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The General Investment Authority adopts the International Standard Industrial Classification

Introduction

The International Standard Industrial Classification of All Economic Activities is a United-Nations system for classifying economic data, and the International Standard Industrial Classification of All Economic Activities is used on a large scale at the national and international levels in data classification, according to the common economic activity type in the production, employment and GDP fields, and in other statistical fields. The International Standard Industrial Classification of All Economic Activities is an essential tool for studying the economic phenomenon and the comparability of the international data and also to provide guidance for the development of national classifications, and promote the development of acceptable national statistical systems.

As part of the National Transformation Plan and the 2030 Vision, the government agencies in Saudi Arabia are collectively working on improving the investment environment through the application of the international business standards; as the General Investment Authority and the General Authority for Statistics established and organized the national classification of the economic activities according to the fourth edition of the International Standard Industrial Classification and the investment regulations applicable in the Kingdom of Saudi Arabia; in order to collect reports on these economic activities and produce data to be shared at the national and international levels. Mr. Ibrahim Saleh Al Suwail, Sub-Governor of the General Investment Authority for the Investors’ Services and Counselling, announced the implementation of this classification on the 1st of January 2018 and its enforcement at the beginning of 2018; in order to facilitate the current corporate operations and attract more foreign investment in the Saudi market.

“The main purpose of this classification is to provide a range of departments, groups, branches and categories of activities that can be used for the collection and dissemination of statistics, according to the activities”. The classification of economic activities is defined as a method, through which the counting units can be grouped according to a serial order determined by homogeneous groups; in order to create a general framework for comparison between the statistical data on the local, regional and international levels; as the economic activity data is divided, according to the manual prepared for this purpose, into specific grades in a manner where the characteristics of the classified economic activities are similar in a single grade, and this similarity is present in the type of produced goods and services and their use, the relevant services, the intermediate inputs, the used technology and the financing methods.

The enterprise or the unit of the economic activity type is considered the basis of this classification, where the units involved in the formation of the different economic sectors in the appropriate place in the classification are classified according to the main practiced economic activity, regardless of the ownership or working method. The classification aims to provide a range of statistical data, according to the aspects of the economic activity from production, employment, wages, physical capital assets, profits and losses, and budgets; in addition to providing a comprehensive framework for the economic activities. The classification consists of units, sections, groups and categories at the fourth level; in addition to the branches, and the economic activity and its description.

Main Objectives for the Application of the International Standard Industrial Classification:

  • Provide a wide range of business options.
  • Have clear and specific licensing standards by the General Investment Authority at the international level.
  • Monitor the licensed business activities through the International Standard Industrial Classification codes.
  • Monitor the companies’ performance in order to support and promote growth in the market.
  • Implement the international standards accredited and recognized by various countries around the world
  • Help the General Investment Authority and the General Authority for Statistics in the collection of reports and statistical data necessary for the purposes of improving the investment environment in the Kingdom of Saudi Arabia.
  • Apply a uniform standard licensing system followed by all the competent government authorities in Saudi Arabia.

Application Scope:

The criteria of the International Standard Industrial Classification of All Economic Activities will be applied on all the foreign investments involved in the Saudi market; as it will be applied to the modern companies only. As for companies that have already issued foreign investment licenses before the application of the International Standard Industrial Classification criteria, these criteria will not be applicable to them, and they will work according to the previously licensed activities.

Drafted by: Lama Alshehri – Hazim Almadani

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