Saudi Arabia to allow full foreign ownership in retail sector

Saudi Arabia will examine all trade and investment regimes in a bid to facilitate foreign investments as part of a plan to attract high-end businesses and diversify its economy, the government said Sunday.

The decision stipulates that the kingdom will ease restrictions on foreign investors to let them own 100 percent of retail and wholesale businesses.

The step aims to make Saudi Arabia an international center for the distribution, sale and re-export of products.

It is hoped the move might attract foreign companies and encourage them to manufacture their products in Saudi Arabia, then sell them directly to the consumer, who would benefit from the advantage of after-sales services.

The announcement made by the Saudi Arabian General Investment Authority (SAGIA) came in line with orders from King Salman Bin Abdulaziz, who was on a visit to Washington over the weekend.

The king told reporters on Friday that his country must allow more opportunities for the United States and Saudi Arabia to do business.

As per the new decision, SAGIA said foreign companies wishing to invest in the Saudi market must ensure their offers include specific manufacturing time programs and plans for introducing new technology, according to the Saudi Press Agency (SPA).

It also said offers by foreign companies must ensure the creation of job opportunities and provide training for Saudi citizens under the kingdom’s ongoing Saudization project.

The approach aims to increase competitiveness and provide better work opportunities to Saudi youths, by enabling them to be trained in centers affiliated to these companies.

The decision will include brands such as Apple and Samsung, but does not include the retail sellers such as Walmart and Tesco that cooperate with more than one producer.

The advantage of this decision is that international companies will no longer need a Saudi partner who usually acquires a percentage no less than 25 percent and takes from the proceeds without giving added value.

Rashid Al-Tayeb, vice-chairman of the public sector in Booz Allen Hamilton, said the decision to allow foreign companies to acquire an ownership up to 100 percent will have a “positive” impact on the retail sector.

“We deem this approach by the kingdom as positive as it will really change the reality in terms of attracting Foreign Direct Investment (FDI) to the retail sector,” he told Al Arabiya News Channel on Sunday.

It is expected that a higher percentage of Saudization - or nationalization of the private sector workforce - will be imposed on these companies.

Tayeb said a higher Saudization percentage was “essential” although “it might cause a challenge in the short term.”

“The foreign investor who wants to invest in any sector in Saudi Arabia is also responsible to serve the kingdom. For instance, the investor can serve the kingdom by creating jobs in Saudi Arabia, and we see that this is something important and positive.”



*The English version of this report was produced for Al Arabiya News by Shounaz Meky

Last Update: Wednesday, 20 May 2020 KSA 09:45 - GMT 06:45