December 16, 2024/
The 2034 FIFA World Cup is driving massive investments in real estate, infrastructure, and tourism. Saudi Arabia is offering lucrative…
Investment Opportunities in Iraq? For several decades Iraq had an economic framework based mainly on oil production and export. During the last few years, there has been an increase in the oil price of production and export followed by an increase in the GDP of the State. Iraq is recognizing the need for broader economic development to ease the State’s economic dependence on oil production.
Iraq is a strategically located nation with an educated and enterprising population and vast natural wealth. Iraq aims to boost the country’s economic performance through enhancing political stability and security, building and improving infrastructure, promoting investment in non-oil sectors, and supporting the development of the financial sectors.
The Iraqi government has undertaken steps to develop greater investments in the public and private sectors, thus contributing to the economic development that has characterized Iraq in recent years. This promises to further increase thanks to the incentives and strengthening projects planned for all the less developed sectors.
Foreign Direct Investment and Investment Opportunities in Iraq
In the global economy, foreign direct investment (FDI) is a key component in national strategies to achieve sustainable economic and social development. This has long been recognized by OECD countries, which are both the largest providers and largest beneficiaries of FDI worldwide. The experience of OECD countries suggests that there are, broadly speaking, two requirements for attracting high levels of FDI:
- Building a stable environment conducive to business and investment through progressive macro-economic and structural policies, and legal frameworks; and
- having the capacity to compete effectively on world markets for mobile FDI
After decades of war, sanctions, and destruction, Iraq needs significant investment inflows to rebuild its infrastructure, create employment, foster growth, and – in the case of FDI – transfer modern technology and know-how.
With improvements in Iraq’s security and economic stability, the Iraqi government now is to attract and build technical and scientific expertise, develop human resources, create job opportunities, and remove red tape.
Foreign investment is surging. Strategic and financial investors from around the world are seeking ways to invest in Iraq with reliable, experienced, well-connected partners. The Iraq reconstruction opportunity is singular in scale and scope. Iraq possesses what could prove to be the largest oil reserves in the world and it is the only important oil and gas producer in the world. Iraq has the potential and the intention to increase production by a factor of four or more times over the coming decade.
Business Establishment in Iraq
The steps to establish a company in Iraq do not last more than 30 days. First of all, the investor must choose a valid business name to be reserved later at the Baghdad Chamber of Commerce.
The company name must also be reserved for the Federation of Chambers of Commerce. In order to establish business in Iraq it is necessary to obtain, through a specific application, the certificate showing the regular registration of the company at the Companies Registry. For the eventual issuance of the certificate 15 days are required and counted from the day of taking charge of the request.
The investor will then have to create a seal that will be used to certify and protect the company’s most sensitive documents, guaranteeing their inviolability. This is a delicate phase that is completed in 48 hours.The establishment of a company process ends with the regular registration of all employees to the social security systems.
Possible Business Entities to Establish in Iraq
Limited Liability Company is the most common and widespread business entity in Iraq. LLC must be composed of at least two members, a shareholder and a director. At least 51% of the ownership of the company LLC must be Iraqi (the percentage value may vary in relation to the type of sector in which the company intends to operate)
A foreign investor can establish a Joint Stock Company in Iraq with at least four other members and five directors.
In Iraq it is possible to establish Branch Offices of Foreign Corporations in cases where these are necessary to support certain government functions or if they intervene to collaborate with companies that support government functions. A foreign investor who decides to establish a branch office in Iraq has the possibility to own it 100%.
One or more foreign companies may decide to join for a limited period in order to carry out a common project, thus establishing a Joint Venture (JV).In Iraq it is possible to establish a Joint Venture (JV) only if it is composed of at least an LLC or a JSC.
Sectors with Investment Opportunities in Iraq
Sectors with Investment Opportunities in Iraq
- Oil and gas sector
- Infrastructure and construction sector
- Healthcare
- Agricultural sector
- The sector of alternative and renewable energies
Oil and Gas
With the cost of oil and gas production in Iraq being among the lowest in the world, and having one of the largest oil reserves in the world, the opportunity in this sector is huge.
Infrastructure and Construction
There are plenty of investment opportunities in Iraq for those looking to invest in construction and infrastructure. The construction and engineering sectors are key to the reconstruction of houses, facilities, and infrastructure in Iraq. Iraq’s National Investment commission is also heavily seeking private investments in various infrastructure and housing projects, creating many opportunities for foreign investment.
Much of Iraq’s transportation infrastructure, constructed during the 1970s and 1980s, is now in dire need of substantial rehabilitation and replacement. Enhancing this infrastructure is crucial for integrating Iraq with other markets across the Middle East and Europe.
The Iraqi Government has initiated plans to develop new railway systems and port facilities, as well as to upgrade existing roads and aviation infrastructure. These initiatives have resulted in increased investment opportunities, facilitating the transfer of knowledge and expertise in areas such as technical infrastructure, operations and management, security, and concessions for various modes of air, land, and sea transportation.
