatar National Vision 2030. Qatar requires all projects in the industrial, agricultural, urban development, and infrastructural sectors to acquire environmental impact assessments from the Ministry of Environment and Climate Change, which was established in October 2021. As of February 2022, the government stopped extending additional incentives for companies that adopt environmental conservation measures. Law 30/2002 is the primary legislation protecting the environment. It prohibits polluting equipment, machinery, 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. Despite these initiatives, Qatar suffers from ecological threats such as water insecurity, temperature anomalies, and air pollution.
Corruption in Qatar does not generally affect the conduct of business, although the power of personal connections plays a significant role in business culture. Qatar ranked as the second least corrupt country in the Middle East and North Africa, according to Transparency International’s 2021 Corruption Perceptions Index, and ranked 31st 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. Corruption and misuse of public money are a focus of the executive office. Law 22/2015 imposes hefty penalties for corrupt officials. Decree 6/2015 restructured the Administrative Control and Transparency Authority, granting it juridical responsibility, a budget, and direct affiliation with the Amir’s office. The authority’s objectives are to prevent corruption and ensure that ministries and public employees operate with transparency. Transparency is also mandated when investigating alleged crimes against public property or finances perpetrated by public officials.
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 previously have. Individuals convicted of embezzlement are subject to prison terms of no less than five and up to ten years. The penalty can be 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 charges. The Criminal Court makes final judgments.
Bribery is a crime in Qatar, and the law imposes penalties on public officials convicted of acting 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 regulations and stipulates that individuals convicted of bribery may be sentenced up to ten years in prison and fines amounts 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 most 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 center’s purpose is to support, promote, and disseminate legal principles to fight corruption (https://rolacc.qa/).
Despite these efforts, some American businesses cite a 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.
The Administrative Control and Transparency Authority is also responsible for receiving transparency-related complaints within the public sector:
Administrative Control and Transparency Authority
Al Bida St., Al Dafna, Doha, PO Box: 25558
974 44305220, +974 44305222, and +974 44069909
To file complaints: http://actadev.wpengine.com/en/complaints/
10. Political and Security Environment
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 a medium risk country for terrorism, including 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 Smart Traveler Enrollment Program to receive further information on safety conditions in Qatar: https://step.state.gov/step/.
11. Labor Policies and Practices
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 2.78 million as of January 2022, 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. As of the second quarter of 2021, about 60 percent of the female population aged 15 years and above were economically active, compared to 95 percent of males. However, local statistics may not fully account for all employed females as calculations as primarily based on residency statuses, which are family, not employment-based for most migrant females.
Qatar’s unemployment rates are among the lowest globally, with a 0.1 percent unemployment rate for men and a 0.5 percent unemployment rate for women, as of 2021. The government mandates that Qataris make up at least 60 percent of the employees of state-owned enterprises or companies where the government is a majority investor and 80 percent of those entities’ human resources workforce. Children of Qatari women are considered Qataris for purposes of calculating this localization ratio. Over three-quarters of employed Qatari citizens work for the government.
The Ministry of Labor (MOL) 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 owed wages and other benefits in full, provided they have performed expected work duties during the notice period, which varies based on years of employment. The English common law governs companies registered with QFC, and labor issues are administered by QFC’s Regulation 10/2006.
There are no labor unions in Qatar. Non-citizens are not eligible to form worker committees or go on strike. However, according to an agreement between MOL 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. 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. Still, the restrictive conditions imposed by the law make the likelihood of an approved strike remote. Regardless of nationality, individuals working in the public sector are prohibited from joining unions. Workers at labor camps occasionally go on strike over non-payment or delayed wages; however, this practice is technically illegal.
Local courts handle disputes between workers and employers, but the process is widely regarded as inefficient. To speed up the process of resolving labor disputes, the government established Labor Disputes Settlement Committees headed by a judge and representatives from MOL. As of 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.
Law 17/2020 sets the minimum basic wage for workers and domestic workers at $275 per month and $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 specific 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 MOL; this requirement, however, does not apply to domestic workers. Employers who fail to pay their workers face penalties between $550 and $1,650 per case and possible prison sentences. Those penalties, however, are rarely implemented. The system currently applies to over 1.4 million workers.
