The Kingdom of Saudi Arabia & (KSA)   with an area of 2.24 million km2 and about 27 million population (in 2006) is located in south-west of Asia and is one of the Gulf countries, which was founded by the late King Abdulaziz bin Abdulrahman Al-Saud in 1902 A.D. (1319 A.H.). Its timing is Gmt + 3:00, Internet code is sa, Phone code 00966, working days from Saturday to Wednesday, and working hours 7:30 a.m. to 2:30 p.m. (Public Sector) and 8:00 a.m. to 1:00 p.m. and 4:30 p.m. to 8:00 pm. (Private Sector), and banking hours are 8:30 a.m. to 4:30 p.m. The Saudis are famous in extending warm hospitality.

It is known as a country of various lucrative opportunities. Its annual population growth is 2.1%, with life expectancy of over 70 years. About 25% of the annual budget is spent on education and training, and about 11% on health facilities. Major cities are Riyadh, Jeddah, Makkah, Mdainah and Dammam. Arabic is the national language, and English is widely used in business circles. Its currency is Saudi Riyal and SR3.75 are equivalent to one U.S. Dollar. Its banking sector has developed excellent IT data base and they are rendering the most advanced banking services, supervised by its central bank ‘Saudi Arabian Monetary Agency (SAMA)’.

Through the far-sighted policies adopted by the wise and sincere leadership of its founder late King Abdulaziz and his successor-sons, the KSA was put on the track of development, and discovery of oil in 1938 gave a boost to it. Its oil reserves are the largest in the world around 25 percent. The last three decades of the 20th Century witnessed unprecedented rapid development in almost every sphere of life in the KSA.

Infrastructure:

Its infrastructure meets with the standards of any developed country. It has one of the best roads network with 45,500 km of paved roads. The telecommunication facilities are excellent. The electricity is plentiful (exceeding 25000 MW), which is inexpensive and reliable for both industrial and domestic use. There are 27 water desalination plants with a capacity of about 600 million gallons per day. It has one of the best healthcare system with several specialized hospitals equipped with the most advanced facilities. There are more than 24,000 schools and a large number of colleges and universities adequately equipped with the facilities and advanced educational aids matching with the developed countries.

It plans to invest $200 billion in the fields of oil, gas, electricity, desalination and petrochemical industries. It has developed extensive bilateral trade and It is the 25th world’s largest importer and exporter. Most of the developed countries are its foreign trade partners. Its Annual National Budget for 2006 and 2007 tuned over SR300 billion.

Living Conditions and General Atmosphere:

The living standard of the people is reasonably high and its GDP is also one of the best. Around seven million expatriates are working in the KSA, and they are playing an important role in the development of the country, and living peacefully over here since several years. The general atmosphere is quite peaceful, and the people enjoy their stay here. They can travel on the highways safely all around the KSA any time with confidence. The crime rate is one of the most minimum comparing with even the most advanced countries.

Seaports:

Its eastern (Al-Jubail and Dammam) and western (Jeddah and Yanbu) and other seaports are fully equipped with the most advanced facilities, and they are rated amongst the most busiest seaports in the world.

Air-Transport:

Its air transport, both local and international, is one of the heaviest in the world, and the national career Saudia Airlines has a large fleet of the most advanced aircrafts. About seven million expatriate workers travel frequently throughout the year, and about four million pilgrims and visitors visit the KSA every year, and this number is continuously on the rise. The Saudi businessmen and general public also travel abroad frequently for promoting their business activities and spending vacations. Similarly, the foreign businessmen also visit the KSA very often throughout the year.

Rail Network:

Although the rail network of 450 km presently links the Eastern Province with the Central Province only, which is mostly used for goods transportation and very few people avail rail as a means of transportation although its standards is quite high, and that is because of the nice, safe and high standard of road network, and the people usually travel by road for their own convenience. A large number of people from the neighboring countries visit the KSA frequently for business, pilgrimage and tourism by road, which is quite tiresome for them, therefore, the government has planned to develop the rail network linking Eastern region to the Western region, and expanding it Kingdom-wide, both for passengers and goods transportation, which shall prove another milestone in the development of this country. Since the KSA is a very large country, therefore, the rail network would help in further developing several regions and making them big commercial centers, like its capital Riyadh, which is connected with Dammam Port through Rail, has its own large Dry Port, which has made Riyadh as one of the main business centers.