Healthcare
Despite great measure to improve a health sector that provides universal free care, it has yet to recover from decades of conflict and neglect. To improve this situation the country needs tens of thousands of new doctors and more than 100,000 new hospital beds. A number of new contracts have been signed recently with international companies.
Agriculture
The agricultural sector is one of the main economic activities that contribute to a country’s national economy. However, this sector’s growth in Iraq is facing difficulties considering the decline of agricultural capital stock and its reliance on government investment, which is insufficient. Therefore, the government is actively looking for foreign direct investment in the agricultural sector.
Investing in this sector and implementing policies and programs to foster its growth and development would help fight the poverty in rural areas which is 30% twice of that in urban areas, it would also increase food security, meet domestic needs, and contribute to the exports.
Recently the agricultural sector in Iraq has been receiving growing attention led to initiate few projects for the cultivation of cereal crops, fruits, vegetables, and dates.in addition to raising livestock.
Alternative and Renewable Energies
It is not surprise to see investment opportunities in Iraq for the energy sector. Iraq, which has a population of 43 million, is sitting on 17 percent of the Middle East’s proven oil reserves and generates 80 percent of its power using fossil fuels.
At 1.43, the power score of Iraq is lower than the regional average of 1.74 in the Middle East region. Investment in clean energy in Iraq was around $1.8 million in 2022, a decrease of 10% from 2020 ($2 million). Between 2019 and 2022, the highest investment in clean energy was in 2019 at $184 million, while the lowest was in 2022 with $1.8 million.
Now, Iraq is planning to build solar plants and its first green hydrogen project as part of a strategy to tackle power shortages and reduce its carbon footprint. The country’s cabinet has approved a proposal to install 12 gigawatts (GW) of solar power by 2030.
How are we helping?
At Injaz Company we are supporting businesses to invest in Iraq, aligning with the interest from both the private and governmental sectors in Iraq.
Iraq is ranked fourth among 14 countries in the Arab real estate market for 2024. The real estate market in Iraq is experiencing a significant transformation, driven by increased foreign investment and a growing population. In 2024, the Real Estate market in Iraq is expected to reach a projected value of US$1.11tn. The real estate sector presents lucrative opportunities for investors.
Among the various segments within this market, Residential Real Estate is anticipated to dominate with a projected market volume of US$0.84tn in the same year. According to statistics issued by Statista, a German online platform that specializes in data gathering and visualization, it is projected that the market will experience a steady annual growth rate of 4.43% from 2024 to 2028 (CAGR 2024-2028). This is resulting in a market volume of US$1.32tn by 2028. This growth is fueled by an increasing population, with 57% under the age of 25 and a driving demand for housing.
Trend in Iraq’s Real Estate Market
In a trend observed among many Iraqis, people are increasingly opting to invest in land and real estate as their primary avenue for guaranteed returns, given the current landscape devoid of viable alternatives.
The real estate market presents itself as a flourishing sector with minimal risk of loss. This sentiment is largely attributed to Iraq’s substantial demand for over three million housing units, a figure that continues to surge amidst the rapid population growth.
Moreover, the real estate market in Iraq adheres to an open market policy, where prices are dictated by supply and demand, with minimal government intervention.With substantial demand within urban areas, prices have steadily climbed over the past four years, reaching unprecedented heights.
Challenges in Iraq’s Real Estate Market
Despite the promising growth, the Iraqi real estate sector faces several challenges:
- The process of obtaining necessary permits and approvals for real estate transactions and developments can be cumbersome and time-consuming.
- The real estate market in Iraq suffers from a lack of reliable information and data, making it difficult for investors to make informed decisions.
- Infrastructure development is uneven across the country, with some areas lacking basic amenities such as roads, water supply, and electricity.
- The market operates on a 100% cash-based system. Using this system can be difficult for international buyers with large transactions. In the case of international bank transfers, this can be costly in bank fees and cause delays.
- Real Estate agents often charge fees to both sellers and buyers. This increases the cost of transactions.
The construction sector in Saudi Arabia is experiencing unprecedented growth. The numerous cranes decorating the Kingdom’s cities’ skylines make this clear. Skilled talent, strategic investments, and innovative companies are driving this surge. These elements create a robust foundation for the sector’s expansion.
Saudi Arabia to Become the World’s Largest Construction Sector by 2028
Saudi Arabia’s ambitious mega and giga projects lie at the heart of this boom. Projects like Qiddiya, Red Sea, and Amaala are transforming the country’s infrastructure. They generate millions of jobs and attract global attention. The Kingdom is also preparing for major events like Riyadh Expo 2030 and FIFA World Cup 2034. These preparations further fuel construction and open doors for new market entrants.
Key Highlights
– Saudi Arabia boasts the largest project pipeline in the region, valued at approximately $1.5 trillion.
