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Bahrain

Executive Summary

The investment climate in Bahrain is generally positive and has remained relatively stable in the last year. Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses.

In an economy largely dominated by state-owned enterprises, the Government of Bahrain (GOB) aims to foster a greater role for the private sector in economic growth. Government efforts focus on encouraging foreign direct investment (FDI) in the manufacturing, logistics, information and communications technology (ICT), financial services, and tourism sectors. Bahrain’s FDI as of June 2019 reached BD 10.9 billion (USD29 billion), with the majority of the investments from the financial services and insurance sector and the ICT sectors.

The Covid-19 pandemic, in tandem with the global oil price collapse in 2020, undermined GOB efforts to generate revenue and reduce spending. In April 2020, Bahrain introduced a BD 4.3 billion (USD11.4 billion), eight-point stimulus package to ease the economic impact of the Covid-19 pandemic, equivalent to 29 percent of Bahrain’s GDP. Many of the business-friendly subsidies were extended to foreign-owned and local companies alike, such as coverage of utility bills and waiver of tourism and industrial land fees.

To strengthen Bahrain’s position as a startup hub and to enhance the Kingdom’s investment ecosystem, the GOB in 2018 launched Bahrain FinTech Bay, the largest FinTech hub in the Middle East and Africa; issued four new laws covering data protection, competition, bankruptcy, and health insurance; established the USD100 million Al Waha venture capital fund for Bahraini investments; and set up a USD100 million ‘Superfund’ to support the growth of start-ups.

The U.S.-Bahrain Bilateral Investment Treaty (BIT) entered into force in 2001. The BIT provides benefits and protection to U.S. investors in Bahrain, such as most-favored nation treatment and national treatment, the right to make financial transfers freely and without delay, international law standards for expropriation and compensation cases, and access to international arbitration.

Bahrain permits 100 percent foreign ownership of new industrial entities and the establishment of representative offices or branches of foreign companies without local sponsors. In 2017, the GOB expanded the number of sectors in which foreigners are permitted to maintain 100 percent ownership stakes in companies to include tourism services, sporting events production, mining and quarrying, real estate activities, water distribution, water transport operations, and crop cultivation and propagation.  In May 2019, the GOB loosened foreign ownership restrictions in the oil and gas sector, allowing 100 percent foreign ownership in oil and gas extraction projects under certain conditions.

The U.S.-Bahrain Free Trade Agreement (FTA) entered into force in 2006. Under the FTA, Bahrain committed to world-class Intellectual Property Rights (IPR) protection.

Despite the GOB’s transparent, rules-based government procurement system, U.S. companies sometimes report operating at a perceived disadvantage compared with other firms in certain government procurements. Many ministries require firms to pre-qualify prior to bidding on a tender, often rendering firms with little or no prior experience in Bahrain ineligible to bid on major tenders.

Since 2017, the Central Bank of Bahrain (CBB) has operated a financial technology (FinTech) regulatory “sandbox” that enables the testing and launching of non-conventional FinTech startups in Bahrain, including cryptocurrency and blockchain technologies. The CBB also issued regulations to enable conventional and Sharia compliant financing-based crowdfunding businesses.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 77 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 43 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 78 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 USD 647 https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2018 USD 21,890 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

9. Corruption

The King and Crown Prince have advocated publicly in favor of reducing corruption and some ministries have initiated clean-up efforts. Legislation regulating corruption is outlined in Bahrain’s “Economic Vision 2030” plan, and in the National Anti-Corruption Strategy. Bahrain joined the United Nations Convention Against Corruption (UNCAC) in 2003. Accordingly, Bahrain ratified its penal code on combatting bribery in the public and private sectors in 2008, mandating criminal penalties for official corruption. Under law, government employees at all levels are subject to prosecution and punishments of up to 10 years imprisonment if they use their positions to engage in embezzlement or bribery, either directly or indirectly. The law does not require government officials to make financial disclosures. In 2010, Bahrain ratified the UNCAC and the Arab Convention Against Corruption, and in 2016, it joined the International Anti-Corruption Academy. In 2019, the Public Prosecution initiated proceedings on 178 economic corruption cases. In 23 cases, offenders have been sentenced to prison; one was cleared; and 13 are pending investigation. The remaining 129 cases have been classified as administrative contraventions and closed.