Tourism:

The government is now giving special attention to Tourism and is aggressively promoting it by developing several facilities. Recently, tourist visas have been introduced.

Industrial Development:

There was no industry in this country only a few decades ago, but today it has extremely large independent industrial estates in the neighborhood of all big cities, like Riyadh, Jeddah, Dammam, Aseer, Makkah, Al-Qassim, Al-Ahsa, Al-Jouf and Najran. Al-Jubail and Yanbu are known as two of the best industrial cities in the world. The industrial development in the KSA has not only made it self-sufficient in different products, but it has attained the ability of exporting several products to other countries within a very short span of a couple of decades, the demand of which is speedily rising because of the internationally recognized standards, specifications, high quality and packing standards fixed and supervised by the government. Its economy is no more exclusively based on oil and other natural resources, but its industrial sector is playing an important role in further strengthening its economy.

Agricultural Development:

In a large country like Saudi Arabia, which is famous for its deserts, it is a miracle that it has made tremendous development in the agricultural sector too. A country which used to import all agricultural produces and products only a couple of decades ago, has not only made itself self-sufficient, but it is now exporting a number of agricultural produces and products, poultry and dairy products, and their demand is ever-rising because of high quality standards fixed by the government.

Trade Policy:

The KSA has adopted a free trade policy, as a result of which the business activities are increasing impressively. The governmental policies encourage the private sector to boost their activities, and the private sector is playing an active role in the economic development. Soft loans are given to the businessmen to establish and promote their businesses and industries. The businessmen may import or export different commodities freely, however, with no comprise with quality standards. For establishing commercial firms and/or industries, licenses are issued by the Ministry of Commerce & Industry. National firms pay a religious tax (which is called ‘zakat’) of 2.5% per annum on the net profits, however, the accounts of the firms have to be maintained properly.

Economic Reforms:

The government of the KSA has embarked an ambitious economic reforms program to encourage greater participation of the private sector in the economic activity. In this regard, the Supreme Economic Council (SEC), chaired by HRH then Crown Prince (and now His Majesty the King) was formed in 1999, who oversees the economic policy. The Supreme Economic Council has been instrumental in driving forward the economic reforms and accelerating the privatization program.

Privatization:

The Saudi government is pursuing various procedures for privatizing enterprises owned by the State. The main objective of it is to promote more effective contribution of the private sector, and to reduce dependence on oil. Several activities and services are included in the list of privatization, e.g. Water & Drainage, Saline Water Desalination, Telecommunication, Air Transport and Services, Railways, Roads Maintenance, Airport Services, Postal Services, Seaport Services, Flour Mills and Silos, Various Municipality Services, Educational Services, Social Services, Agricultural Services, and Health Services.

Foreign Investment:

The government’s concern in improving the investment climate led to the formation of Saudi Arabian General Investment Authority (SAGIA) in April 2000, which is the gateway to investment in the KSA. The main objective is to promote investment, with special emphasis on attracting and streamlining the foreign investment. Foreign Investment Act has been introduced laying down the relevant rules and regulations with the objective of liberalizing and improving the investment climate by strengthening the rights and privileges of the foreign investors. It has enacted provisions giving rights, incentives, soft loans, facilities and guarantees to foreign investors.

The law provides SAGIA with such a broad mandate that the Saudi Government’s various ministries and concerned agencies are represented in SAGIA’s Board of Directors. SAGIA reports to the Supreme Economic Council (SEC), and it has the following basic roles to play:

1. To act as a service organization (facilitator) supporting and providing assistance to existing and prospective investors.

2. To act as the KSA’s investment promotion agency for promoting the KSA as a stable, modern economy and strategic and profitable investment location, with a peaceful social and cultural atmosphere and globally acceptable standard of living.

