2018 Business Review of Saudi Arabia

Saudi Arabia experienced much growth and development in 2018 with the government implementing reforms that have enhanced life in the Kingdom for both expats and nationals. The government continued to make the country attractive to foreign investors and implemented their largest expansionary budget yet.

Vision 2030 continues to remain centre in the developments as the Kingdom works to diversify the economy away from oil. This has resulted in historic changes such as the lifting of the driving ban for women, the re-introduction of cinemas after 35 years and the promotion of heritage tourism.

Over the course of 2018 there have been multiple changes and in this article we take a look back at the most notable.

One of the biggest changes to the way companies operate in Saudi Arabia was the introduction of value-added tax on January 1. The tax was not only implemented the Kingdom but across the wider GCC region at a five percent rate with exclusions for certain necessities, medical, cultural and educational products, financial and insurance services.

Saudi Arabia expedited the foreign investment license process from 2 days and five hours (53 hours) down to four hours. The process that previously required 8 documents was streamlined down to financial statements and a certified commercial license. Additionally, companies are now able to self-renew their license through the SAGIA website.

The Saudi government also lowered the requirements for foreign institutional investors to enter the Kingdom. Now, only requiring $500m in assets, instead of $1bn and the qualification process was simplified to be complete through one application.

The Kingdom also introduced the electronic tourist visa to expand the tourism industry in the Kingdom . Nationals from Japan, Taiwan, Singapore, Malaysia, Brunei, Australia, South Korea, South Africa and countries in North and South America are able to apply for a tourist visa online through the new system.

In an effort to improve the environment for foreign investors, the Saudi government approved a bankruptcy law, decreasing risk and giving a viable solution to close businesses. The law was officially effective from August 18 later on in the year.

The Saudi Arabia General Investment Authority (SAGIA) introduced electronic investor licenses. Now, investor licenses are sent directly to the company via email and they can be validated through a smart device or the SAGIA website. This improved the speed of the service that previously required individuals to visit the SAGIA office and complete the process manually.

In March, Saudi held their first women’s business forum, featured around increased participation of women working in the Saudi workforce, one of the Vision 2030 objectives.

The Ministry of Labour and Social Development (MLSD) introduced a private sector employment agency to encourage Saudi nationals to pursue jobs in the private sector. The MLSD will now be responsible for job creation, decreasing unemployment and taking on the role of the Job Creation and Unemployment Control Authority in the Kingdom.

In April, Saudi Arabia was promoted to Emerging Market status by FTSE Russell. Through the reforms, and the Kingdom meeting the formal requirements constant analysis, use of advanced technology and unbiased research, Saudi was found to qualify for the FTSE GEIS.

In further steps to enhance the economy, the government launched an entertainment city in April to encourage Saudi residents to spend more disposable income inside of the Kingdom. The entertainment city, one of the country’s giga-projects, will rival the likes of Disneyland.

The Saudi government announced their initiative to become an entertainment and leisure hub, following the announcement of the cinema ban lift in late 2017. They aim to create major projects, including 16 entertainment complexes, an aquatic centre and three large leisure hubs. The government will invest 50.9 billion riyals and will seek the rest of the investment from private and foreign investors.

The government also sought investors in the education sector to build schools in the Kingdom and handed over 25 public schools to private sector companies.

Saudi Arabia made a historic move to lift the driving ban on women. As the last country in the world to have a driving ban, the shift means a huge change to the Saudi labor market giving women access to work that they did not have before. Getting more women in the workplace is one of the major objectives of Vision 2030.

The government launched the second phase of the dependent levy, where expats are required to pay a monthly fee per dependent. This fee increased from 100 riyals to 200 riyals per month per dependent and covers spouses, children and staff such as maids and drivers and is to be paid by the employee at the time of Iqama renewal.

The Saudi government in partnership with the private sector began the building of the mega heritage tourism project, Souq Okaz City in Taif, expected to cost around $2 billion. The project is expected to create 15,000 jobs and accommodate 750,000 people.

The Saudi government issued the first two fintech licenses to bolster the middle market ecosystem.

In August, the Ministry of Labour and Social Development launched a portal that allowed expats to change their profession online. Integration with other organizations to verify the applicant’s qualifications simplifies the process.

The Kingdom announced the online tourist visa, called Sharek, for those visiting for the inaugural Saudia Ad Diriyah E-Prix, with acts like David Guetta, One Republic, Enrique Iglesias, Amr Diab and The Black Eyed Peas playing the after race concerts. This is the beginning of the tourist visa and is expected to be open for those visiting Saudi Arabia for other events in the future.

The Saudi government opened four licenses to foreign investors that they were previously restricted from obtaining. The licenses; recruitment, audio and video, road transport and real estate brokerage services are now available for foreign investors to operate in.

In November, the Saudi government introduced the online registration for private sector workers for e-approval of sick leave. The Ministry of Health authorized the e-approval of sick leave allowing doctors to issue sick leave online through the system straight to employers and other concerned parties. The government will use the data provided from this service to provide residents with better services and treatments.

The government eased the block visa process for companies by removing the initial TAQAT waiting period before applying for a block visa, significantly decreasing the processing time. Additionally, the MLSD announced that companies with a high Saudization rating are eligible for a fast tracked visa service where they receive immediate approval.

An online registration for private sector workers was launched, allowing employers to update the details of their employees, both Saudi and non Saudi. The program aims to protect the rights of employer and employee, increase transparency and decrease disputes.

To close out the year, the Saudi government announced the restoration of the Al-Turaif historical district. This district displays Saudi culture and the development of the country from the 15th century. The restoration is a part of the Cultural Heritage Program which aims to preserve sacrosanct locations in Saudi.

The rapid changes that occurred in the Kingdom this year is testament to the commitment the Saudi government have to Vision 2030. Moving forward, we can expect more reforms to position the Kingdom as a continued attractive place for foreign investors, create a thriving economy and a modern society.