Saudi Arabia Foreign Capital Investment Law

Saudi Arabia Foreign Capital Investment Law

The cabinet approved the Saudi Arabia new Foreign Capital Investment Law in April 2000. This signalled a shift in all the procedures and the attitudes towards foreign capital investment in the Kingdom. The essential purpose of the law was to attract, encourage and remove the obstacles to the foreign investment, to diversify the away from the main oil-dependent economy. This is a contrast with the current legislation, which restricts the foreign capital investment to narrowly defined categories. The new draft has proposed to make the investment in Saudi Arabia more attractive than the 2000 investment law, however for investors hoping to make investments in the real estate projects will be exempted (Shalaby et al., 2008).

Protection

The investment environment has witnessed some constant changes following the implementation of the Vision 2030 and the National Transformation Plan, 2020. It is true today that some of these restrictions have been relaxed, which apply to foreign investors to enhance the overall investment environment. In accordance with the new investment, law Foreigners can now invest in all sectors according to the investment laws. An exception is, however, made on the activities that are on a negative list like exploring, excavating and producing oil and mining activities. In my view, the new foreign investment law has given foreigners a wide range of activities that they can invest in the Kingdom compared to the 2000 foreign investment law (Cleron et al., 1978).

According to the new investment law, the law states that the foreign investors shall be accorded treatment no less favourable than that accorded the domestic investors in terms of expansion, management, operation or other disposition. All the investments owned by foreigners shall, therefore, be treated with a minimum standard of treatment that is under the customary law, this shall include the fair and equitable treatment and full protection and physical security.  In according to the relevant laws and regulations, the investors are protected from the compulsory acquisition of property, save for expropriation that is for a public purpose and on payment of adequate compensation (Abdel-Rahman et al., 2002).

The 2000 Saudi Arabian foreign investment law did restrict foreign investment to specific elements of the country economy. It was considerably narrow in terms of investment for foreigners with foreigners limited to invest in particular ways. Critical barriers to another aspect of investment were stipulated. The April 2000 law, however, did place much power on the local investors at the experience of the actual economic benefit that the foreign investment would have on the country. An in this way, I do believe that the law would discourage eh foreign investors investing in particular elements of the country’s economy. Inventors are likely to shift to other forms of business even though some might not be so rewarding and this element of the draft, unlike the initial law, might hurt investment (Abdel-Rahman et al., 2002)

However, it did protect some aspects of the finance according to article elven of the 2000 law on foreign financing of Saudi Arabia, the investor’s stake was protected by the law and could not be confiscated without the court judgement. This element did create some stronger will and the confidence of the foreign investors investing in the country, especially whenever there was any form of dispute.  Compared to the draft, I which does not protect the foreign investor the investor’s investment according to this new draft can be confiscated. This, I believe, hurts the element of investment since the confidence is taken away from this foreign investor (Shalaby et al., 2008).

Promoting foreign investment

Unlike the old investment law, the new bill has some priorities that will encourage a perfect foreign investment in the Kingdom. Some of the restrictions that were initially present have been eliminated. The new investment law, according to my view, has granted foreign investors a wide range of freedom as far as promoting foreign investment is concerned. For instance, the investors shall have the full freedom of managing their business enterprise. This freedom shall include the ability to hire and lay off workers in accordance with the labour laws and regulations. The investor shall also have the privilege of determining the production processes, output, and inputs. Selling any company in accordance with the relevant laws and regulations. However, the 2000 foreign investment law did not provide a wide range of priorities that foreigners could benefit from the production processes (Cleron et al., 1978).

In promoting foreign investment, the new investment law permits all foreigners to have the freedom of rightfully to convert the national currency of the Kingdom into any other currency. The foreigners also have the full freedom of transferring funds oversees in the Freely Convertible Currency but should be in accordance with the relevant laws and regulations. The new foreign investment law of said Arabia was considered favourable for the investors. According to article four of the 2000 foreign investment law of Saudi Arabia, investors were given a power of acquiring more than a single license unlike the proposal of the draft which limits the foreign investor from receiving more than one investment license for various activities (Abdel-Rahman et al., 2002). The selection being an improvement of the law of 2000, does not stand at the significant path to improve the operation of the foreign investment in line with the number of activities. The draft, however, gives the investors more protection to the foreign investment compared to the element of security that the 2000 law did provide for the same investors. With a more significant power vested on the individual investors, the new draft is likely even to attract more investors because various investment barrios have been illuminated

The selection, which is an improvement of the 2000 law on foreign investment, has made an investment of the investors from the other countries even better. According to the 2000 Saudi Arabian law of investment, the foreign investors were in the past given the opportunity of investing in various activities, and the new draft has made it even better than the foreign investors can invest in activities or business operation which they were not allowed to take part in before. This means the frat does offer the investor a more significant element of protection compared to 2000 (Shalaby et al., 2008).

According to the new investment law, in promoting foreign investment and investment incentives, the Kingdom shall provide the fiscal and fiscal incentives to foreign investors to attract and encourage investments. These incentives will be designed in a way to achieve specific policy objectives. The new draft also allows the investors to be able to submit their grievances to the relevant authorities in the event it is aggrieved by a measure of the Kingdom related to the investments. In terms of the domestic remedies, the new investment law allows the investors to approach any court or tribunal the investor considers competent in the kingdom for the resolution of the dispute that relates to an alleged breach. The 2000 investment law, however, allowed the amicable settlement of the conflicts that arise between the investor and the government or partners.

The draft investment law states that foreign entities should be treated equally to Saudi companies. It sets out individual freedoms regarding international remittances from projects, unlike the 2000 foreign investment law. The new draft has also lifted some restrictions over real estate that were present in the 2000 foreign investment. Under the new law, foreign investors are free to lease real estate within some cities. The 2000 investment law only allowed the foreigners to acquire a real estate for operating a licensed activity, or for housing the staff. According to the MFN, that requires that an investor to a party to an agreement, would be treated by the other party no less favourably concerning a given subject matter than an investor from any third country or its investment. The Kingdom has provided inconsistency between the provisions of an applicable international treaty or investment agreement to which the Kingdom is a party. The international deal shall also prevail to this extent of inconsistency (Abdel-Rahman et al., 2002)

National treatment

The draft will seemingly protect the rights of the foreign investor which had been protected by the initial 2000 law on foreign investment but this time build the much necessary confidence on their various aspect of the royal treatment. Subject to the provision of the draft, the international treaties and the investment agreements entered by Kingdome, other obligations of the kingdom and any sanction or restriction that is imposed against eh foreign country or nationals of any foreign country. According to the draft, which is an advancement of the previous 2000 law on foreign investment, a more significant element of the royal treatment has been put ahead by the selection. This law will even see the royal treatment of foreign investors very rewarding (Shalaby et al., 2008).

Conclusion

The two laws through both keen on the element of the aspect of the national treatment. The draft on the national treatment is likely to enhance the treatment of the foreign investors as well as the other elements of the investment, and the two laws are comparable on the various elements. For instance, the 2000 law look at foreign investors, guidance, freedom and the aspect of security. However, the drafts law, in my opinion, do stipulate the actual component of this suggestion which were made in the first Saudi Arabian law of 2000 on foreign investment. In my view, I believe the new draft to some level will aid in attracting more investors to the country. The element of royal treatment, security and promotion of the investment in the country has significantly been advanced in the draft. However, I feel that the freedom of the foreign investors will have interfered within the draft, and this is likely to enhance the ability to invest in some regions of the Kingdom.