The Labor Law prohibits the employers’ withholding of workers’ passports and stiffens penalties for transgressors. To eliminate forced labor, the government issued Law 19/2020, enabling employees to switch employers without requiring the employer’s permission. This new legislation complimented Law 13/2018, allowing workers covered by the Labor Law to leave the country without requiring exit permits.
To protect workers from fraudulent employment contracts, the Ministry of Interior (MOI) established the Qatar Visa Centers (QVCs) to simplify residency procedures for expatriate workers from India, Nepal, Sri Lanka, Pakistan, Bangladesh, and the Philippines. In partnership with MOI and MOL, contracted companies set up QVCs in these countries to facilitate biometric enrollment, medical records verification, and 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, MOL signed an MOU with the U.S. Department of Labor to enhance cooperation in labor inspection and protecting domestic workers’ rights.
14. Contact for More Information
U.S. Embassy, Doha
22nd February Street, Al Luqta District, P.O. Box 2399, Doha, Qatar
In 2021, the Saudi Arabian government (SAG) continued its ambitious socio-economic reforms, collectively known as Vision 2030. Spearheaded by Crown Prince Mohammed bin Salman, Vision 2030 provides a roadmap for the development of new economic sectors and a transition to a digital, knowledge-based economy. The reforms aim to diversify the Saudi economy away from oil and create more private sector jobs for a young and growing population.
To accomplish these ambitious Vision 2030 reforms, the SAG is seeking foreign investment in burgeoning sectors such as infrastructure, tourism, entertainment, and renewable energy. Saudi Arabia aims to become a major transport and logistics hub linking Asia, Europe, and Africa. Infrastructure projects related to this goal include various “economic cities” and special economic zones, which will serve as hubs for petrochemicals, mining, logistics, manufacturing, and digital industries. The SAG plans to double the size of Riyadh city and welcomes investment in its multi-billion-dollar giga-projects (including NEOM, Qiddiya, the Red Sea Project, and Amaala), which are the jumping-off points for its nascent tourism industry. The Kingdom is also developing tourism infrastructure at natural sites, such as AlUla, and the SAG continues to grow its successful Saudi Seasons initiative, which hosts tourism and cultural events throughout the country.
The Saudi entertainment and sports sector, aided by a relaxation of social restrictions, is also primed for foreign investment. The country hopes to build hundreds of movie theaters and the SAG aims to sign agreements for production studios in Saudi Arabia for end-to-end film production. The SAG seeks to host world class sporting events and has already hosted the European Golf Tour, Diriyah ePrix, Dakar Rally, and Saudi Formula One Grand Prix. In addition, recent film festivals and concerts have demonstrated strong demand for art and cultural events. Lastly, the SAG is eager for foreign investment in green projects related to renewable energy, hydrogen, waste management, and carbon capture to reach net-zero emissions by 2060. It is particularly interested in green capacity-building and technology-sharing initiatives.
Despite these investment opportunities, investor concerns persist regarding business predictability, transparency, and political risk. Although some activists have recently been released, the continued detention and prosecution of activists remains a significant concern, while there has been little progress on fundamental freedoms of speech and religion. The pressure to generate non-oil revenue and provide increased employment opportunities for Saudi citizens has prompted the SAG to implement measures that may weaken the country’s investment climate going forward. Increased fees for expatriate workers and their dependents, as well as “Saudization” policies requiring certain businesses to employ a quota of Saudi workers, have led to disruptions in some private sector activities. Additionally, while specific details have not yet been released, Saudi Arabia announced in 2021 that multinational companies wanting to contract with the SAG must establish their regional headquarters in Saudi Arabia by 2024.
The SAG has taken important steps since 2018 to improve intellectual property rights (IPR) protection, enforcement, and awareness. While some concerns remain regarding IPR protection in the pharmaceutical sector, no new incidents related to regulatory data protection for health and safety information have been reported since October 2020, and in March 2022 Saudi Arabia issued a public statement stipulating that data protection in the Kingdom is for five years. While the sharp downturn in oil prices in 2020 put pressure on Saudi Arabia’s fiscal situation, the subsequent spike in oil prices has increased government revenue and the SAG expects a budget surplus in 2022.
