Policies Towards Foreign Direct Investment

The Government of Bahrain (GOB) has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses. Increasing foreign direct investment (FDI) is one of the government’s top priorities. The GOB permits 100 percent foreign ownership of a business or branch office, without the need for a local partner. The GOB does not tax corporate income, personal income, wealth, capital gains, withholding or death/inheritance. There are no restrictions on repatriation of capital, profits or dividends, aside from income generated by companies in the oil and gas sector, where profits are taxable at the rate of 46 percent. The Bahrain Economic Development Board (EDB), charged with promoting FDI in Bahrain, places particular emphasis on attracting FDI to the manufacturing, logistics, information and communications technology (ICT), financial services and tourism and leisure sectors. As a reflection of the Kingdom’s openness to FDI, the EDB won the 2019 United Nations Top Investment Promotion Agency in the Middle East award for its role in attracting large-scale investments.

To date, U.S. investors have not alleged any legal or practical discrimination against them based on nationality.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOB permits foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. The GOB imposes only minimal limits on foreign control, and the right of ownership and establishment of a business. The Ministry of Industry, Commerce and Tourism (MoICT) maintains a small list of business activities that are restricted to Bahraini ownership, including press and publications, Islamic pilgrimage, clearance offices, and workforce agencies. The U.S.-Bahrain Free Trade Agreement (FTA) outlines all activities in which the two countries restrict foreign ownership.

U.S citizens may own and operate companies in Bahrain, though many such individuals choose to integrate influential local partners into the ownership structure to facilitate quicker resolution of bureaucratic issues such as labor permits, issuance of foreign visas, and access to industrial zones. The most common challenges faced by U.S firms are those related to bureaucratic government processes, lack of market information, and customs clearance.

Other Investment Policy Reviews

The World Trade Organization (WTO) has conducted a formal Trade Policy Review of Bahrain every seven years. Its last formal review was in 2014 (see link below). https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(@Symbol=%20wt/tpr/g/*)%20and%20((%20@Title=%20bahrain%20)%20or%20(@CountryConcerned=%20bahrain))&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true# 

Business Facilitation

Bahrain ranked 43rd out of 190 countries on the World Bank’s overall Ease of Doing Business Indicator in 2019.

The Central Bank of Bahrain’s regulatory sandbox allows local and international FinTech firms and digitally focused financial institutions to test innovative solutions in a regulated environment, allowing successful firms to obtain licensing upon successful product application.

The MoICT operates an online commercial registration portal, “Sijilat” (www.sijilat.bh ) to facilitate the commercial registration process. Through Sijilat, businesspeople can obtain a business license and requisite approvals from relevant ministries. The business registration process normally takes two to three weeks but can take longer if a business requires specialized approvals. In practice, some businesspeople retain an attorney or clearing agent to assist them through the commercial registration process.

In addition to obtaining primary approval to register a company, most business owners must also obtain licenses from the following entities to operate their businesses:

• MoICT
• Ministry of Electricity and Water
• The Municipality in which their business will be located
• Labour Market Regulatory Authority
• General Organization for Social Insurance
• The National Bureau for Revenue (Mandatory if the business revenue expected to exceed BD 37,500)

The GOB provides industrial lands at reduced rental rates for short periods of time to incentivize foreign investment in Bahrain’s targeted investment zones.

Outward Investment

The GOB neither promotes nor incentivizes outward investment. The GOB does not restrict domestic investors from investing abroad.

Bahrain’s major state-owned enterprises (SOEs) include the Bahrain Petroleum Company (BAPCO), Aluminum Bahrain (ALBA), Gulf Petrochemical Industries Company (GPIC), Gulf Air, Bahrain Telecommunications Company (BATELCO), the National Bank of Bahrain (NBB) Bahrain Flour Mills, Tatweer Petroleum, and the Arab Shipbuilding & Repair Yard (ASRY). While the GOB maintains full ownership of oil production, refineries, and heavy industries, it allows investment in ALBA, BATELCO, and ASRY, and encourages private sector competition in the banking, manufacturing, telecommunications, shipyard repair, and real estate sectors.