Giving or accepting a bribe is illegal. The government, however, has not fully implemented the law, and some officials reportedly continue to engage in corrupt practices with impunity. Officials have at times been dismissed for what is widely believed to be blatant corruption, but the grounds for dismissal rarely have been tied to corruption.

The National Audit Office, established in 2002, is mandated to publish annual reports that highlight fiscal irregularities within government ministries and other public-sector entities. The reports enable legislators to exercise oversight and call for investigations of fiscal discrepancies in government accounts. In 2013, the Crown Prince established an Investigation Committee to oversee cases highlighted within the National Audit Office’s annual report.

The Minister of Follow-Up Affairs at the Royal Court was designated in 2015 to execute recommendations made in that year’s National Audit Report. At the same time, the Crown Prince urged all government entities and the Council of Representatives to work closely to implement the recommendations made in the report. Bahrain’s National Audit Office issues annual reports that list violations committed by various Bahraini state bodies and agencies.

As a result of the 2011 National Dialogue process, the Ministry of Interior established an anti-corruption directorate. In 2011, the Ministry of Interior signed a Memorandum of Understanding with the United Nations Development Programme to enhance the anti-corruption directorate’s capabilities.

Bahrain has conflict-of-interest laws in place, however, in practice, their application in awarding contacts is not fully enforced.

Local NGOs generally do not focus their efforts on corruption-related issues, and human rights activists and members of the political opposition who have spoken out about corruption have at times been detained, prosecuted, and banned from travel for reasons related to their broader political activism. All civil society groups are required to register with the Ministry of Labour and Social Development, which has the discretion to reject registration if it determines the organization’s services unnecessary, already provided by another society, or contrary to state security.

Few cases have been registered by U.S. companies reporting corruption as an obstacle to their investments in Bahrain.

Bahrain signed and ratified the UN Anticorruption Convention in 2005 and 2010, respectively. Bahrain, however, is not a signatory to the OECD Convention on Combating Bribery. In 2018, Bahrain joined the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

General Directorate of Anti- Corruption & Economic & Electronic Security
Ministry of Interior
P. O. Box 26698, Manama, Bahrain
Hotline: 992

Contact at “watchdog” organization:

Sharaf AlMosawi
President
Bahrain Transparency Association
P.O. Box 26059
Phone: +973 39640929
Email: Sharaf115@gmail.com
Website: www.alshafafeyabh.org 

Kuwait

Executive Summary

Kuwait is a country of 1.4 million citizens and 3.3 million expatriates.  It occupies a land mass slightly smaller than New Jersey, but possesses six percent of the world’s proven oil reserves and is a global top ten oil exporter.  The economy is heavily dependent upon oil production and related industries, which are almost wholly owned and operated by the government. The energy sector accounts for more than half of GDP and close to 90 percent of government revenue. The fall in oil prices after OPEC+ failed to agree on production targets in 2019 greatly exacerbated Kuwait’s fiscal deficit. This was only heightened with the onset of the COVID-19 pandemic, which resulted in dramatically reduced oil demand in the first and second quarters of 2020. No one can predict what a post-pandemic economy will look like, except that it is likely to be very different from what it has been. In the background looms the prospect for economic reforms and diversification as outlined by the government in its national development plan, called New Kuwait Vision 2035.

As it develops the private sector to reduce the country’s dependence upon oil, the government faces two central challenges. It must improve the business climate to enable the private sector, and prepare its citizens to successfully work in the private sector. The government has made progress on the business climate, improving from 97 to 83 among 190 countries the World Bank’s 2020 Doing Business Report. Nonetheless, Kuwait remains the lowest ranked of its fellow Gulf Cooperation Council (GCC) countries. Preparing Kuwaitis to work successfully in the private sector and compete internationally may be more difficult. Today, more than 85 percent of all Kuwaitis with jobs work in the public sector, where they receive generous salaries and benefits. Convincing young Kuwaitis that their future is in the private sector will require changing in social attitudes and raising the level of local education so that they may compete internationally.

With a view to attracting foreign investment the government passed a new foreign direct investment law in 2013 that permits up to 100 percent foreign ownership of a business, if approved by the Kuwait Direct Investment Promotion Authority (KDIPA).  All other foreign businesses must abide by existing law that mandates that Kuwaitis, or a GCC national, own at least 51 percent of any enterprise. In approving applications from foreign investors seeking 100 percent ownership, KDIPA looks for job creation, the provision of training and education to Kuwaiti citizens, technology transfer, diversification of national income sources, contribution to exports, support for small- and medium-sized enterprises, and the utilization of Kuwaiti products and services.  KDIPA reported that it had sponsored 37 foreign firms, including six U.S. companies. KDIPA may also provide certain investment incentives such as tax benefits, customs duties relief, and permission to recruit certain foreign employees.