1. Openness To, and Restrictions Upon, Foreign Investment
The SAG seeks to attract $3 trillion in foreign investment to promote economic development, transfer foreign expertise and technology to Saudi Arabia, create jobs for Saudi nationals, and increase Saudi Arabia’s non-oil exports.
In October 2021, Saudi Arabia announced its National Investment Strategy, which will help it deliver on its Vision 2030 goals. The National Investment Strategy outlines investment plans for sectors including manufacturing, renewable energy, transport and logistics, tourism, digital infrastructure, and health care. The strategy aims to grow the Saudi economy by raising private sector contribution to 65 percent of total GDP and increasing foreign direct investment to 5.7 percent of total GDP. The National Investment Strategy aims to raise net foreign direct investment flows to $103 billion annually and increase domestic investment to about $450 billion annually by 2030.
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/.
The SAG has adopted reforms to improve the Kingdom’s attractiveness as an investment destination. It has reduced the license approval period from days to hours, decreased required customs documents, reduced the customs clearance period from weeks to hours, and increased the investor license period to five years. It has launched e-licenses to provide a more efficient and user-friendly process and 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. The SAG allows 100 percent foreign ownership in most sectors.
Saudi Arabia’s burgeoning entertainment sector provides opportunities for foreign investment. 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. The audiences for many of these events are now gender-mixed, representing a larger consumer base. In addition to reopening cinemas in 2018, the SAG has hosted Formula One and Formula E races, professional golf and tennis tournaments, and a world heavyweight boxing title match. Saudi Arabia’s General Entertainment Authority launched the Saudi Seasons initiative in 2019, which hosts tourism and cultural events in each of the country’s 11 regions. The second iteration of Saudi Seasons began in October 2021 after a pause due to COVID. Riyadh Season attracted more than 15 million people and more than 1,200 companies participated, providing 150,000 job opportunities. The program included more than 7,500 entertainment events, including Arab and international concerts, international exhibitions, theatrical shows, and a freestyle wrestling tournament. The initiative also featured 200 restaurants and 70 coffee shops at 14 entertainment zones across Riyadh.
The SAG is also seeking foreign investment for its “economic cities” and “giga-projects” that are at various stages of construction. These projects are large-scale, self-contained developments in different regions focusing on particular industries, such as technology, energy, logistics, tourism, entertainment, and infrastructure. These projects include:
NEOM: a $500 billion long-term development project to build a futuristic “independent economic zone” and city in northwest Saudi Arabia. This initiative aims to create 380,000 jobs and contribute $48 billon to domestic GDP by 2030. This project includes:
The Line: a 100 mile-long, urban smart city that will have no cars, no streets, and no carbon emissions.
Oxagon: NEOM’s economic and industrial hub focusing on innovation, research, and technology. Built on the coast, it will include the world’s largest floating structure.
Trojena: NEOM’s mountain destination blending natural and developed landscapes. This project will include a man-made lake, a wildlife reserve, and a ski resort.
Qiddiya: a large-scale entertainment, amusement, 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.
Diriyah Gate: a $50 billion project transforming Diriyah, a suburb of Riyadh, into a premiere destination for culture and heritage, entertainment, hospitality, retail, and education.
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.
Asir: a $13 billion project to develop the southwestern region of Asir into a global tourism hub, aiming to attract more than 10 million visitors by 2030.
To attract tourists to these new sites, the SAG introduced a new tourism visa in 2019 for non-religious travelers, and the Kingdom no longer requires foreign travelers staying in the same hotel room to provide proof of marriage or family relations. The SAG is facilitating private investments through its Tourism Development Fund, which has initial capital of $4 billion, and the Kafalah program, which provides loan guarantees of up to $400 million. In addition, the Tourism Fund signed MOUs with local banks to finance projects valued up to $40 billion to stimulate tourism investment and increase the sector’s contribution to GDP.
Investment opportunities in Saudi Arabia’s mining sector continue to expand. In June 2020, the SAG approved a new law allowing foreign companies to enter the mining sector and invest in the Kingdom’s vast mining resources. 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. 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 the Saudi chemical giant SABIC to produce phosphate-based fertilizers.