The SOEs are managed by two government-run holding companies: the National Oil and Gas Authority (NOGA) Holding Company, which owns nine energy sector companies, and Mumtalakat, which owns 38 domestic companies in all other sectors. The full portfolio of the NOGA Holding Company can be viewed at www.nogaholding.com/portfolio/ , while the full portfolio of Mumtalakat companies can be viewed at www.bmhc.bh .

Bahrain is not a party to the WTO Government Procurement Agreement (GPA), however, in 2008 Bahrain was granted “observer” status in the GPA committee.

Private enterprises can, in theory, compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives. In practice, however, given the relatively small size of Bahrain’s economy, large SOEs such as ALBA, BAPCO, GPIC and ASRY have an outsized influence in the market.

In 2002 the GOB instituted guidelines to ensure its SOEs were in line with OECD policies on corporate governance. SOEs produce quarterly reports. The National Audit Office monitors all SOEs and annually reports any irregularities, mismanagement, and corruption.

Both funds are managed by government-appointed boards: Mumtalakat’s board is chaired by the Deputy Prime Minister, Sh. Khalid bin Abdulla AlKhalifa, and NOGA Holding’s board is chaired by the Minister of Oil, Sh. Mohammed bin Khalifa AlKhalifa.

All Bahraini SOEs have an independent board of trustees with well-structured management. The Mumtalakat Holding Company is represented by a Board of Trustees appointed by the Crown Prince, while NOGA Holding’s Board of Trustees is appointed by a Royal Decree. Each holding company then appoints the Board of Trustees for the SOEs under its authority. In some cases, the appointment of the Board of Trustees is politically driven.

Privatization Program

The GOB has been supportive of privatization as part of its Vision 2030 economic development plan, and advocates for increased foreign investment as a means of driving private sector growth. The GOB’s decision to privatize the telecommunications sector in the early 2000s is an example of incentivizing private sector growth in Bahrain. In 2018, the GOB began to privatize some medical services, such as pre-employment screenings that it previously had conducted. It has also begun the process of privatizing certain support services at GOB medical facilities, such as transportation, cleaning, laundry, textiles, maintenance, and security.

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 production-sharing agreements.

* Source for Host Country Data: www.data.gov.bh

The energy sector is dominated by parastatals, as law precludes private participation in most sector activities.  Outside the energy sector, Kuwait has few fully state-owned enterprises (SOEs). One notable exception is Kuwait Airways.  No published list of SOEs exists. The government owns shares in various Kuwaiti companies through the Fund for Future Generations managed by the KIA or the Social Security Fund managed by Kuwait’s Public Institution for Social Security.  SOEs are permitted to control their own budgets.

Privatization Program

The National Assembly has passed several privatization laws since 2008.  One legal stipulation is that Kuwaiti employees have the right to retain their jobs in a privatized company for at least five years with the same salary and benefits.  Another stipulation is that the privatization of any public service must offer shares as follows: 40 percent of shares reserved for Kuwaiti citizens;

• 40 percent of shares reserved for Kuwaiti citizens;
• 20 percent of shares retained by the government;
• five percent of shares distributed to Kuwaiti employees, both former and current; and
• the remaining 35 percent of shares sold at auction to a local or foreign investor.

Telecommunications is the largest service sector in Kuwait.  The Ministry of Communications owns and operates landlines and owns a fiber optic network.  Internet providers may access both landlines and fiber optic networks. Three private mobile telephone companies provide cellular telephone and data services to the country.  The government owns a significant minority interest in each, but foreign companies own majority interests in two of them. In 2014, the National Assembly passed legislation creating the independent Communication and Information Technology Regulatory Authority (CITRA), in part to prepare for the liberalization of mobile communications and Internet markets.  Officially opened in 2016, CITRA serves as the primary national telecom regulator and cybersecurity agency. CITRA also has a mandate to attract hi-tech investment.

According to the 2019 World Investment Report published by the United Nations Conference on Trade and Development, Kuwait attracted USD 346 million in foreign direct investment in 2018, compared to USD 3.75 billion in foreign direct investment outflows.

According to the U.S. Department of Commerce Bureau of Economic Analysis, 2018 U.S. direct investment in Kuwait was USD 313 million, up from USD 296 million in 2017.  Kuwait’s FDI position in the United States totaled USD 1.26 billion in 2018. Kuwaiti direct investment in the United States is primarily in real estate. Estimates of total Kuwaiti investment in the United States, including securities and real estate, range from USD 500 billion to USD 1 trillion.