The government remains committed to executing its long-term Vision 2035 national development plan, which focusses on improving the country’s economic infrastructure, such as the construction of new airports, ports, roads, industrial cities, large residential developments, hospitals, a railroad, and a metro rail.  The Northern Gateway initiative, which encompasses the Five Islands or Silk City projects, envisions public and private sector investment in the establishment of an international economic zone that could exceed USD 400 billion over several decades.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 85 of 180 https://www.transparency.org/
cpi2019?/news/feature/cpi-2019
World Bank’s Doing Business Report 2020 83 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 60 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $313 million https://apps.bea.gov/international/
factsheet/factsheet.cfm?Area=506
World Bank GNI per capita 2018 $34,290 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=KW

9. Corruption

Corruption is criminalized, and several investigations and trials involving current or former government officials accused of malfeasance are active.

Transparency International’s 2019 Corruption Perceptions Index ranked Kuwait 85 out of 180 countries.  Within the GCC, Kuwait ranked behind UAE, Qatar, Saudi Arabia, and Oman, ahead of only Bahrain.  According to Transparency International, Kuwait’s numeric score of 40 (out of 100) indicated that the country has a serious corruption problem.

The often-lengthy procurement process in Kuwait occasionally results in accusations of attempted bribery or the offering of other inducements by bidders.  In 1996, the government passed Law No. 25, which required all companies securing contracts with the government valued at KD 100,000 (USD 330,000) or more to report all payments made to Kuwaiti agents or advisors while securing the contract.  The law similarly requires entities and individuals to report any payments they received as compensation for securing government contracts.

Kuwait signed the UN Convention Against Corruption in 2003 and ratified it in 2007.  In 2016, the National Assembly passed legislation to establish the Anti-Corruption Authority, also known as Nazaha (integrity).  The legislation was passed to comply with the United Nations Convention Against Corruption. Nazaha has sent several cases to the Public Prosecution Office for failure to comply with financial disclosure requirements.

Resources to Report Corruption

Contact information for the government agency responsible for combating corruption is as follows:

Mr. Abdulrahman Nimash Al-Nimash.
President
Kuwait Anti-Corruption Authority (Nazaha)
Shamiya, Block 2, Opposite Wahran Park, Kuwait City, Kuwait
Tel:  +965 2464-0200/118
Email: contact@nazaha.gov.kw

Oman

Executive Summary

Oman is taking steps towards making the country a more attractive destination for foreign investment. However, to improve the country’s overall investment climate substantially, the government will need to address its increasing financial problems, lessen its dependency on oil, and open up key sectors to private sector competition and foreign investment. These measures have a renewed sense of urgency in the wake of the dual crises of the oil price collapse and COVID-19 pandemic.

Oman touts its geographic advantages and interest in attracting foreign direct investment (FDI) in key sectors. It is located just outside the Arabian Gulf and Strait of Hormuz, with proximity to shipping lanes carrying a significant share of the world’s maritime commercial traffic and access to larger regional markets.  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 at the crossroads of East Africa and South Asia.

Oman promulgated five new laws in 2019 to promote investment: the Public-Private Partnership Law; the Foreign Capital Investment Law (FCIL); the Privatization Law; the Bankruptcy Law; and the Commercial Companies Law. Oman’s long awaited FCIL holds particular promise for removing minimum share capital requirements and limits on the amount of foreign ownership of an Omani company. Under the U.S.-Oman Free Trade Agreement, U.S. businesses and investors already have the right to 100 percent ownership. Although the new laws provide a legal framework to promote investment, the government has not issued many of the underlying regulations with details for their implementation.

Sultan Haitham’s smooth accession following the passing of the late Sultan Qaboos in January 2020 showed Oman’s political stability, reassuring many investors. Sultan Haitham’s business background, combined with his initial decrees and televised speeches, also raised hopes that he could right Oman’s flagging economy. However, the collapse of oil prices in March due to the COVID-19 oil demand shock, the resulting oversupply, and OPEC+ disagreements highlighted Oman’s oil dependence and chronic fiscal vulnerabilities. Recent credit downgrades also reflect skepticism about the Omani government’s efforts to raise debt, control spending, diversify the economy, and foster private sector-led economic growth.