Saudi Arabia’s transportation sector also provides ample opportunity for international investment. In June 2021, Crown Prince Mohammed bin Salman launched the National Transport and Logistics Strategy to upgrade transportation infrastructure throughout Saudi Arabia. The strategy aims to enhance Saudi Arabia’s position as a global logistics center, improve quality of life, and balance the public budget. The strategy calls for the launch of a new national air carrier, with the goal of increasing the number of international destinations served by the country to more than 250. The SAG also aims to raise air freight sector capacity to more than 4.5 million tons. The strategy includes an initiative to connect Saudi Arabia with the other Arab Gulf states via a railway line. The SAG plans to invest $147 billion in transport and logistics over the next eight years.
Lastly, the Kingdom’s infrastructure sector is open to foreign investment. The SAG launched an $800 billion project to double the size of Riyadh city in the next decade and transform it into an economic, social, and cultural hub for the region. The project includes 18 “mega-projects” in the capital city to improve livability, strengthen economic growth, and more than double the population to 15-20 million by 2030. The SAG is seeking private sector financing of $250 billion for these projects, with similar contributions from income generated by its financial, tourism, and entertainment sectors.
Saudi Arabia fully recognizes rights to private ownership and the establishment of private business. However, the SAG excludes foreign investors from some economic sectors and places some limits on foreign control.
Foreign investors must contend with increasingly strict requirements to base a certain percentage of production within Saudi Arabia (localization), 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 this is becoming more relaxed as socio-economic reforms progress).
The SAG implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases. In 2020, the SAG increased the value-added tax (VAT) from five to 15 percent.
In February 2021, MISA and the Royal Commission for Riyadh City (RCRC) announced a new directive requiring that companies wanting to contract with the SAG establish their regional headquarters in Saudi Arabia – preferably in Riyadh – by 2024. MISA has yet to publish details regarding this mandate. According to MISA, companies that relocate their regional headquarters to Riyadh will benefit from incentives including relaxed Saudization, spouse work permits, waivers of professional accreditation, visa acceleration, and end-to-end business, personal, and concierge services. 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 beginning in 2024. Implementing regulations for this new directive have not been issued and it remains unclear if the rule would affect contracting by parastatal organizations such as Saudi Aramco.
Foreign investment is currently prohibited in ten sectors:
Oil exploration, drilling, and production except services related to the mining sector listed under Central Product Classification (CPC) 5115+883
Catering to military sectors
Security and detective services
Real estate investment in the holy cities, Mecca and Medina (Note: Foreign investment in real estate in Mecca and Medina is allowed in certain locations and limited to 99-year leases.)
Tourist orientation and guidance services for religious tourism related to Hajj and Umrah
Commission agents internationally classified under CPC 621
Services provided by midwives, nurses, physical therapy services, and quasi-doctoral services classified under CPC 93191
Poison centers, blood banks, and quarantine services
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. ExxonMobil, Shell, China’s Sinopec, and Japan’s Sumitomo Chemical are partners with Saudi Aramco in domestic refineries. ExxonMobil, Chevron, Shell, and other international investors have joint ventures with Saudi Aramco and/or the Saudi Basic Industries Corporation (SABIC, a wholly-owned subsidiary of Saudi Aramco since 2020) in large-scale petrochemical plants. 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 a group of contractors to provide engineering, procurement, construction, hook-up, commissioning and maintenance, and modifications and operations jobs for its offshore oil and gas infrastructure.
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; 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 have precluded many investors from taking full advantage of the reform.
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 several 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.
Saudi officials have stated their intention to attract foreign small- and medium-sized enterprises (SMEs) to the Kingdom. Under Vision 2030, Saudi Arabia aims to increase SME contribution to its GDP to 35 percent by 2030. To facilitate and promote the growth of the SME sector, the SAG established the Small and Medium Enterprises General Authority, Monsha’at, 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. The SAG continues to roll out initiatives to spur the development of the SME ecosystem in Saudi Arabia. As of 2019, women no longer need a male guardian to apply for a business license. In February 2021, Monsha’at launched the Bank of Small and Medium Enterprises to provide a one-stop shop for SME financing. In March 2022, Monsha’at and the King Abdulaziz City for Science and Technology inaugurated the National Business Innovation Portal, which provides guidance and resources for SMEs.