*Host country source: https://www.cbk.gov.kw/en/statistics-and-publication/publications/quarterly-statistical-bulletin 

Policies Towards Foreign Direct Investment

Oman actively seeks foreign direct investment and is in the process of improving the regulatory framework to encourage such investments.  The new FCIL allows 100 percent foreign ownership in most sectors and removed the minimum capital requirement. The law effectively provides all foreign investors with an open market in Oman, privileges already extended to U.S. nationals due to the provisions in the U.S.-Oman Free Trade Agreement (FTA), although the FTA goes further in providing American companies with national treatment.

The Government of Oman’s (GoO) “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 GoO includes bidders’ demonstration of support for ICV as one factor in government tender awards.  While the GoO 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.

Limits on Foreign Control and Right to Private Ownership and Establishment

With the implementation of the United States-Oman 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.  The government 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.

With the implementation of the United States-Oman 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.  The government 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.

The new FCIL also contained a “negative list” of 37 additional sectors. The Ministry of Commerce and Industry (MOCI) is applying the new law on a reported case-by-case basis, and it remains uncertain whether a 100 percent foreign-owned company can now undertake an activity which is not on the negative list.

Under the old law, foreign nationals seeking to own 100 percent shares in local companies had to seek MOCI’s approval, which required a detailed business plan highlighting the capital investment and the projected benefits to the Omani economy, including the number of local jobs to be created; the old law also required a minimum of two shareholders and two directors and minimum capital of one million Omani rials (approximately $2.6 million).

Over the past year, Oman has banned non-Omani ownership of real estate and land in various governorates and other areas the government deems necessary to restrict under Royal Decree 29/2018.  However, Oman has allowed the establishment of real estate investment funds (REIF) in order to encourage new inflows of capital into Oman’s property sector.  The new regulations permit foreign investors, as well as expatriates in Oman, to own units in REIFs.  In January, Oman’s first REIF (Aman) launched an initial private offering valued at $26 million for Omani and non-Omani investors.

Other Investment Policy Reviews

Oman has not undergone any third-party investment policy reviews in the past six years.  The last WTO Trade Policy Review was in April 2014  (Link to 2014 report: https://www.wto.org/english/tratop_e/tpr_e/tp395_e.htm .)

Business Facilitation

The GoO has tasked the Public Authority for Investment Promotion and Export Development (Ithraa) with attracting foreign investors and smoothing the path for business formation and private sector development.  Ithraa works closely with government organizations and businesses based in Oman and abroad to provide a comprehensive range of business support.  Ithraa also offers a comprehensive range of business investor advice geared exclusively to support foreign companies looking to invest in Oman, based on company-specific needs and key target sectors identified under the country’s diversification program. In November 2019, Ithraa launched a new “Invest in Oman” portal with some information about investment opportunities.

The GoO has tasked the Public Authority for Investment Promotion and Export Development (Ithraa) with attracting foreign investors and smoothing the path for business formation and private sector development.  Ithraa works closely with government organizations and businesses based in Oman and abroad to provide a comprehensive range of business support.  Ithraa also offers a comprehensive range of business investor advice geared exclusively to support foreign companies looking to invest in Oman, based on company-specific needs and key target sectors identified under the country’s diversification program. In November 2019, Ithraa launched a new “Invest in Oman” portal with some information about investment opportunities.

MOCI has an online business registration site, known as “Invest Easy” (business.gov.om ), and businesses can obtain a Commercial Registration certificate from MOCI in approximately three or four days.  However, commercial registration and licensing decisions often require the approval of multiple ministries, slowing down the process in many cases.  In 2019, MOCI set up the Investment Services Center (ISC) to integrate as many as 75 government agencies and private sector service providers into its “Invest Easy” portal in 2020 so it can serve as a single window for businesses in Oman. The various investment promotion entities and online portals appear to have overlapping and possibly redundant roles.

Outward Investment

The government neither promotes nor provides incentives for outward investment but does not restrict its citizens from investing abroad.

State-Owned Enterprises (SOE) 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.  The government does not have a complete, published 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, telecom and information technology. 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 composed of various government officials, with a cabinet-level senior official usually serving as chairperson.

