General Requirements that must be provided before and during the Application for any Foreign Investment License
Written by the Trainee Attorney Maysa Alghamdi
- Saudi Arabia has worked relentlessly at attracting foreign investment, so as to contribute positively to the development of the national economy and the sustainable development, and to increase Saudi manpower and promote the economic competition at both local and international levels, all the while diversifying the sources of income in Saudi Arabia.
- Accordingly, the Saudi Arabian General Investment Authority (SAGIA) was established, which set the investment licensing requirements, procedures and services, and clarified the implementation mechanisms and their relationship with the government authorities, along with the conditions required for conducting these services, and the method for providing post-licensing services by the government authorities represented in the Authority’s business centers. Furthermore, this Authority mentioned the violations established in accordance with the Executive Regulations, along with the rights of the foreign investor and the General Investment Authority, and the restrictions written on the licenses.
- Therefore, in this article I will address the most important general requirements to be provided before and during the application for any foreign investment license.
- Among the initial conditions to apply for an investment license is that the establishment or the job applicant must not have court rulings against him, whether criminal or trade rulings inside or outside the Kingdom, or lawsuits being reviewed inside or outside the Kingdom; furthermore, the establishments must be the ones to produce their products, and said products must comply with the applicable Saudi, Gulf and international specifications. Furthermore, it should be acknowledged, as a start, that the activity of the country of origin must not be among the activities excluded from the foreign investment activities in Saudi Arabia, which are stated in the (ban list) by the General Investment Authority, and they are classified and tabulated in an orderly manner under each description of the activity.
- Note that these banned activities are not fixed, and may change every once in a while, and there are some activities that are hard to change; as they are connected to religious and political constants. Here are examples from the banned activities: –
- Information and Communication Sector
Activities such as publishing books, newspapers, periodicals, directories and mailing lists, and software; screening movies; and publishing audio recordings and music, in addition to the news agencies activities
- Agriculture, forestry and fishing
Marine fishing, fresh water fishing, logging, fishing, hunting and related services activities
- Arts, Entertainment and Recreation
Gambling and betting activities
- Manufacturing Industries
- Making wine, alcoholic beverages, tobacco products; along with distilling, refining and mixing spirits.
- Manufacture of weapons and ammunition, along with the manufacture of military equipment, devices, clothing (manufacture of civil explosives) are from the activities, which had been removed from the excluded list, and they became part of the specialized activities; meaning that they require the approval of their relevant government authority (Ministry of Interior) before issuing the foreign investment license. As for the specialized activities: (Mortgage financing, insurance, financial leasing, banks … etc.) are considered from the specialized activities, which also require the approval of their relevant government authority for issuing the license, which is from the Saudi Arabian Monetary Agency (SAMA).
The Role of the Supreme Economic Council in issuing Investment Licenses
-Aside from any of the activities excluded from the foreign investment, and so the license will be issued after the Supreme Economic Council’s approval. According to the report made after the research and investigation, it turned out that when a foreign establishment wishes to issue an investment license for an activity banned in Saudi Arabia, i.e. the activities within the Negative Sector, where the request for this investment is usually made between the foreign establishment and one of the state’s government authorities (any state party), the foreign establishment will submit this application to the government authority, and it will not sign the contract until after ensuring that the government authority in the state had, in turn, taken the internal procedures necessary for approving this investment and removing the ban thereon in an exceptional manner, and after it had obtained the approval of the Supreme Economic Council to enter this investment in Saudi Arabia; so that the establishment will ensure its rights as an investor. Accordingly the Supreme Economic Council will study and review this topic, consider the establishment’s reputation and strength, take the necessary considerations, review the agreements between the two states, and other considerations it deems necessary, essential and fundamental to the state’s interests, which are reflected on its safety and its political, economic and social entity, in order to approve the license… Regardless, there may be other exceptions and completely different measures such as if there is a memorandum of understanding between the two governments.
-As for the most important documents required for the issuance of the investment license, the investment applications provided by the applicants must contain all their distinctive local or global expertise, as well as their financial and organizational ability to activate the desired investment in the Kingdom, which must be summarized in:
- A clear plan of action to activate the capital to be invested; and it should include a specific timetable and a feasibility study.
- The production method according to the latest international standards and specifications
- The recruitment of Saudi nationals and their training plan.
- A clarification and a statement for the positive contribution of this investment in the technology transfer and the localization of quality jobs; in addition to enhancing the Kingdom’s competitiveness in the global markets, while increasing exports.
- In addition, there are special conditions linked to the nature of each investment license application, whether through a Saudi partner or a 100% foreign investment; as well as basic conditions regarding the foreign investor’s capacity, which will be defined in the next article, with God’s willing.
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