Private Saudi citizens, Saudi companies, and SAG entities hold extensive overseas investments. The SAG has transformed its Public Investment Fund (PIF), into a major international investor and sovereign wealth fund. The PIF’s outward investment projects are covered in Section 6 (Financial Sector). 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. In December 2021, the ExxonMobil-SABIC $10-billion-dollar joint venture, Gulf Coast Growth Ventures, commenced operations at its new petrochemical facility near Corpus Christi, Texas.
3. Legal Regime
Saudi Arabia received the lowest score possible (zero out of five) in the World Bank’s 2017-2018 Global Indicators of Regulatory Governance project, 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. In addition, in March 2021, Saudi Arabia’s National Competitiveness Center launched a public consultation platform called “Istitlaa” to solicit feedback on proposed laws and regulations before they are approved. That said, the processes and procedures for stakeholder consultation remain generally opaque and are not 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.
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 the WTO Committee on Technical Barriers to Trade of all draft technical regulations.
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” section 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 2021, theCrown Prince announced draft legal reforms including a new personal status law, civil transactions law, evidence law, and discretionary sentencing law that aim to increase predictability and transparency in the legal system, facilitating commerce and expanding protections for women. To date, Saudi Arabia has published the new evidence law and the new personal status law. The two new laws have not yet come into force, but if implemented effectively, these reforms could be a major step towards modernizing the Saudi legal system.
In January 2019, the Saudi government established the General Authority for Foreign Trade (GAFT), 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 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 WTO. The Governor of GAFT reports to the Minister of Commerce.
Despite the list of activities excluded from foreign investment (see “Limits on Foreign Control and Right to Private Ownership and Establishment” section), 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 Policies” section). Minimum capital requirements to establish business entities range from zero to $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.
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 covers 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. 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.
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.
In August 2018, the SAG implemented new bankruptcy legislation that 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 law clarifies procedural processes and recognizes distinct creditor classes (e.g., secured creditors). It also includes procedures for continued operation of a 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.
4. Industrial Policies
MISA advertises several 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’s website 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.
In 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, 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 3,000 Saudi riyal (SAR) monthly stipend plus occupational hazard insurance for a period of three to six months.
American and other foreign firms can participate in SAG-financed and/or -subsidized research-and-development (R&D) programs. Many of these programs are run through the King Abdulaziz City for Science and Technology (KACST), which funds many of the Kingdom’s R&D programs.
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 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 Abdelaziz 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 northwestern Saudi Arabia on the Red Sea coast. A significant portion of Saudi Arabia’s refining, petrochemical, and other heavy industries are 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 and the Jazan City for Primary and Downstream Industries. The RCJY’s website is https://www.rcjy.gov.sa.
In 2017, Saudi Aramco began building the King Salman Energy Park (“SPARK”), a sustainable global energy and industrial hub, in the Eastern Province between Dammam and Al-Ahsa. SPARK is designed to attract, establish, and encourage local energy industries in the fields of exploration, production, refining, petrochemicals, conventional power, and water production and treatment. Saudi Aramco aims to finish construction of SPARK in 2035 and expects the hub to add around $6 billion to annual GDP.
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 retain Aramco’s percentage of locally manufactured energy-related goods and services at a minimum of 70 percent.
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 by 2030. 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 manufacture locally defense articles.
The government encourages recruitment of Saudi employees through a series of incentives (see “Labor Policies” section 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 SAG has recently increased fees for expatriate employers and levies on expatriates with dependents.
5. Protection of Property Rights
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.
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 to spur development. In 2018, in order to increase Saudis’ access to financing 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.
Saudi Arabia was removed from the U.S. Trade Representative’s (USTR) Special 301 Report Priority Watch List in 2022 due to steps Saudi Authority took to address stakeholder concerns including the publication of its IP enforcement procedures and increased enforcement againt counterfeit and pirated goods and online pirated content.