3. To act as a catalyst for major changes, and to recommend state policies designed to promote and enhance local and foreign investments and to propose executive plans and criteria to improve the investment climate. It also acts as a bridge between the international business community and the Saudi government.

4. To prepare state policies designed to promote and enhance local and foreign investment, and submitting them to the SEC.

5. To propose implementation plans and criteria to improve the investment climate.

6. To monitor and evaluate the performance of local and foreign investment.

7. To conduct studies on investment opportunities and promoting them.

8. To organize and participate in conferences, symposia, local and international exhibitions and workshops concerning investment.

9. To develop relevant database and carry out statistical surveys, and last but not the least

10. To undertake any other task officially assigned to it in this regard.

The SAGIA’s tasks includes to propose executive plans and rules capable of improving the investment climate in the KSA. Some of these plans shall include following :

- Giving incentives instrumental to enhancing local investment and attracting foreign investment, and ensuring the ability to compete with other countries.

- Plans for technical education and training that conform to the requirement of investment development.

- Preparing criteria for granting concessions to projects and companies.

- Planning State investment in projects and privatization program.

- Suggesting custom exemptions and tax incentives capable of attracting investment.

Saudi Arabia is a signatory to various regional agencies guaranteeing a level playing field to foreign investors. It is a member of the Multilateral Investment Guarantee Agency (MIGA), hence it ensures the same treatment, protection and incentives accorded to a national capital.

The KSA has signed Investment Promotion and Protection Agreements with Austria, Belgium, P.R. China, France, Germany, Italy, Malaysia, and Taiwan, with the primary aim to eliminate double payment of taxes.

It has also agreements to develop economic, trade and technical cooperation with some 35 countries, including Argentine, Australia, Austria, Belgium, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Malaysia, Pakistan, Russia, Turkey and USA, etc. The KSA has also signed trade and economic agreements with GCC and Arab League countries.

The pre-investment requirements of the foreign investors include preparation of feasibility studies for projects, information and statistics for investment projects, acquisition of land for setting up industrial units which is available throughout the Kingdom in several industrial estates and cities.

The government makes electricity, water and fuels available to industrial projects at low prices. The industrial areas have public utilities like roads, desalinated water, telephones, police stations, restaurants and postal services.

Commodities entering the KSA as input for industrial production and some basic foods are exempted from custom duties.

The Saudi Industrial Development Fund (SIDF) gives soft, medium and long-term loans for industrial projects upto 50 percent of the total cost. The payback period is up to 15 years. There is also a two-year grace period from the start of production.

Except for a very small Exception List, highly lucrative opportunities in agricultural, industrial and other sectors are open to foreign investors, in addition to tax holiday.

The Foreign Investment Projects enjoy all the benefits, incentives and guarantees extended to national projects, including the following :

- ownership of real estate to carry out the investor’s licensed activity or for his residence and his staff housing.

- the benefits ensuing from agreements of avoiding double taxation and agreements of promotion and protection of investment which are signed by the KSA.

- prohibition of confiscation of investment without following proper judicial procedure.

- the foreign investors are entitled to repatriate their share that is derived from the sale of their equity or profits generated by the entity.

- shares can be freely exchanged amongst partners and others.

- the licensed entity is entitled to sponsor the foreign investor and its non-Saudi staff.

- the licensee is entitled to obtain industrial loans in accordance with the regulations of the Saudi Industrial Development Fund.

- the losses incurred by the entity may be carried forward to the following years and will not be calculated at tax settlement of the years during which the entity reaps profits.

Foreign Capital (Investment) means, but not limited to, Cash, Securities and Commercial Papers, Foreign Investment Profits if reinvested, Machinery (Equipments, Fixtures, Spare-parts, Means of Transport & Production), Intangible Rights (Licenses, Intellectual Property Rights, Technical Know-how, Administrative Skills, and Production Techniques).

The foreign investor may obtain more than one license to practice the same or any other activity.