Even before the sharp economic downturn in 2020, Oman was a challenging place to do business. Smaller companies without in-country experience or a regional presence face considerable bureaucratic obstacles. The top complaints of businesses often relate to onerous requirements to hire and retain Omani national employees and heavy-handed application of “Omanization” quotas. Payment delays to companies are pervasive across various sectors and have done harm to Oman’s image within the business community.In sum, foreign investors will need to understand where Oman’s financial management plans are going in order to restore confidence in the local credit markets. Although the government has implemented across-the-board budget cuts, officials acknowledge that these will not be enough to cover growing fiscal gaps related to the COVID-19 crisis. The government needs to undertake more fundamental reforms to truly open up Oman to foreign investment.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 56 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 68 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 80 of 126 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 USD 1,624 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 USD 15, 140 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

9. Corruption 

U.S. businesses do not 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 40 percent shares in the company or in situations where the private sector company has punishable dealings with government bodies and officials.

2) The Omani Penal Code (promulgated by Royal Decree 7/2018).  In January 2018, the GoO issued a new penal code that completely replaced Oman’s 1974 penal code.  Minimum sentencing guidelines for public officials guilty of embezzlement increased from three months to three years.  The definition of “public officials” expanded to include officers of parastatal corporations in which the GoO 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 is still 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 on implementing 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.  In 2011, the Tender Law (Royal Decree No. 36/2008) was updated to preclude Tender Board officials from adjudicating projects involving interested relatives to “the second degree of kinship.”

It is not yet clear if Sultan Haitham will prioritize rooting out corruption. The late Sultan dismissed several ministers and senior government officials for corruption during his reign. In response to public protests in 2011, a royal decree expanded the powers of the State Financial and Administrative Audit Institution (SFAAI).

Oman has stiff laws, regulations, and enforcement against corruption, and authorities have pursued several high profile cases.  In March 2019, local press and social media focused intensely on an embezzlement scandal and the subsequent arrest of employees at the Ministry of Education. The Courts have signaled that corruption will not be tolerated.

In an extra attempt to prevent and eradicate corruption in the Sultanate of Oman, Oman joined the United Nations Convention Against Corruption (the “UNCAC”) in 2013.  Oman is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

State Audit Institution
http://www.sai.gov.om/en/Complain.aspx   
Phone number: +968 8000 0008

There are no “watchdog” organizations operating in Oman that monitor corruption.

Qatar

Executive Summary

The State of Qatar is the world’s second largest exporter of liquefied natural gas (LNG) and has one of the highest per capita incomes in the world.  A diplomatic and economic embargo of Qatar launched by Saudi Arabia, the UAE, Bahrain, and Egypt in June 2017 continues unabated.  The International Monetary Fund estimates that Qatar’s real gross domestic product (GDP) will grow by 2.8 percent in 2020.  Qatar projects a modest budget surplus in 2020, based on an oil price assumption of USD 55 per barrel.  In contrast to other oil- and gas-dependent economies, Qatar’s LNG supply contracts and relatively low production costs have largely shielded the economy from the impact of the 2014 global oil price downturn.  Qatar maintains high levels of government spending in pursuit of its National Vision 2030 development plan and in the lead-up to hosting the 2022 FIFA World Cup.

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 remains the oil and gas sector, which has attracted tens of billions of dollars in FDI.  In adherence to the country’s National Vision 2030 plan to establish a knowledge-based and diversified economy, the government recently introduced reforms to its foreign investment and foreign property ownership laws to allow 100 percent foreign ownership of businesses in most sectors and real estate in newly designated areas.

There are significant opportunities for foreign investment in infrastructure, healthcare, education, tourism, energy, information and communications technology, and services.  Qatar’s 2020 budgetary spending is focused on infrastructure, health, and education.  By value of inward FDI stock, manufacturing, mining and quarrying, finance, and insurance are the primary sectors that attract foreign investors.  Qatar provides various incentives to local and foreign investors, such as exemptions from customs duties and certain land-use benefits.  The World Bank’s 2020 Doing Business Report ranked Qatar third globally for its favorable taxation regime, and first globally for ease of registering property.  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 LNG extraction.

