(MENAFN - Arab News) Saudi Arabia has become one of the most investment-friendly states in the world, with foreign investment inflows reaching over SR600 billion. A huge increase in the number of joint projects being implemented with the participation of foreign capital in various sectors as well as the record number of investment licenses issued by the Saudi Arabian General Investment Authority (SAGIA) during the last 10 years are the major factors contributing to this, says Mahdi Al-Nahari, chairman of the Foreign Investment Committee at the Jeddah Chamber of Commerce and Industry.
In an exclusive interview with Arab News, Mahdi Al-Nahari speaks at length about the attractive investment environment prevailing in the Kingdom as a result of the incentives and support being extended by the government.
Al-Nahari, a prominent businessman, also says that there has been a tremendous increase in the number of foreign investor licenses issued by the chamber after the committee was set up under his captaincy.
More than 4,800 licenses, out of a total 7,400 foreign investor licenses, issued all over the Kingdom were from Jeddah.
Following are excerpts from the interview:
When did the Foreign Investment Committee come into force? Are there any other committees to serve the interests of foreign investors?
The committee was set up nearly one year ago. We made such a demand during a meeting with the chamber's board members early 2011 and they approved it. The committee is the first of its kind among other chambers or the Council of Saudi Chambers of Commerce and Industry.
What about the exact number of foreign investors in the Kingdom?
The number of investors who started pumping money into the Kingdom from all over the world is on the rise. There are investors from more than 40 countries, including Arabs, Asians, Europeans and Americans. A total of 7,500 foreign investment licenses have been issued in various regions of the Kingdom until 2009, of which Jeddah's stake is 4,800. Jeddah has become the most attractive Saudi city for foreign investors.
Saudi Arabia is regarded as a rich country. Hence, some people believe that there is no need to attract foreign investors into the Kingdom. Please comment on it.
All countries, irrespective of whether they are in the West or in the East, have opened doors for foreign investment and are competing each other to attract more Foreign Direct Investment (FDI). Foreign investment inflows would spur development, create employment opportunities in addition to encouraging investment inside the country. This would also be detrimental to cover-up business and huge foreign remittance by expatriates. There are several mega economic projects that need foreign investment such as railway and airport projects as well as energy generation and downstream projects in various fields including communications, IT, trade, and industry. The significant thing is attracting both foreign investment and expertise.
Could you explain which are the major economic sectors that can attract investments in the Kingdom?
I would like to say that there are foreign investments in most economic sectors in the Kingdom. Petrochemical, industrial, communications and contracting sectors are in the forefront of these sectors as they make up lion's share of foreign investments. Other major sectors are service, tourism, agriculture, and commerce. It has been fixed that the minimum amount of foreign capital for commercial investments in the Kingdom is SR30 million.
What does the Foreign Investment Committee stand for?
The committee is serving as an umbrella for all foreign investors, irrespective of their nationality or volume of investments they made. In a nutshell, our message is promoting foreign investors. The committee has close interaction and cooperation with SAGIA, JCCI and the concerned agencies and departments to ease procedures as well as to solve problems and remove hurdles that stand in the way of foreign investors while going ahead with their investment projects.
What are the committee's major plans?
We have several ideas and plans that we want to realize through the committee. We conducted on Feb. 27 an extensive meeting to discuss various problems facing foreign investors and their investments in the Kingdom. Several foreign investors as well as officials from various government and private departments and agencies participated in the meeting. Seventeen members of the committee and myself, as its chairman, are striving, in cooperation and coordination with the officials of the chamber and other departments, to realize various goals. Our work included preparation of data base and precise statistical reports about foreign investors in the Kingdom, extending cooperation with the chamber and SAGIA in acquainting the available investment opportunities and promoting them, representing foreign investors at the chamber, SAGIA and other bodies, preparing proposals and solutions for various problems facing foreign investors with the objective of creating appropriate investment environment in a way serving the interests of both the investors and the Saudi economy as well.
Please comment on the committee's social responsibility toward foreign investors and the Kingdom as well?
Well. A large number of investors, especially individual investors, have an intimate moral attachment to the Kingdom because of its lofty position as the cradle of Islam and hosting of the two holiest shrines in Islam. Investors from the neighboring Arab countries see that they are harmonious with the Kingdom in both their cultures and traditions. As an investor, take my case as an example. My company has a program to train Saudi youths as part of giving them employment after successful completion of the program. By this, I am also fulfilling my social responsibility to the country. As for the committee, it has also a social responsibility toward foreign investors. The committee is striving to set up a non-profitable fund to finance foreign investors and that is in cooperation with the chamber and other financial bodies in the immediate future.
