The most prominent features of the new foreign investment law

The Ministry of Investment recently announced the new investment system that is expected to enter into force at the beginning of 2025,This is an extension of the series of legislative and economic reforms undertaken by the government of the Kingdom of Saudi Arabia under the umbrella of national transformation (Vision 2030).

Explore the National Investment Strategy:

Foreign investment falls under the second pillar of Vision 2030, as the Kingdom of Saudi Arabia seeks to diversify sources of income and improve the investment environment with the aim of building a global investment force to achieve economic sustainability.Accordingly, the National Investment Strategy issued by Cabinet Resolution No. (134) and Cabinet Resolution No. (16917) was confirmed, which is based on four main axes that include developing investment opportunities, diversifying financing options, targeting all types of investors, and enhancing the competitiveness of the investment environment.

Investment principles and policies in the Kingdom:

Investment principles and policies are based on ensuring equality between Saudi and non-Saudi investors, and enhancing the sustainability of investments, as investor complaints are dealt with in a transparent manner. Protection of the property of all investments is also guaranteed in accordance with the regulations in the Kingdom. Investment incentives are provided when needed while ensuring full transparency when granting. A list of investment incentives is provided and granted according to general, clear, and non-discriminatory criteria..

In addition, environmental and social standards are maintained to ensure that Saudi and non-Saudi investors adhere to regulations related to work, health and environmental safety in accordance with national regulations and policies and international agreements to which Saudi Arabia has joined. The science and technology resulting from foreign direct investment are also transferred and localized in accordance with the Kingdom’s international obligations.

Methodology for preparing the system and international experiences and practices:

First of all, the Ministry assessed the current situation by reviewing the provisions of the current foreign investment system, and surveying the opinions and proposals submitted by international bodies. After that, comparative international experiences were studied, such as(Indonesia, Singapore, Germany, the United Arab Emirates, Turkey, the United States of America) in order to address the shortcomings that were diagnosed in the first trip.

The most prominent positive effects of the updated system are the adoption of investment principles and policies that are consistent with international best practices, in a way that enhances the flow of foreign investments into the Kingdom, increases non-oil revenues, and reduces the financial gap. This will reflect positively on the state’s general budget and the national economy by generating new job opportunities. The system also focuses on enabling national programmes, initiatives and projects that rely on local and foreign direct investment to achieve sectoral plans and strategies, in line with the Kingdom’s Vision 2030, which aims to diversify the economy outside the oil sector..

In addition, the updated investment system will contribute to attracting investors to participate in financing and developing major national projects, and aims to create a competitive environment for investors of different sectors and sizes. The system seeks to provide better quality services to beneficiaries at competitive prices, which stimulates research and innovation and creates new opportunities for investment in various fields. It also contributes to localizing expertise, transferring technology, and improving the level of qualification and training of human capital. The system enables investors to raise their level of commitment to applying targeted safety, health and environmental standards, taking into account international reporting standards related toESG, the sense of responsibility for preserving land and natural resources, makes it a tool to attract investors towards green investments and create a more sustainable economy.

The most prominent legislative amendments:

The most prominent amendment brought about by the updated law is amending the name and scope of the law to make it comprehensive for the investment process, whether local or foreign. The new system also abolished the requirement for the foreign investor to obtain an investment license, and transferred jurisdiction from the Council of Ministers to a ministerial committee with regard to excluded activities according to objective criteria.

It also explicitly stipulated equality between the local investor and the foreign investor, and came with multiple texts that guarantee the governance of the investment process from many aspects, such as investment incentives, a clear mechanism to protect investors, freedom of action in investment activity, and transfer of capital without delay. Protecting intellectual property and adopting alternative means of resolving investment disputes, including arbitration, mediation and conciliation.

The new legislation received the support of international advisory entities, including the International Monetary Fund, which praised the equality and equal opportunities embraced by the legal texts of the legislation.