– The construction sector is projected to reach $181.5 billion by 2028.
– In 2023 alone, Riyadh secured the majority of $140 billion in construction contracts.
– Between 2021 and 2025, the total value of awarded projects is expected to hit $569 billion.
A Growing Business Appetite and Urgency in the Construction Sector in Saudi Arabia
The construction sector in Saudi Arabia has an optimistic outlook. It is on track to become the world’s largest by 2028, ahead of the Vision 2030 timeline. This growth enhances economic opportunities and lays the groundwork for sustained prosperity.
Global companies like Grankraft, Waagner Brio Steel and Glass, and WBG lead this expansion. They bring diverse expertise and capabilities to the Saudi market. Supported by local teams, these industry leaders drive innovation and growth. The market size is expected to grow by 30% from 2023 to 2028. This demonstrates the sector’s robust health and the need to foster an environment conducive to business innovation.
Expedited awarding of public project contracts sparks significant interest from international businesses. This interest is reflected in the $569 billion worth of projects awarded between 2021 and 2025. Rapid urbanization and population growth increase the demand for residential and commercial properties. This continues to attract new players to the market. The real estate sector contributed 12.2% to Saudi GDP in Q3 2023. Its GDP contribution is expected to rise from 6% to 10% by 2030.
Riyadh: The Epicenter of Saudi Arabia’s Construction Boom
Riyadh has emerged as the focal point of the construction boom. The government aims to boost the city’s population to 10 million by 2030. This ambition makes Riyadh a prime destination for international companies seeking construction contracts and participation in its transformation.
In 2023, Riyadh secured construction contracts worth over $140 billion. The city also serves as the base for international corporations that have recently established operations in Saudi Arabia through the “Regional Headquarters” program. This program offers significant incentives, including tax breaks and exemptions from Saudization requirements, to attract businesses to set up offices in the Kingdom.
Tourism: A Catalyst and Beneficiary of the Construction Surge
The construction sector’s economic impact extends beyond direct contributions. It fosters growth in key industries like tourism. The hospitality sector is expanding rapidly to meet increasing travel demand. By 2030, Saudi Arabia aims to welcome 150 million domestic and international tourists. The Kingdom plans to add 320,000 new hotel rooms to accommodate this influx. These rooms will cater to diverse visitor needs.
This growth necessitates a skilled workforce and global expertise. The development of the hotel construction space drives these efforts. The government’s goal of tourism contributing 10% to the economy by 2030 hinges on these developments.
The thriving economy and expanding business opportunities make the Saudi construction industry a magnet for international firms. Extensive and varied construction activities across Riyadh and other regions attract companies eager to contribute to the Kingdom’s sustainable development model. As the sector continues to grow, it becomes increasingly intertwined with Saudi Arabia’s economic prosperity and diversification goals outlined in Vision 2030.
In summary, the construction sector in Saudi Arabia drives the Kingdom’s march toward economic prosperity. Skilled talent, strategic investments, and forward-thinking companies propel its growth, positioning the sector for continued dynamism and expansion.
While it is about foreign company registration in Saudi Arabia, staying on top of the country’s licensing process is crucial for smooth business expansion and establishing a legitimate and compliant business process.
Saudi Arabia is a powerhouse, delivering strong growth and enhanced investment opportunities in a challenging 2024. Global confidence in Saudi Arabia’s financial stability and reform program is borne out by attracting more foreign direct investment. Securing a commercial license unlocks significant benefits and incentives. Read more to find out how you can register and license your foreign company in Saudi.
Saudi Arabia’s economy has demonstrated its resilience over the course of 2022 and into 2023. Growth has been sustained in the midst of global economic pressures, geopolitical instability and the wake of the Covid-19 pandemic.
Whilst most global economies experienced a slowdown in economic growth, Saudi Arabia saw a steady growth in GDP year on year in 2022, supported by non-oil private sector activity. The Kingdom’s GDP growth rate was the fastest-growing among the G20 countries in 2022.
Saudi Arabia’s strong economic stance, strategic location and business-friendly reforms attract high-growth companies. Securing a commercial license unlocks significant benefits and incentives, read more to find out how you can register and license your foreign company in Saudi.
Saudi Arabia’s prime geographical location and progressive business reforms are drawing high-growth companies from around the globe. By securing a commercial license in the Kingdom, businesses can unlock numerous benefits and incentives. This is what makes it essential for foreign companies to understand the registration and licensing process.
First, Saudi Arabia’s strategic position, combined with targeted sector-specific reforms and a dynamic business environment, makes it an attractive destination for companies with international ambitions. Acquiring a one-year commercial license is a vital initial step for any business looking to enter the Saudi market. This license not only provides legal legitimacy for business operations but also grants access to a wide array of incentives and support offered by the Saudi government.
Moreover, navigating Saudi Arabia’s licensing process is critical for seamless business expansion. It ensures a compliant and effective business setup, paving the way for success.