What about the tax on investment projects?
The tax imposed on foreign investment projects is reasonable. It represents only 20 percent of the net profit earned by the investor in a year. This would be calculated in accordance with a specific mechanism through an approved auditor. In case the project incurs losses, there is no need to pay the tax. Similar is the case with the investor's insolvency. If the investor sets aside the profit for project expansion purposes, collection of tax could be postponed for the next year. I would also like to point out that foreign investment makes up 54 percent of total revenues of the Department of Zakat and Income.
Could you outline benefits of foreign investments in the Kingdom?
Despite the fact that foreign investment projects represent only less than one percent of the Kingdom's total commercial registrations, these schemes have created as many as 375,000 job opportunities in the Kingdom, of which 101,000 are for Saudi nationals. It is mandatory for foreign investors to support Saudization as long as they make investments in the Kingdom and that is in coordination with various agencies. The government is keen to draw the attention of foreign investors for supporting the Human Resources Development Fund.
Saudi Arabia is regarded as an attractive market for investors. What are the major incentives given to foreign investors?
The Kingdom enjoys a unique position among the most investment friendly countries. There are several factors contributed to this, such as its geographic position between Asia and Africa and nearby Europe, internal security, solid currency, high per capita income in addition to its robust and strong economy, which is the largest in the region. Moreover, the Kingdom receives about 10 million Haj and Umrah pilgrims every year. All these contribute substantially in attracting more and more foreign capital into the Kingdom.
Are there any impediments faced by foreign investors in the Kingdom? What are the types of impediments if there are any?
Foreign investors are facing a number of hurdles, especially bureaucratic issues. Take the case of commercial registration for example. Now, the investors have to renew the registration every year. The process of getting renewing of commercial registration consumes a lot of time and energy of the investor. Hence, it is essential to extend the period of validity of registration from one year to three years. Similar is the case with recruitment of manpower from abroad. We have to achieve the required percentage of Saudization. We must embrace some expertise in improving our performance results in this respect.
Is there any plan to develop the committee's working mechanism, as well as to draw new investments during this year?
We are undertaking several activities. These included setting up a database with comprehensive information about foreign investors in the Kingdom in general and in Jeddah in particular, designing a special web page for foreign investors at the committee, and making preparations to organize the first annual meet for foreign investors with the participation of Saudi businessmen to exchange expertise and experience as well as to take advantage of each other. We have also plans to publish a guide, both in print and online, having details and advertisements of every foreign investment project in Jeddah.
Is the committee playing any role outside Jeddah city?
We strive to create an appropriate environment to attract foreign investments in regions outside Jeddah city, such as Rabigh, Qunfudah and Al-Leith, in addition to far away provinces including Najran, Jazan and Hail. These activities included holding seminars and workshops to introduce investment opportunities in front of foreign investors as well as investment potential of these regions and the incentives offered to investors. We are also encouraging these investors to pump their investments fully or partially into these regions.
Your observations on the Kingdom's financial freedom?
We enjoy freedom in carrying out our responsibilities as per the regulations of SAGIA. In the global economic freedom index, the Kingdom ranks fourth among the countries that enjoy more financial freedom. Among the world's tax haven countries, Saudi Arabia holds seventh position. According to the Ease of Doing Business Index of World Bank's International Finance Corporation (IFC), the Kingdom ranks 11 among 181 countries.
You spoke about features of investments in the Kingdom. Could you spell out some of them?
There are several factors that help promote investments in various sectors. The Kingdom is located in the heart of the Middle East and North Africa (MENA) region, which has a total population of 400 million. Being the largest economy in the region, the Kingdom makes available of energy to investment projects at a rate, which is the cheapest at the global level. This has made the Kingdom the best model for projects based on energy consumption. There are also several projects in mining sector also. Apart from this, the Kingdom's prime location makes an easier entry point to the markets of Asia, Africa and Europe. The Kingdom's market, which is witnessing robust growth and expansion, also enjoys higher purchase power.
What about the incentives offered to foreign investors in easing bureaucratic procedures?
Saudi Arabia offers the best possible investment environment in all sense of the word. Most significant among them is the logistic support and measures taken by the Supreme Economic Council, headed by Custodian of the Two Holy Mosques King Abdullah. These measures included creation of SAGIA, which is entrusted to give investment license to foreign investors and offer several incentives to set up a project. SAGIA takes decision on application for investor license within 30 days after its submission. We always strive to have an equal treatment to investors while offering incentives and guarantees. The investors are entitled to have 100 ownership of their project sites.