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 GoO published about its 2020 budget did not include allocations to and earnings from most SOEs.

Privatization Program

The GoO has indicated that it hopes to reduce its budget deficits by privatizing or partially privatizing some government-owned companies.  Although the plan for privatization is not publicly available, the GoO has already begun to reorganize its some of its holdings for public offerings.

In March, State Grid Corporation of China (SGCC) acquired a 49 per cent stake in 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 one example of a past partial privatization.  In this case, the government offered Omantel stock on the Muscat Securities Market, but only to Omani investors.

The government allows foreign investors to participate fully in some privatization programs, even in drafting public-private partnership frameworks.  In July 2019, Oman established the Public Authority for Privatization and Partnership (PAPP), which is reportedly examining 38 public-private partnership projects for implementation. Forthcoming executive regulations for the new Privatization law reportedly will clarify the role of PAPP in public-private partnerships.

In 2018, total FDI inflow into Oman was $4.1 billion, an increase from $2.9 billion in 2017, according to the UN World Investment Report 2019. Oman’s National Centre for Statistics and Information (NCSI) is currently the only host country source of 2018 data on FDI.  Total cumulative FDI at the end of the second quarter of 2018, was RO 9.7 billion (over $25.22 billion) compared to RO 8.3 billion (about $21.58 billion) from the second quarter of last year, a growth rate of almost 17 percent.  The United Kingdom remains by far the biggest investor in FDI, followed by the UAE, the United States, Kuwait, and China (see Table 3).

Major foreign investors that have entered the Omani market within the last five years 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), and Vale (Brazil).

* Source for Host Country Data: National Centre for Statistical Analysis, 2018 Q2. 

Table 4: Sources of Portfolio Investment
Data not available.

Policies Toward Foreign Direct Investment

Attracting foreign direct investment remains a critical component of the SAG’s broader Vision 2030 program to diversify an economy overly dependent on oil and to create employment opportunities for a growing youth population. As such, the SAG seeks foreign investment that explicitly promotes economic development, transfers foreign expertise and technology to Saudi Arabia, creates jobs for Saudi nationals, and increases Saudi Arabia’s non-oil exports. The government encourages investment in nearly all economic sectors, with priority given to transportation, health/biotechnology, information and communications technology (ICT), media/entertainment, industry (mining and manufacturing), and energy.

Saudi Arabia’s economic reforms are opening up new areas for potential investment. For example, in a country where most public entertainment was once forbidden, the SAG now regularly sponsors and promotes entertainment programming, including live concerts, dance exhibitions, sports competitions, and other public performances. Significantly, the audiences for many of those events are now gender-mixed, representing a larger consumer base. In addition to the reopening of cinemas in 2018, the SAG has hosted Formula E races, PGA European Tour professional golf tournaments, a world heavyweight boxing title match, and a professional tennis tournament. Saudi Arabia launched the 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. As part of the Riyadh Season, the Kingdom organized a first-ever car exhibition and auction in Riyadh, which attracted 350 U.S. exhibitors.

The SAG is proceeding with “economic cities” and new “giga-projects” that are at various stages of development and is seeking foreign investment in them. In 2020, the Kingdom announced the opening of a NEOM Airport, an important milestone for opening the northwest territory for development. These projects are large-scale and self-contained developments in different regions focusing on particular industries, e.g., technology, energy, tourism, and entertainment. Principal among these projects are:

• Qiddiya, a new, large-scale entertainment, sports, and cultural complex near Riyadh;
• King Abdullah Financial District, a commercial center development with nearly 60 skyscrapers in Riyadh;
• Red Sea Project, a massive tourism development on the archipelago of islands along the western Saudi coast, which aims to create 70,000 jobs and attract one million tourists per year.
• Amaala, a wellness, healthy living, and meditation resort on the Kingdom’s northwest coast, projected to include more than 2,500 luxury hotel rooms and 700 villas.
• NEOM, a $500 billion long-term development project to build a futuristic “independent economic zone” in northwest Saudi Arabia.

Pressure on Saudi Arabia’s fiscal situation from the sharp downturn in oil prices and 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 impact on specific development projects will be, fiscal pressure is likely to dampen the SAG’s ambitious plans in the near term.