Advantages of Obtaining a Commercial License
- Acquiring the legal authority to engage in business activities within Saudi Arabia.
- Gaining exceptional access to incentives, services, and protection for intellectual property.
- Improved opportunities for securing contracts and participating in tenders.
Step by Step Foreign Company Registration in Saudi Arabia
Required Documents
- Certificate of incorporation.
- A financial statement, memorandum of association and article of association.
- Notarizing a power of attorney (POA) document from a public notary.
Process for Setting Up a Company in Saudi Arabia
There are three main stages for setting up a company in the Kingdom of Saudi Arabia.
- Foundations of the Legal Entity
- Authorization to Hire Staff
- Acquiring Residency and Opening a Bank Account
Stage 1: Foundations of the Legal Entity (Projected timeline: 1 month)
1. Obtain a MISA Investor License
2. Name Reservation
3. Draft Local Articles of Association (AoA)Insight: The Articles of Association template is set up by law and companies are only able to adjust their general manager’s powers.
4. Commercial Registration (CR)
5. Chamber of Commerce (CoC) Registration
Stage 2: Authorization to Hire Staff (Projected timeline: 2 months)
6. Obtain a Company seal
7. Register with The Ministry of Labor
8. Register with the General Organization for Social Issuance (GOSI)
9. Register a National Address
10. Issue a GM Visa
11. Registration with the General Authority of Zakat and Tax (GAZT) and VAT Registration
Stage 3: Acquiring Residency and Opening a Bank Account (Projected timeline: 3 months)
12. Activate the Chamber of Commerce (CoC) Account
13. Obtain Health Insurance
14. Get a Medical Check-up
15. Issuing the GM’s Iqama
16. Register with the Muqeem portal for streamlined visa and residency management
17. Register with the Absher portal for an array of e-government services
18. Register with the Qiwa portal for business services designed for SMEs
19. Register with the Mudad Portal to manage essential municipal services for your company
20. Open a Bank account
At Injaz Company, we specialize in helping businesses expand into Saudi Arabia. We understand that ensuring compliance with the country’s industry-specific norms and regulations is vital for establishing a strong foundation for long-term economic success in Saudi Arabia’s growing economy.
By fostering local partnerships with setup specialists, we effectively guide businesses through the complexities of the market’s ever-evolving conditions. This strategic approach significantly enhances the growth prospects of companies choosing Saudi Arabia as their next business destination.
Your go-to-market insider in the Middle East
The topic of investing in Saudi Arabia has become a focal point of discussions within the business world. Saudi Arabia’s economy has demonstrated its resilience over the course of 2023 and into 2024. Growth has been sustained in the midst of global economic pressures, geopolitical instability, and the wake of the Covid-19 pandemic.
Saudi Arabia’s ongoing economic transformation, supported by commendable reforms under the Vision 2030 agenda and higher oil prices, has helped create high growth, record low unemployment, contained inflation, and strong external and fiscal buffers, while reducing reliance on oil.
The banking system remains on a strong footing. The aggregate capital adequacy ratio is strong, profitability—driven by net interest margins—is high and above pre-pandemic levels, and the NPL ratio is low and declining. While growth in mortgages has recently moderated, demand for project-related and consumer loans remains strong, helping offset the impact on profitability from rising funding costs linked to higher interest rates and a greater share of time and saving deposits in banks’ liabilities.
While higher oil prices and increased oil-driven exports account for much of the Kingdom’s growth, the nonoil economy has also demonstrated strength, buoyed by pro-business reforms that seek to diversify the economy and attract foreign private investment under the strategic roadmap of Vision 2030. Saudi Arabia is in the middle of an economic upswing, supported by higher non-oil activity, according to analysis by the Economist Intelligence Unit.
Saudi Arabia: Selected Economic Indicators, 2021–24
Population: 32.2 million (2022)
Quota: SDR 9,992.6 million (2.10% of total)
Main products and exports: Oil and oil products (79.5%)
Key export markets: Asia, the U.S., and Europe
9th
largest stock exchange by market capitalisation – Saudi Exchange
17
out of 64 – World Competitiveness Ranking (Overall) (IMD)
10.2 0%
growth in FDI inflows in Q1 2023 compared to Q1 2022
In this guide, we look at investing in Saudi Arabia, the Vision 2030 objectives, and recent business-friendly reforms that support the private sector. We also discuss key legal issues that foreign investors need to know about when considering investing in the Kingdom.
Key Facts About Vision 2030
Vision 2030 is an ambitious socio-economic reform program, with the purpose of creating an open Kingdom where business opportunities are diverse and abundant, education, employment, and career development opportunities are aligned, and economic growth is sustainable.
The three key themes of Vision 2030 are to foster an ambitious nation, a thriving economy, and a vibrant society. These broad themes are cascaded into 96 “Strategic Objectives” and 13 “Vision Realisation Programmes” (“VRPs”).