The government has created a regulatory regime by empowering the Administrative Control and Transparency Authority and the National Competition Protection and Anti-Monopoly Committee to curb corruption and anti-competitive practices.  In 2016, Qatar streamlined its procurement processes and created an online portal for all government tenders to improve transparency.

In recent years, Qatar has begun to invest heavily in the United States through its sovereign wealth fund, the Qatar Investment Authority (QIA) and its subsidiaries, notably Qatari Diar.  QIA has pledged to invest USD 45 billion in the United States.  QIA opened an office in New York City in September 2015 to facilitate these investments.  The second annual U.S.-Qatar Strategic Dialogue in January 2019 in Doha further strengthened strategic and economic partnerships and addressed obstacles to investment and trade.  The third round of strategic talks is expected to take place in Washington, D.C. in 2020.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 30 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 77 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 65 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2017 USD 8.2 billion http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 USD 61,150 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

9. Corruption

Corruption in Qatar does not generally affect business although the power of personal connections plays a major role in business culture.  Qatar is one of the least corrupt countries in the Middle East and North Africa, according to Transparency International’s 2019 Corruption Perceptions Index, and ranked 30 out of 180 nations globally with a score of 62 out of 100, with 100 indicating full transparency.

Qatari law imposes criminal penalties to combat corruption by public officials and the government practices these laws.  In recent years, corruption and misuse of public money has been a focus of the executive office.  Decree 6/2015 restructured the Administrative Control and Transparency Authority, granting it juridical responsibility, its own budget, and direct affiliation with the Amir’s office.  The objectives of the authority are to prevent corruption and ensure that ministries and public employees operate with transparency.  It is also responsible for investigating alleged crimes against public property or finances perpetrated by public officials.  Law 22/2015 imposes hefty penalties for corrupt officials and Law 11/2016 grants the State Audit Bureau more financial authority and independence, allowing it to publish parts of its findings (provided that confidential information is removed),which it was not previously empowered to do.

In 2007, Qatar ratified the UN Convention for Combating Corruption (through Amiri Decree 17/2007) and established a National Committee for Integrity and Transparency, (through Amiri Decree 84/2007).  The permanent committee is headed by the Chairman of the State Audit Bureau.  Qatar also opened the Anti-Corruption and Rule of Law Center in 2013 in Doha in partnership with the United Nations.  The purpose of the center is to support, promote, and disseminate legal principles to fight against corruption.

Those convicted of embezzlement and damage to the public treasury are subject to terms of imprisonment of no less than five and up to ten years.  The penalty is extended to a minimum term of seven and a maximum term of fifteen years if the perpetrator is a public official in charge of collecting taxes or exercising fiduciary responsibilities over public funds.  Investigations into allegations of corruption are handled by the Qatar State Security Bureau and Public Prosecution.  Final judgments are made by the Criminal Court.

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

The Procurement Law 24/2015 is designed to promote a fair, transparent, simple, and expeditious tendering process.  It abolishes the Central Tendering Committee and establishes a Procurement Department within the Ministry of Finance that has oversight over the majority of government tenders.  The new department has an online portal that consolidates all government tenders and provides relevant information to interested bidders, facilitating the process for foreign investors (https://monaqasat.mof.gov.qa ).

Despite these efforts, some American businesses continue to cite lack of transparency in government procurement and customs as recurring issues encountered 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.

Qatar is not a party to the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials.

Resources to Report Corruption

In 2015, the Public Prosecution’s Anti-Corruption Office launched a campaign encouraging the public to report corruption and bribery cases, establishing hotlines and a tip reporting inbox and vowing to protect the confidentiality of submitted information:

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

Saudi Arabia

Executive Summary

During 2019, the Saudi Arabian government (SAG) continued to pursue its ambitious series of socio-economic reforms, collectively known as “Vision 2030.” Aimed at diversifying the Saudi economy away from oil revenues and creating more private sector jobs for a growing and young population, Vision 2030 contemplates the development of new economic sectors and a significant transformation of the economy. Spearheaded by Crown Prince Mohammed bin Salman, the reform program seeks to expand and sharpen the country’s knowledge base, technical expertise, and commercial competitiveness.