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 guides and a catalogue of current investment opportunities on its website (https://investsaudi.sa/en/sectors-opportunities/).

MISA has introduced e-licenses for the first time as part of its ongoing efforts to provide a more efficient and user-friendly process. An online “instant” license issuance or renewal service is now being offered by MISA to foreign investors that are listed on a local or international stock market and meet certain conditions. Saudi Arabia recently opened the following additional sectors to foreign investors: (i) road transport, (ii) real estate brokerage, (iii) audiovisual services and (iv) recruitment and related services.

Despite Saudi Arabia’s overall welcoming approach to foreign investment, some structural impediments remain. Foreign investment is currently prohibited in 10 sectors on the Negative List, including:

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

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

Foreign investors must also contend with increasingly strict localization requirements in bidding for certain government contracts, labor policy requirements to hire more Saudi nationals (usually at higher wages than expatriate workers), an increasingly restrictive visa policy for foreign workers, and gender segregation in business and social settings (though gender segregation is becoming more relaxed as the SAG introduces socio-economic reforms).

Additionally, in a bid to bolster non-oil income, the government implemented new taxes and fees in 2017 and early 2018, including significant visa fee increases, higher fines for traffic violations, new fees for certain billboard advertisements, and related measures. On July 1, 2020, the SAG will increase the value-added tax (VAT) from five percent to 15 percent. The VAT was originally introduced in January 2018, in addition to excise taxes implemented in June 2017 on cigarettes (at a rate of 100 percent), carbonated drinks (at a rate of 50 percent), and energy drinks (at a rate of 100 percent).

Limits on Foreign Control and Right to Private Ownership and Establishment

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

With respect to other non-oil natural resources, the national mining company, Ma’aden, has a $12 billion joint venture with Alcoa for bauxite mining and aluminum production and a $7 billion joint venture with the leading American fertilizer firm Mosaic and SABIC to produce phosphate-based fertilizers.

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

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

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

Other Investment Policy Reviews

Saudi Arabia completed its second WTO trade policy review in late 2015, which included investment policy (https://www.wto.org/english/tratop_e/tpr_e/tp433_e.htm ).

Business Facilitation

In addition to applying for a license from MISA, foreign and local investors must register a new business via the Ministry of Commerce (MOC), which has begun offering online registration services for limited liability companies at: https://mc.gov.sa/en/ . Though users may submit articles of association and apply for a business name within minutes on MOC’s website, final approval from the ministry often takes a week or longer. Applicants must also complete a number of other steps to start a business, including obtaining a municipality (baladia) license for their office premises and registering separately with the Ministry of Labor 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 a foreign investor on average three to five months from the time an initial MISA application is completed, placing the country at 141 of 190 countries in terms of ease of starting a business, according to the World Bank (2019 rankings). With respect to foreign direct investment, the investment approval by MISA is a necessary, but not sufficient, step in establishing an investment in the Kingdom; there are a number of other government ministries, agencies, and departments regulating business operations and ventures. In 2019, MISA established offices in the United States, starting in Washington D.C., to further facilitate investment in Saudi Arabia.

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

Outward Investment

Saudi Arabia does not restrict domestic investors from investing abroad. Private Saudi citizens, Saudi companies, and SAG entities hold extensive overseas investments. The SAG has been transforming its Public Investment Fund (PIF), traditionally a holding company for government shares in state-controlled enterprises, into a major international investor and sovereign wealth fund. In 2016, the PIF made its first high-profile international investment by taking a $3.5 billion stake in Uber. The PIF has also announced a $400 million investment in Magic Leap, a Florida-based company that is developing “mixed reality” technology, and a $1 billion investment in Lucid Motors, a California-based electric car company. In the first half of 2020, the PIF made a number of new investments, including in Facebook, Starbucks, Disney, Boeing, Citigroup, LiveNation, Marriott, several European energy firms, and Carnival Cruise Lines. Saudi Aramco and SABIC are also major investors in the United States. In 2017, Aramco acquired full ownership of Motiva, the largest refinery in North America, in Port Arthur, Texas. SABIC has announced a multi-billion dollar joint venture with ExxonMobil in a petrochemical facility in Corpus Christi, Texas.