Vision Realisation Projects
Saudi Arabia’s large-scale “giga-projects” have been described by the Government as “the crown jewel of Vision 2030”. Designed to open new areas of economic activity, create jobs, and drive economic development, the projects span sectors, from energy to tourism.
Many giga-projects are large-scale infrastructure and construction projects, led by the PIF in partnership with the private sector.
The giga-projects are already stimulating the economy. The vast investment needed is driving both domestic and foreign investment. The human capability needed to bring the giga-projects to fruition is creating jobs and attracting international expertise, and it will serve to develop the skills and capabilities of Saudi nationals.
Looking ahead, the projects have the potential to re-cast the economic profile of Saudi Arabia and drive non-oil sector contribution to GDP for the long term.
The investment climate
Despite an uncertain global economic outlook in 2022, Saudi Arabia experienced a strong growth rebound. This contrasts with the stalling growth seen in the world’s three largest economies—the United States, China and the euro area.
Privatization and the growing private sector
The Privatisation Programme is one of the cornerstone programmes under Vision 2030. Privatisation initiatives are an important tool to enable the Government to realize several aims: to maximize revenues from state-owned assets, diversify the economy into new sectors, reduce historic dependence on oil, stimulate foreign investment and develop national capabilities.
Progressive legal reforms over the last few years have put in place some important pillars of the legislative framework to achieve these aims. Most recently, a new Companies Law introduced a modernized regime for local companies with effect from January 2023.
Privatization initiatives are typically carried out through public-private partnerships (“PPPs”) or the sale and lease of state-owned assets.
National Investment Strategy
A National Investment Strategy (Shareek) was launched in October 2021 to encourage investment in the Vision 2030 initiatives. Its aim is to accelerate the growth of the private sector by providing investment and broad based support across a number of pillars, ranging from financial to operational.
The goal is increasing contribution to GDP to 65 per cent by 2030. The program offers incentives and enable private investment of US$1.33trn (SAR 5trn) through until 2030.
As at April 2023, reports indicate that 28 companies have received SAR 192bn of investment the Shareek program. The Saudi Investment Promotion Authority (SIPA) was established by the Government of Saudi Arabia in August 2022, with a mandate to attract national and foreign investment as part of the National Investment Strategy.
Various drivers of continued growth include:
> elevated oil prices, which is providing additional liquidity for the government’s investment arms, such as the PIF;
> an increasingly sophisticated and diversified business environment, which is attracting foreign investment inflows (in particular from Asia);
> increased tax revenues following the tripling of the VAT rate to 15 per cent in 2020; and
> increased tax revenues following the tripling of the VAT rate to 15 per cent in 2020; and
> strong domestic demand, with steady population growth and the opening up of new sectors of the economy serving to stimulate spending.
Foreign Direct Investment
In driving private sector growth, foreign investment emerges as a fundamental force within Saudi Arabia’s economic framework. The Privatisation Programme, coupled with the liberalization of the Saudi Exchange and the establishment of Special Economic Zones, extends a compelling invitation to international investors. Inbound investment into Saudi Arabia has been affected by the slowdown of economic growth as a result of geopolitical tensions.
Despite a global downturn in FDI flows, Saudi Arabia defies the trend. The trend, investing in Saudi Arabia is witnessing a noteworthy surge during Q1 2023, signaling a promising trajectory of economic resilience and attractiveness to foreign capital.
While global FDI flows declined in Q1 2023 by 34.7 percent compared to Q1 2022 according to the OECD, FDI inflows into Saudi Arabia increased in the same period. Data published by the Ministry of Investment (“MISA”) in October 2023 shows that Saudi Arabia saw a growth rate in foreign direct investment (“FDI”) inflows of SAR 8.1bn in Q1 2023.
Saudi Arabia was the most targeted nation for M&A in the MENA region, with deal values of US$7bn, according to statistics published by MENA Investment Banking Review.
Investing in Saudi Arabia Special Economic Zones
When it comes to investing in Saudi Arabia, Special Economic Zones are one of the first questions that investors ask. The creation of SEZs, with bespoke regulations, is expected to boost investment further. Sector-based SEZs are a key tool to incentivize foreign investors to enter the local market. Moreover, SEZs have few or no restrictions on foreign investment and provide more favorable
regulatory and operating environments, including tax holidays.
The Kingdom’s first special economic zone, the Integrated Logistics Bonded Zone (ILBZ), focusses on providing integrated logistics. The ILBZ located adjacent to the King Khalid International Airport in Riyadh. Furthermore, four new SEZs, Ras Al-Khair Special Economic Zone, King Abdullah Economic City Special Economic Zone, Jazan Special Economic Zone and Cloud Computing Special Economic Zone were announced in April 2023.
Geographical Importance: Asia Investing Saudi Arabia
Saudi Arabia is a strategic location at the crossroads of three continents – Asia, Africa and Europe. This is why, the Kingdom is well placed to foster relationships across the globe.