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 second Cooperation Arrangement in December 2021 between SAIP and USPTO. In 2021, SAIP made 6,400 field inspection tours in 10 cities, conducted 1,912 online inspection visits, and carried out 282 visits to promote awareness of IPR across Saudi Arabia. In addition, in cooperation with Ministry of Commerce, the General Authority for Audio-Visual Media, the Zakat, Tax and Customs Authority and Public Security, SAIP announced in its 2021 enforcement report confiscation of over 5 million counterfeit products during its inspection campaigns, including pirated DVDs, CDs, books, computers, laptops, hard disks, memory chips, TV satellite boxes, CD-copying devices, copied books, and satellite broadcasting devices. In 2021, SAIP blocked over 2,000 websites for violating intellectual property laws.
SAIP published a first of its kind statement in March 2022 confirming its commitment to regulatory data protection. In a statement posted on social media, that was also published by the Saudi Food and Drug Authority (SFDA), SAIP clarified its definition of confidential commercial information, described why this type of IP is important to innovation, confirmed its duty to protect this data against disclosure and unfair commercial use, and outlined proper procedures to take if an incident occurs. It states, “Any person harmed as a result of violating the provision of the Regulation of Confidential Commercial Information may file a lawsuit before the competent Court to claim compensation for damages sustained.”
In 2022, the Ministry of Human Resources and Social Development approved the establishment of Saudi Arabia’s first nonprofit intellectual property protection entity, Himayah, to spread societal awareness of intellectual property rights.
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.
In November 2021, the CMA allowed financial market institutions to accept subscriptions from non-Saudis in real estate funds that invest in assets within the boundaries of Mecca and Medina.
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 continues 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 to 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 previously been an observer member since 2015.
Saudi Arabia is forward leaning on the development of financial technology. In February 2022, the Saudi cabinet approved a license for a local digital bank, D360, to be established with capital of $440 million. In March 2022, SAMA announced the licensing of a new payment financial technology company, Moyasar Financial Company, to provide e-commerce payment services, bringing the number of payment companies licensed by SAMA to 16 companies. In 2021, SAMA introduced the new Instant Payment System (Sarie) to facilitate instant, 24/7 money transfers across local banks. STC Pay, which provides digital payment solutions, achieved a $1.3 billion valuation in 2020, and the SAG recently approved its conversion into a digital bank.
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 two percent in 2020. In addition, credit is available from several government institutions, such as the SIDF, which allocates 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 procurements executed outside of Saudi Arabia. The Ministry of Finance has a pivotal role under the new GTPL to set policies and issue directives, collate and distribute information, maintain a list of boycotts, and approve 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 government sectors and competing entities.
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 grow the PIF more than five-fold to a $2 trillion global investment fund by 2030, relying in part on proceeds from the initial public offering of 1.5 percent of Saudi Aramco shares.
Under the Vision 2030 reform program, the PIF is financing several of the country’s giga-projects, including NEOM, Qiddiya, the Red Sea Project, and Amaala. The PIF increased its holding of U.S. equities to nearly $44 billion in Q3 2021, acquiring new stakes in 19 firms.
In February 2022, the PIF advanced in the global ranking to become the sixth largest sovereign wealth fund with $580 billion in assets under management after receiving a four percent stake in Saudi Aramco, according to data released by the Sovereign Wealth Funds Institute. 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 strategy focuses 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 aims to invest $267 billion into the local economy, contribute $320 billion to non-oil GDP, and create 1.8 million jobs.
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 reserve holdings peaked at $746 billion in 2014 but have since fallen to $429 billion in January 2022, the lowest level since 2010. This decline may be due to transfers to the PIF, as well as SAMA’s efforts to finance a recovery in import demand following the COVID-19 pandemic.
Though not a formal member, Saudi Arabia serves as a permanent observer to the International Working Group on Sovereign Wealth Funds.