To help accomplish these goals and develop nascent industries, Saudi Arabia seeks increased foreign investment and international private sector participation in its economy. As in 2018, the SAG took several steps in 2019 to further improve the Kingdom’s investment climate. Regulatory changes were made to allow foreign investors to own controlling stakes in Saudi companies, a new consolidated authority to protect intellectual property rights was launched, significant investments in infrastructure were made, reforms were introduced to remove guardianship laws and travel restrictions for adult women, and a tourism visa was introduced, opening the Kingdom to non-religious tourism for the first time. To further facilitate investment in priority segments of the economy, the SAG elevated two Saudi authorities to full ministries in 2020: the new Ministry of Investment and the new Ministry of Tourism. Saudi Arabia also held several events in 2019 focused on attracting new foreign investments, including the third annual Future Investment Initiative, the National Industrial Development and Logistics Program, and the Saudi Iron and Steel Conference.

Saudi Arabia’s Capital Market Authority removed the 49 percent ownership limit for foreign strategic investors in companies trading on the Saudi Stock Exchange “Tadawul,” the largest capital market in the Middle East and North Africa (MENA) region. Foreign strategic investors are now able to own controlling stakes in listed enterprises. The Tadawul currently holds ‘emerging market’ status from leading index providers such as the FTSE Russell Emerging Market Index, the S&P Dow Jones Emerging Market Index, and Morgan Stanley Capital International (MSCI). The incorporation of the Tadawul into these funds in 2019 resulted in sizeable foreign capital infusions into the Kingdom, which increased international interest in Saudi markets and economic sectors.

The Saudi Arabian government (SAG) and its new stand-alone intellectual property rights (IPR) agency, the Saudi Authority for Intellectual Property (SAIP), took important steps in 2019 to improve IPR protection. Nearly all IPR institutions and enforcement responsibility have been consolidated into SAIP. Working with other SAG agencies, in 2019 SAIP increased enforcement actions, drafted new IPR regulations, conducted market raids against counterfeit and pirated goods, and launched significant pro-IPR awareness campaigns. In 2019, Saudi Arabia increased in-market seizures of illegal goods and Saudi Customs seized over 3 million counterfeit and illegal goods at its borders and ports. In addition, the illicit satellite and online provider of sports and entertainment content known as “beoutQ” ceased operations in the Kingdom in August 2019.

In December 2019, the Kingdom fulfilled its long-standing objective to publicly list shares of its crown jewel – Saudi Aramco, the most profitable company in the world. The initial public offering (IPO) of 1.5 percent of Aramco’s shares on the Saudi Tadawul stock market on December 11, 2019 was a cornerstone of Crown Prince Mohammed bin Salman’s Vision 2030 program. The largest-ever IPO valued Aramco at $1.7 trillion, the highest market capitalization of any company, and generated $25.6 billion in proceeds, exceeding the $25 billion Alibaba raised in 2014 in the largest previous IPO in history.

Infrastructure remains at the forefront of Saudi Arabia’s ambitions as it pursues its Vision 2030 goal to become the most important logistics hub in the region, linking Asia, Europe, and Africa. By establishing new business partnerships and facilitating the flow of goods, people, and capital, the Kingdom seeks to increase interconnectivity and economic integration with other Gulf Cooperation Council countries. Improvements to transportation, such as the $23 billion Riyadh metro and completion of a new airport in Jeddah in 2019, are intended to support this plan. In addition, Saudi Arabia continues its work to create and expand “economic cities” throughout the Kingdom as hubs for petrochemicals, mining, logistics, manufacturing, and digital industries.

In recognition of the progress made in its investment and business climate, Saudi Arabia’s ranking on several world indexes improved in 2019. The Kingdom jumped 13 places on the IMD World Competitiveness Yearbook 2019, the biggest gain of any country surveyed. Saudi Arabia was ranked the world’s 26th most competitive country, and 7th among G20 countries, supported by improvements to government and business efficiency. Furthermore, the World Bank ranked Saudi Arabia the world’s top reformer and improver in its Doing Business 2020 report. The Kingdom rose 30 places, from 92nd to 62nd, and improved in 9 out of 10 areas measured in the report. Saudi Arabia also climbed three places in the World Economic Forum’s 2019 Global Competitiveness Report rankings, becoming the world’s 36th most competitive economy of 141 surveyed. The Kingdom achieved significant results across each of the 12 index components, ranking first for macroeconomic stability, 17th for market size, and 19th for product market.