It is clear that Saudi Arabia’s economic relationships are evolving closer to Asia. Whilst not displacing traditionally strong relationships with Western countries, deepening ties with the East are being driven by mutually beneficial trade and investment opportunities.
Inflows of investment and expertise from Asia are to a large extent attributable to economic diversification initiatives in Saudi Arabia and the Giga projects.
Outflows from goods trade to Asia are primarily in the oil and gas sector. For example, in 2021, the KSA was the largest supplier of oil to China. Moreover, renewable energy becoming increasingly significant as it contributes to Asia’s green agenda and plans for energy security in the future. Sovereign wealth funds are also looking East for investment opportunities.
Many opportunities for outbound investment are being led primarily by the PIF as well as companies such as Aramco and Dar Al Arkan. PIF has a focus on the infrastructure, energy, and renewables sectors. India, China and Malaysia are key destinations for investment in the Asia region.
China Investing Saudi Arabia
China is already one of Saudi Arabia’s largest trading partners. As at August 2023, China is the main destination for exports of Saudi Arabia, according to statistics released by the General Authority for Statistics.
In the first half of 2022, Saudi Arabia was the single largest recipient of investment from China at US$5.5bn. China was the top investor in Saudi Arabia by deal volume in Q2 2023, according to MISA.
More recently, Saudi Arabia signed 12 cooperation agreements worth in excess of US$1.3bn with Chinese companies and banks at an investment forum held in Beijing.
Saudi Arabia’s need for investment and expertise, in particular, in the technology, construction and infrastructure, logistics and renewables sectors, complements China’s Belt and Road Initiative (“BRI”) development strategy. China’s BRI aims to build connectivity and co-operation across the world. Since the launch of the BRI initiative, China’s foreign direct investment in Saudi Arabia has grown rapidly. In conclusion, closer coordination of the BRI and Vision 2030 is anticipated. This came in line with announcements following meetings between Crown Prince bin Salman and Chinese President Jinping in 2019.
"In a landscape of economic challenges, Saudi Arabia emerges as a formidable force, boasting robust growth and enticing investment prospects. With ongoing reforms driving momentum, the introduction of a new legal framework stands as a cornerstone of recent advancements in the local business sphere. Our commitment to understanding our clients' strategic objectives enables us to deliver unparalleled business development services."
Ugur Injaz
CEO
In this article, we delve into trends in Saudi Arabia FDI opportunities for European companies.
In the Kingdom of Saudi Arabia, foreign direct investment (FDI) projects serve as the cornerstone of our economic aspirations. These projects not only bolster growth through capital accumulation but also serve as catalysts for job creation, productivity enhancement, and technology adoption. Saudi Arabia stands tall on the global stage as a beacon for FDI. Also, the Kingdom is attracting thriving companies that not only nurture local talent but also entice fresh workforce to our shores.
The Global FDI Landscape
In recent years, the global Foreign Direct Investment landscape has been marred by market uncertainties and trade fragmentation. Geopolitical tensions and volatile food and energy prices have posed significant challenges, particularly for developing nations. Addressing these hurdles necessitates collaborative efforts on a global scale.
Amidst these challenges, Saudi Arabia has emerged as a formidable player in the FDI arena. Saudi Arabia net FDI inflows surged to $3.49 billion in the fourth quarter of 2023. This is marking a remarkable 16% increase from the previous quarter. The resilience of the Saudi economy, coupled with strategic geographical positioning and favorable economic policies, has rendered Saudi Arabia irresistible to international investors.
Vision 2030: A Roadmap for Saudi Arabia FDI Excellence
With a visionary roadmap like Saudi Vision 2030 spearheaded by Crown Prince Mohammed bin Salman, Saudi Arabia aims to attract a staggering $100 billion in FDI by 2030. This ambitious endeavor seeks to diversify our economy away from its dependence on crude oil exports, fostering sustainable growth and prosperity. Central to this strategy is a commitment to investment promotion, transparency, and creating an alluring global financial environment.
This effort includes initiatives such as the National Investment Strategy, the Regional Headquarters Program, and zero-income tax incentives for foreign companies. These measures are seen as essential for advancing Vision 2030, which aims to expand and diversify Saudi Arabia’s economy.
The Success Story: Saudi Arabia FDI Triumphs
In 2023, Saudi Arabia witnessed a commendable 12% surge in FDI inflows, soaring to SR72.28 billion. This substantial increase underscores the Kingdom’s attractiveness to foreign investors seeking lucrative opportunities. Noteworthy initiatives such as the Regional Headquarters Program have enticed multinational giants like Google, Microsoft, and Amazon to establish footholds in Saudi Arabia. Moreover, key players from the US and the UK, including Northern Trust, Bechtel, and IHG Hotels & Resorts, have embraced this initiative. Thus, these moves are propelling Saudi Arabia into the global spotlight as a thriving business hub.