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

According to the 2020 UNCTAD World Investment Report, Saudi Arabia’s total FDI inward stock was $236.1 billion and total FDI outward stock was $123.1 billion (in both cases, as of 2019).

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

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

Source: IMF’s Coordinated Portfolio Investment Survey (CPIS); data as of December 2017.

Policies Towards Foreign Direct Investment

The UAE is generally open to FDI, citing it as a key part of its long-term economic plans.  The UAE Vision 2021 strategic plan aims to achieve FDI flows of five percent of Gross National Product (GNP), a number one ranking for the UAE in the Global Index for Ease of Doing Business, and a place among the top 25 countries worldwide and second regionally in the Global Competitiveness Index.  A letter issued by Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum (MBR) on January 4, 2020 outlined the ruler’s vision for 2020 and beyond, pledging increased government accountability and a push for greater government efficiency.  The letter called for the formation of the Dubai Council, chaired by MBR and his sons, overseeing six sectors in Dubai:  the economy, services for citizens, governmental development, infrastructure, justice and security, and health and knowledge sectors.  UAE investment laws and regulations specific to Dubai are evolving to support the Council’s initiatives in these sectors.

While laws allow foreign-owned free zone companies to operate onshore in some instances, and permit majority-Gulf Cooperation Council (GCC) ownership of public joint stock companies, there is no national treatment for foreign investors, and foreign ownership of land and stocks is restricted.  Non-tariff barriers to investment persist in the form of restrictive agency, sponsorship, and distributorship requirements, although several emirates have recently introduced new long-term residency visas and land ownership rights in an attempt to keep expatriates with sought-after skills in the UAE.  Each emirate has its own investment promotion agency.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign companies and individuals are limited to 49 percent ownership/control in any part of the UAE not in a free trade zone, except in specific economic sectors eligible for 100 percent foreign ownership.  These restrictions have been waived on a case-by-case basis.  The 2015 Commercial Companies Law allows for full company ownership by GCC nationals.  Neither Embassy Abu Dhabi nor Consulate General Dubai (collectively referred to as Mission UAE) has received any complaints from U.S. investors that they have been disadvantaged relative to other non-GCC investors.

Other Investment Policy Reviews

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

Business Facilitation

UAE officials emphasize the importance of facilitating business and tout the broad network of free trade zones as attractive to foreign investors.  The UAE’s business registration process varies by emirate, but generally happens through an emirate’s Department of Economic Development.  Business registrations are not available online.  Links to information portals from each of the emirates are available at https://ger.co/economy/197 .  At a minimum, a company must generally register with the Department of Economic Development, the Ministry of Human Resources and Emiratization, and the General Authority for Pension and Social Security, with a notary required in the process.  In October 2019, Dubai introduced a ‘Virtual Business License’ for non-resident entrepreneurs and freelancers in 101 countries.

In 2017, Dubai’s Department of Economic Development introduced an “Instant License” valid for one year, under which investors can obtain a license in minutes without a registered lease agreement.  In 2019, the Dubai Free Zone Council allowed companies to operate out of multiple free zones in Dubai through a single license under the “one free zone passport” scheme.  In 2018, Abu Dhabi announced the issuance of dual licenses enabling free zone companies to operate outside the free zones and to participate in government tenders.  In 2018, Sharjah Emirate also announced that foreigners may purchase property in the emirate without a UAE residency visa on a 100-year renewable land lease basis.

Outward Investment

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

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

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

Privatization Program

There is no privatization program in the UAE.  There have been several listings of portions of SOEs, on local UAE stock exchanges, as well as some “greenfield” IPOs focused on priority projects.

* Economic Report: Ministry of Economy

Data from the Annual Report of the Ministry of Economy (2019) indicates that the GDP for 2018 in real prices (base year 2010) were approximately USD $392.7 billion, while the estimated GDP at current prices was about USD $414.1 billion in 2018.

According to the UAE Ministry of Economy’s Annual Economic Report 2019, the net annual FDI inflows to the UAE in 2018 were $10.4 billion, similar to 2017.  The largest investors in the UAE were:  India, United States, UK, Japan, China, Saudi Arabia, Germany, Kuwait, France and the Netherlands.

Table 4: Sources of Portfolio Investment
Data not available.