On the social front, the Kingdom removed guardianship laws and travel restrictions for adult women as part of its effort to increase female participation in the Saudi economy, which currently stands at only 22 percent. To boost domestic tourism, Saudi Arabia launched a new tourism visa in 2019 for non-religious travelers to visit the Kingdom. Citizens of 49 countries are now able to apply for electronic visas. The SAG also removed the requirement that foreign travelers staying in the same hotel room provide proof of marriage or family relations. The SAG launched its Saudi Seasons initiative in 2019, with 11 tourism ‘seasons’ held in each region of the Kingdom. The program includes events and activities specifically designed to complement the cultural, touristic, and historical touchstones of Saudi Arabia. The Kingdom also continued its work on large-scale tourist hubs being constructed around Saudi Arabia, such as Qiddiya, NEOM, the Red Sea Project, and Amaala, which aim to attract both domestic tourists and visitors from around the world when completed.

Investor concerns persist, however, over the rule of law, business predictability, and political risk. The continued detention and prosecution of activists, including prominent women’s rights activists, remains a significant concern. The ongoing diplomatic rift with Qatar also contributes to uncertainty. Moreover, pressure on Saudi Arabia’s fiscal situation from the sharp downturn in oil prices and demand, as well as the unexpected spending needed to respond to COVID-19 will have a negative impact on the budgets of ministries and state-owned entities. While it is unclear what the specific impact on Saudi’s major development projects will be, fiscal pressure is likely to dampen the SAG’s ambitious plans. Overall budget cuts of 15 percent have already been announced for 2020 and further spending reductions may be imposed.

Despite the launch of SAIP, the protection of intellectual property rights (IPR) also remains a significant concern, particularly for the pharmaceutical industry. Several U.S. and international pharmaceutical companies allege the SAG violated their intellectual property rights and the confidentiality of their trade data by licensing local firms to produce competing generic pharmaceuticals without approval. Industry attempts to engage the SAG on these issues have not led to satisfactory outcomes for the affected companies. Moreover, legal recourse and repercussions for IPR violations remain poorly defined. Primarily for these reasons, the U.S. Trade Representative included Saudi Arabia on its Special 301 Priority Watch List for the second consecutive year.

The economic pressures to generate non-oil revenue and provide more jobs for Saudi citizens have prompted the SAG to implement measures that may weaken the country’s investment climate. In particular, increased fees for expatriate workers and their dependents, as well as “Saudization” polices requiring certain businesses to employ a quota of Saudi workers, have led to disruptions in some private sector activities and may lead to a decrease in domestic consumption levels. Furthermore, the lack of a work-visit visa, and the transition to a high-fee, long-term work visa, which requires a work contract, have hindered expatriate workers, including consultants and senior level private sector officials, from entering the country to advise on new and ongoing projects within their own companies.

Finally, U.S. companies, including those with significant experience in Saudi Arabia, continue to experience payment delays for SAG contracts. It is unclear whether the financial impact of sharply lower oil prices and additional spending on COVID-19 will exacerbate this challenge.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 51 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 62 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 68 of 126 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2018 $11,375 https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2018 $21,600 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

9. Corruption 

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 of up to one million riyals (USD 267,000).  Ministers and other senior government officials appointed by royal decree are forbidden from engaging in business activities with their ministry or organization.  Saudi corruption laws cover most methods of bribery and abuse of authority for personal interest, but not bribery between private parties.  Only senior Control and Anti-Corruption Commission (“Nazaha”) officials are subject to financial disclosure laws.  The government is considering disclosure regulations for other officials, but has yet to finalize them.  Some officials have engaged in corrupt practices with impunity, and perceptions of corruption persist in some sectors.

Nazaha, established in 2011, is responsible for promoting transparency and combating all forms of financial and administrative corruption.  Nazaha’s ministerial-level director reports directly to the King.  In December 2019, King Salman issued three royal decrees consolidating the Control and Investigation Board and the Mabahith’s Administrative Investigations Directorate under the National Anti-Corruption Commission, and renaming the new entity as the Control and Anti-Corruption Commission (“Nazaha”). The decrees consolidated investigations under the new Commission and mandated that the Public Prosecutor’s Office transition its on-going investigations to the new consolidated commission. The Control and Anti-Corruption Commission report directly to King Salman. The Commission recommends anti-corruption reforms, administers and audits anti-corruption databases and program, and investigates and prosecutes alleged corruption.  Furthermore, the Commission has the power to dismiss a government employee even if they are not found guilty by the specialized anti-corruption court.