European Business: Opportunities in Saudi Arabia
As Europe undergoes economic transformations, Saudi Arabia emerges as a prime gateway for European companies eyeing expansion into the Middle East, Asia, and Africa. The Kingdom offers a plethora of investment prospects across sectors such as agribusiness, logistics, infrastructure, and sustainable energy. Additionally, burgeoning industries like fintechs, agritechs, and healthtech beckon European enterprises to explore untapped potential in this dynamic market.
Navigating the FDI Horizon
In conclusion, Saudi Arabia’s resolute commitment to fostering FDI lays the foundation for sustainable economic growth and prosperity. With a visionary roadmap, robust policies, and enticing incentives, the Kingdom of Saudi Arabia stands poised to unlock new frontiers of prosperity for both domestic and international investors. As we chart our course towards Vision 2030, the allure of Saudi Arabia as a premier FDI destination shines brighter than ever before, beckoning global enterprises to join us on this transformative journey.
Digital banking in Iraq. But first, what about the banking sector overall in Iraq? Currently, 54 banks operate in Iraq, of which 7 are state-owned, 15 are foreign and 11 are specialized in Islamic banking services. As for the branch network, Iraq currently has around 920 bank branches across different governorates. The Iraqi banking sector is significantly underpenetrated compared to MENA countries. The sector is mainly characterized by low penetration, high asset concentration, and small branch/ATM networks. Therefore, the banking sector has contributed to only 1.94% of the national GDP in 2021.
The majority of these actors rely heavily on the Central Bank of Iraq’s (CBI) foreign currency sales to secure a profitable balance sheet, rather than traditional investments.
Digital Banking in Iraq
Digital banking has transformed the way things are done. Now all you have to do to get cash is to get to the nearest ATM, use your card, and get cash in under a minute! Moreover, going digital allows you the perfect opportunity to enjoy a paperless banking experience, where you no longer need to keep track of your transactions or banking history through physical documents.
In 2014, regulations governing retail payments were introduced, followed by the implementation of the Iraq Retail Payment System Infrastructure by the CBI in 2016. Subsequently, mobile wallets such as ZainCash and AsiaHawala received authorization from the CBI in the same year. Their utility became particularly evident during the COVID-19 pandemic, facilitating the disbursement of government grants and stimulating online shopping and e-commerce platforms.
Electronic Cards
The number of issued electronic cards has grown since 2017. Prepaid cards, in particular, have grown exponentially in popularity, with over 9.7 million cards issued by the end of 2021. This seeming preference is due to the ease of their use and the simplicity. Because they can be obtained without the requirement to create a bank account.
In early 2021, the Central Bank of Iraq launched the Digital Banking Enrollment service. According to the CBI, the program is an “integrated digital financial system” that enhances independence from traditional systems. However, Iraq’s banking and financial legislation is outdated and cannot accommodate modern digital systems.
On March 28, 2024, the Central Bank of Iraq implemented regulations governing the licensing of Digital Banks within the country. The emergence of digital banking is reshaping Iraq’s financial landscape, presenting customers with increased convenience and innovation. Nevertheless, this evolution necessitates adept maneuvering through intricate regulatory frameworks. This briefing offers a succinct summary of the regulatory environment concerning digital banking in Iraq. These regulations also emphasize essential factors and repercussions for financial entities engaged in this domain.
Prospects for the rise of digital banking
Unlike traditional banks, digital banks do not have a store-front presence but use the Internet to serve clients through mobile phone applications and online platforms. It means the availability of all banking activities online.
Cash still is King. Cash’s dominance in Iraq’s economy hinders the growth of the banking system. It is also the biggest instrument of economic exchange. The importance of cash is tied to the stability of the economy due to its usefulness during crises and the need to withdraw it to support spending. Iraq should think bigger and take steps towards establishing a vibrant digital banking system. This would provide consumers with better access to tools like e-payments and improve service provision.
In Iraq, a transition to digital banking will alter the behavior of both companies and consumers holistically.
An indispensable component of any digital banking infrastructure is the capability to facilitate electronic payments. Currently, Iraqis predominantly encounter this through the government’s distribution of public sector salaries via smart cards. However, despite this method, a significant portion of individuals opt to withdraw their salaries as cash, effectively bypassing the digital banking system.
Moreover, while consumers around the world also use their devices for financial transactions, there is a limited opportunity for Iraqis to follow suit because banks and retailers do not yet use e-payments.
Kurdistan Region of Iraq
The banking sector in the Kurdistan Region of Iraq has a limited role in business transactions and, consequently, in economic development. This heavy reliance on cash limits opportunities for economic expansion. An efficient banking system needs interbank and government securities markets to provide liquid instruments for short-term investment. A lack of confidence in the banking sector is related to a loss of deposits under the former regime. While there is no short-term solution to reestablishing trust in the banking system, steps can be made to increase public confidence in the banking sector.