7. State-Owned Enterprises
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 94.5 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 Saudi Aramco. The initial public offering (IPO) of 1.5 percent of Aramco’s shares on the Saudi Tadawul stock market on December 11, 2019, was the largest-ever IPO and valued Aramco at $1.7 trillion. The IPO generated $25.6 billion in proceeds, exceeding the $25 billion Alibaba raised in 2014 in the largest previous IPO in history. In February 2022, the SAG announced the transfer of four percent of Aramco’s shares to the PIF. Crown Prince Mohammed bin Salman announced that after the transfer, the state will remain Aramco’s largest shareholder, retaining more than 94 percent of the total shares.
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; the acquisition was completed in 2020. 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, Saudia Airlines, the Saline Water Conversion Company, Ma’aden, the National Commercial Bank, and other leading financial institutions.
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 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. 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. The program endorses several 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. The Privatization Program report identifies 16 targeted sectors but does not include an exhaustive list of assets to be privatized. The report references 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. The full Privatization Program report is available online at http://vision2030.gov.sa/en/ncp.
In 2017, Saudi Arabia established the National Center for Privatization and Public Private Partnerships (NCP), which oversees and manages the Privatization Program. The NCP’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. The Center’s website is http://www.ncp.gov.sa/en/pages/home.aspx. In March 2021, Saudi Arabia approved the Private Sector Participation (PSP) Law, which aims to increase private sector participation in infrastructure projects and in the provision of public services.
8. Responsible Business Conduct
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.
Saudi Arabia does not participate in the Extractive Industries Transparency Initiative.
The SAG announced the first Saudi National Environmental Strategy in 2018. The strategy included a comprehensive restructuring of the environmental sector, the establishment of the Directorate of Environment under the Ministry of Environment, Water, and Agriculture (MEWA), and the creation of the Environmental Special Forces under the Ministry of Interior. The SAG also formed five specialized environmental centers: the National Center for Waste Management, the National Environmental Compliance Center, the National Center for the Development of Vegetation Cover and Combating Desertification, the National Center for Wildlife Conservation, and the National Meteorological Center. In addition, the Kingdom established the National Environmental Fund to support environmental research and the development of environmentally friendly technologies. In March 2021, Crown Prince Mohammed Bin Salman announced the Saudi Green Initiative (SGI) and the Middle East Green Initiative, which are part of Vision 2030 and place Saudi Arabia at the center of regional efforts to meet international targets for climate change mitigation.
In October 2021, Saudi Arabia announced its intention to reduce, avoid, and remove greenhouse gas emissions by 278 million tons of CO2 equivalent annually by 2030, more than a two-fold increase of its initial nationally determined contribution (NDC). The Kingdom committed to moving to net-zero emissions by 2060 and signed the Global Methane Pledge. In April 2021, Saudi Arabia joined the United States, Canada, Norway, and Qatar to establish the Net-Zero Producers Forum. The forum aims to explore practical net-zero emission strategies, including methane abatement, carbon capture, and clean energy.
Energy Minister Prince Abdulaziz bin Salman Al Saud noted that Saudi Arabia would welcome foreign investment in its climate initiatives but will not require outside financial support to achieve its climate goals. It does, however, need expertise, capacity-building, and technology-sharing. He emphasized that the timeline for these goals could shift, depending on new technologies and the country’s ability to grow its economy.
Saudi Arabia’s flagship environmental initiative is the Circular Carbon Economy (CCE), which it announced during its G20 presidency in 2020. The CCE consists of the “4Rs” model of “reduce, reuse, recycle, and remove” to manage greenhouse gas emissions – a way to offset its carbon emissions while continuing to pump oil. The Kingdom plans to transform the coastal cities of Jubail and Yanbu, both homes to petrochemical, steel, and other heavy industries, into global hubs for carbon capture utilization and storage (CCUS).
By 2030 the SAG plans to generate 50 percent of the country’s electricity from renewables and the other half from natural gas. Currently, 40 percent of electricity generation comes from the burning of crude oil. Saudi company ACWA Power, in which the PIF has a 50 percent stake, has been tasked with developing 70 percent of Saudi renewable energy projects. ACWA Power’s first project under PIF funding, a solar plant in the central city of Sudair, will be one of the largest single-contracted solar PV plants in the world, with an installed capacity of 1,500 megawatts capable of powering 185,000 homes and offsetting nearly 2.9 million tons of emissions each year.