Some evidence suggests Nazaha has not shied away from prosecuting influential players whose indiscretions may previously have been ignored.  In 2016, for example, it referred the Minister of Civil Service for investigation over allegations of abuse of power and nepotism.  On March 15, Nazaha announced it would charge 298 Saudi and foreign individuals with a range of corruption charges, including a major general and at least two judges.  In April, Nazaha indicted eight individuals, including two individuals from Riyadh’s regional health directorate, on corruption charges related to contracts for quarantine accommodations related to the COVID-19 pandemic.  The Commission regularly publishes news of its investigations on its website (http://www.nazaha.gov.sa/en/Pages/Default.aspx).

SAMA, the central bank, oversees a strict regime to combat money laundering.  Saudi Arabia’s Anti-Money Laundering Law provides for sentences up to 10 years in prison and fines up to USD1.3 million.  The Basic Law of Governance contains provisions on proper management of state assets and authorizes audits and investigation of administrative and financial malfeasance.

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

Saudi Arabia ratified the UN Convention against Corruption in April 2013 and signed the G20 Anti-Corruption Action Plan in November 2010.

Globally, Saudi Arabia ranks 51st out of 180 countries in Transparency International’s Corruption Perceptions Index 2019.

Resources to Report Corruption

The National Anti-Corruption Commission’s address is:

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

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

United Arab Emirates

Executive Summary

The Government of the United Arab Emirates (UAE) is pursuing economic diversification to promote the development of the private sector as a complement to the historical economic dominance of the state.  The country’s seven emirates have implemented numerous initiatives, laws, and regulations to develop a more conducive environment for foreign investment.  The UAE maintains a position as a major trade and investment hub for a large geographic region which includes not only the Middle East and North Africa, but also South Asia, Central Asia, and Sub-Saharan Africa.  Multinational companies cite the UAE’s political and economic stability, population and Gross Domestic Product (GDP) growth, fast-growing capital markets, and a perceived absence of systemic corruption as positive factors contributing to the UAE’s attractiveness to foreign investors.

While the UAE implemented an excise tax on certain products in October 2017 and a five percent Value-Added Tax (VAT) on all products and services beginning in January 2018, many investors continue to cite the absence of corporate and personal income taxes as a strength of the local investment climate, relative to other regional options.

While foreign investment continues to grow, the regulatory and legal framework in the UAE continues to favor local over foreign investors.  There is no national treatment for investors in the UAE, and foreign ownership of land and stocks remains restricted.  In September 2018, the UAE issued Decree-Law No. 19 on Foreign Direct Investment (FDI), which grants licensed foreign investment companies the same treatment as national companies, within the limits permitted by the legislation in force.  A negative list of economic sectors restricted from 100 percent foreign ownership includes 14 major industries.  On March 3, 2020, the Cabinet approved a positive list of economic sectors eligible for 100 percent foreign ownership.  This list covers activities in 13 sectors, including renewable energy, space, agriculture, manufacturing, transport and logistics, hospitality & food services, information and communications services, professional and scientific and technical activities, administrative and support services, education, health care, arts and entertainment, and construction.  The Cabinet confirmed that it will allow individual emirates to set foreign investor ownership limits in each activity.

Foreign investors expressed concern over spotty intellectual property rights protection, a lack of regulatory transparency, and weak dispute resolution mechanisms and insolvency laws.  In 2020 the Cabinet approved a resolution concerning combating commercial fraud.  This resolution established a unified federal mechanism to deal with commercial fraud across the UAE and outlined a process for removal and destruction of counterfeit products.  Labor rights and conditions, although improving, continue to be an area of concern as the UAE prohibits both labor unions and worker strikes.

Free trade zones form a vital component of the local economy and serve as major re-export centers to other markets in the Gulf, South Asia, and Africa.  U.S. and multinational companies indicate that these zones tend to have stronger and more equitable frameworks than the onshore economy.  For example, in free trade zones foreigners may own up to 100 percent of the equity in an enterprise, have 100 percent import and export tax exemptions, have 100 percent exemption from commercial levies, and may repatriate 100 percent of capital and profits.  Goods and services delivered onshore by free zone companies are subject to the five percent VAT.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019  21 of 180 http://www.transparency.org/
research/cpi/overview
World Bank “Ease of Doing Business” Report 2019 16 of 190 www.doingbusiness.org/rankings
Global Innovation Index 2019 36 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($B USD, stock positions) 2018 $17.3 https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2018 $40,880 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

9. Corruption

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

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

Resources to Report Corruption

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

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

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