If the Authority rejects the application for a new license or the modification of an existing license, its rejection shall be justified. The foreign investor may object to the rejection decision before the Board of Directors. If the Board of Directors also rejects the application, then the applicant has to right to challenge the rejection decision before the Board of Grievances, and other Courts.

The minimum capital of an LLC with foreign participation is SR500,000 under the Foreign Investment Law. The required amount is increased to SR1,000,000n for industrial projects and SR25,000,000 for agricultural projects. The Board of Directors of SAGIA may reduce the minimum investment capital in projects established in areas specified by it or in export projects or those require considerable technical experience.

JUDICIAL SYSTEM

The Judicial System include Expeditious Courts, Grievances Board, Civil Rights Courts, and High Courts, etc. The Islamic law strictly prohibits discrimination, hence the local and foreign businessmen enjoy equal rights and protection in the courts. All the Courts play an active role in speedy disposal of cases, and all efforts are made that justice is not delayed.

Settlement of Commercial Disputes

Commercial Disputes Reconciliation Centers have been made at the Chambers of Commerce & Industry, who play an active in resolving the commercial disputes through amicable settlement.

Agency / Distributorship Agreement Disputes

Commercial Agencies Disputes Reconciliation Committees have also been formed in Riyadh and Jeddah, and these Committees exert their efforts in resolving the Agency/Distributorship Agreement disputes.

However, if amicable settlement seem impossible, then the parties seek legal recourse through the Courts.

Foreign Courts judgments/decree are implemented through the Saudi Courts.

Protest Bureaus

Protest Bureaus have also been formed at the Chambers of Commerce, who deal with the commercial documents like bounced cheques and L/Cs etc.

Arbitration Centers

Arbitration Centers are also made at the Chambers, where disputes for arbitration are entertained. Arbitrators are usually appointed by the parties to the disputes. The Arbitrators issue their Arbitration Awards which are later confirmed by the Courts for implementation. The Arbitration Centers, if needed, seek expert view of technocrats and professional specialists.

Civil Rights Courts

Money matter cases are usually lodged at the Civil Rights Courts. The Civil Rights Directorate has the primary responsibility of enforcing the judgment of a Saudi Arabian court or tribunal.

The Negotiable Instruments Committee decides cases involving bill of exchanges, promissory notes, and checks.

The Saudi Arabian Monetary Agency (SAMA) Committee resolves certain disputes between banks and their customers.

Labor Courts

The Labor Courts decides labor (workmen) disputes. As a first steps, the employees and their employers are encouraged to resolve their matters amicably. However, if it does not work, then any party may take its case to the Primary Commission, whose decision can be challenged before the Supreme Commission.

YOUR KEY TO SUCCESS IN WORLD-WIDE COMPETITION

Through the blessings of the advanced technology and media, this planet has turned into a global village, which has made the world-wide competition very tough in every walk of life, particularly towards economy of each country. As a result of the developments and progress made so far, the world-wide ‘resources’ are well counted today, therefore, in order to join the pace of competition, it is of utmost importance to consolidate the resources and generate support to establish and/or promote ventures successfully. Undoubtedly, keeping abreast with the international economic competition requirements and trends is of imperative importance, however, the basic tool to run all businesses successfully is the legal awareness, back-up and support.

Legal awareness plays the key role in establishing trade relations and promoting business on sound footing, as well as in preparing suitable commercial agreements and avoiding any unexpected future complications. The basic spirit that may be kept in tact while making agreements is to run the business affairs successfully and achieve the objectives smoothly without any future problems.

The role of the lawyers and law offices world-wide, both in the public and private sectors, throw a big responsibility on their shoulders to lay down such a compact legal structure in all walks of life that may enable the whole system run successfully and bring peace and prosperity world-wide. Besides laying down the system, even more important is the task of bringing awareness amongst the business community of the system and the relevant rules and regulations, to enable them establish and promote their businesses and other activities within the framework of the devised system and run the affairs successfully.

There is a big vacuum of legal awareness amongst local and foreign businessmen for promoting their business in the KSA.