As it seeks to diversify its energy sources away from oil, Saudi Arabia aims to become the world’s largest supplier of hydrogen. The Kingdom’s goal is to produce 2.9 million tons/year by 2030 and four million tons/year by 2035 of blue and green hydrogen. Aramco recently signed an initial agreement to build a green hydrogen and ammonia plant with Hong Kong-based green hydrogen developer InterContinental Energy, bringing private investment into the sector. In 2020, U.S. industrial gas producer Air Products, ACWA Power, and NEOM signed a $5 billion agreement to build a green hydrogen plant powered by four gigawatts of wind and solar power. The completed facility will produce 650 tons of green hydrogen daily, enough to run around 20,000 hydrogen-fueled buses. The fuel will be shipped as ammonia to end markets globally, and production is expected to start in 2025. Challenges remain in the hydrogen sector. The required technology for green and blue hydrogen is still nascent, production costs are high, and the market for these types of hydrogen is being developed.
Saudi Arabia aims to recycle 100 percent of solid waste in Riyadh by 2025 and 82 percent of all waste streams countrywide by 2035. Waste management is a nascent industry, and current recycling stands at only one percent. To reach its waste management goals, the Saudi Investment Recycling Company (SIRC), a wholly owned subsidiary of the PIF, was established in 2017. SIRC is mandated to develop, own, operate, and finance projects across all waste types to establish recycling capacities and build a circular economy.
In December 2019, King Salman issued royal decrees creating the Oversight and Anti-Corruption Commission (“Nazaha”). Nazaha is responsible for promoting transparency and combating all forms of financial and administrative corruption. Nazaha reports directly to King Salman and has the power to dismiss a government employee even if found not guilty by the specialized anti-corruption court. Throughout 2021, 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 at http://www.nazaha.gov.sa/en/Pages/Default.aspx.
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 US$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, and in December 2021 Saudi Arabia amended the Combating Bribery Law to criminalize foreign bribery. Only senior Nazaha officials are subject to financial disclosure laws. The government is considering disclosure regulations for other officials but has yet to finalize them.
SAMA 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 investigations 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, and the International Anti-Corruption Academy (IACA) elected Saudi Arabia to its Board of Governors in April 2022.
The Kingdom ranks 52 out of 180 countries in Transparency International’s Corruption Perceptions Index 2021.
The National Anti-Corruption Commission’s address is:
National Anti-Corruption Commission
P.O. Box (Wasl) 7667, AlOlaya – Ghadir District
The Kingdom of Saudi Arabia
Fax: +966 11 264-5555
Nazaha accepts complaints about corruption through its website www.nazaha.gov.sa or mobile application.
10. Political and Security Environment
The Department of State regularly reviews and updates travel advisories to apprise U.S. citizens of the security situation in Saudi Arabia and frequently reminds U.S. citizens of recommended security precautions. Please visit www.travel.state.gov for further information, including the latest travel advisory.
11. Labor Policies and Practices
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 jobs in the country are held by expatriates, who represent roughly 38 percent of the total population. 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.
The removal of guardianship laws and travel restrictions for women, the introduction of workplace protections, and recent judicial reforms that provide additional protection have enabled more women to enter the labor force. From 2016 to 2020, the Saudi female labor participation rate increased from 19 percent to 33 percent. As of Q4 2021, Saudi Arabia’s General Authority for Statistics estimates unemployment at 6.9 percent for the total population and 11 percent for Saudi nationals, but these figures mask a high youth unemployment rate, a Saudi female unemployment rate of 22.5 percent, and low Saudi labor participation rates (51.5 percent overall; 35.6 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 remain a challenge.
The SAG encourages Saudi employment through “Saudization” policies that place quotas on employment of Saudi nationals in certain sectors, coupled with limits 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. The MHRSD has mandated that certain job categories in specific economic sectors only employ Saudi nationals. The ministry has likewise mandated that only Saudi women can occupy retail jobs in certain businesses that cater to female customers. 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.
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 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. Foreign workers (particularly domestic staff) have encountered 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. It is available at https://www.state.gov/reports/2021-trafficking-in-persons-report/saudi-arabia/.
Overtime work 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 on 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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($M USD)