Iraq’s Digital Banking for Financial Institutions
In 2021, CBI allocated around 42 trillion IQD towards the development of industrial, transportation, and a range of other sectors in an effort to tackle stagnation and encourage existing small projects. State-owned banks led investment with an 11.4% increase in 2021 due to COVID-19’s financial impact. Private domestic and local banks saw significant growth. Private foreign banks, however, experienced a 60% decline.
Financial institutions interested in establishing a digital bank in Iraq must comply with regulations set forth by the CIB. These regulations include obtaining a license from the Central Bank, meeting minimum capital requirements, submitting detailed documentation, and adhering to cybersecurity and data protection standards.
To initiate the application procedure, applicants must furnish details including the bank’s title, invested capital, and nation of origin. Also, applicants must provide the legal ownership structure, financial records, and organizational layout, among other particulars. Moreover, they are required to present a financial viability assessment and remit a non-reversible fee for license application.
Foreign Investment
For companies that want their business to thrive in the high-intensity world of banking and finance in the Middle East, Iraq could be a gate to enter the market. With several successful entry cases for global and regional banks, Iraq private banking sector is promising.
The majority of the foreign banks in Iraq focus on the Kurdistan Region. Top Iraqi private banks generate most of their revenue from trade related activities and net interest income. Foreign participation in digital banks operating in Iraq is allowed, subject to certain conditions. Foreign shareholding in a digital bank should not exceed 49%, and there must be a contribution from a conventional bank of not less than 30% of the digital bank’s shares, with approval from the CBI.
The potential risks associated with operating a digital bank in Iraq include cybersecurity threats, compliance failures, operational disruptions, and financial instability. To have safe digital banking in Iraq, banks must take some measurements. Digital banks must implement robust risk management practices and contingency plans to mitigate these risks. Thus they can safeguard the interests of depositors, clients, and shareholders.
The Kingdom of Saudi Arabia is currently experiencing a significant surge in foreign companies’ influx, accompanied by various other factors. This dynamic environment has led to a remarkable 20% increase in office space rental prices. In the first quarter of 2023 alone, Saudi Arabia issued an astounding 1,600 foreign investment licenses, averaging at about 25 licenses granted each day. The escalating demand for office space is not only driven by foreign companies but also fueled by the establishment of new government and private entities.
Rising Demand for Office Space: The occupancy rate in category an office space has soared to an impressive 97%, marking a 15% price increase over the past year. This trend is poised to continue as more foreign companies set foot in the Kingdom and various commercial sectors expand. This increasing demand has created a vibrant market for office space, making it an attractive investment prospect.
Investment Opportunities in the Construction Sector: The construction sector is emerging as a hotspot for investors, with the Saudi government launching mega and giga projects in the tourism and housing sectors. These ambitious projects are not only boosting the economy but also driving the need for additional office space. Investors with an eye on the real estate and construction industries are well-positioned to capitalize on this opportunity.
Government’s Commitment to Investment: During the first quarter of 2023, the Saudi government sealed 104 investment deals, a notable increase from the previous year’s 101 deals, representing a 3% growth. This underlines the government’s unwavering commitment to facilitating foreign investment and economic diversification. Such initiatives create a favorable environment for businesses, further stimulating the demand for office space.
Erbil, June 6 – Injaz Company, a trusted leader in business solutions, successfully participated in the prestigious HITEX event, held in Erbil. With a strong focus on expanding its international business services, Injaz Company showcased its expertise in supporting organizations in their global growth initiatives.
As businesses increasingly sought to enter new markets and seize international opportunities, Injaz Company stood ready to provide comprehensive support and guidance. With a deep understanding of diverse markets and extensive experience in international business expansion, Injaz Company offered tailored solutions to help companies navigate the complexities of global trade.
During the HITEX event, Injaz Company showcased its wide range of services designed to facilitate international expansion. From market research and strategic planning to regulatory compliance and partner identification, Injaz Company’s experts were equipped to assist organizations at every stage of their global journey.
The Injaz Company team was present at their booth, engaging with attendees, sharing insights, and discussing potential collaborations. By leveraging their extensive network and industry knowledge, Injaz Company aimed to connect businesses with the right partners and resources to accelerate their international growth.
Injaz Company’s participation at HITEX highlighted its dedication to helping businesses thrive in the global marketplace. With their international business expansion services, they continue to empower organizations to unlock new growth opportunities in global markets.
Saudi Arabia is taking a bold step forward in its pursuit of becoming a global investment destination with the announcement of the establishment of four new special economic zones (SEZs) on 14 April 2023. The SEZs will be located in Riyadh, Jazan, Ras Al-Khair, and King Abdullah Economic City. And the zones aim to offer competitive incentives to international investors. The zones will serve as new hubs for businesses across key growth sectors, enabling them to launch and expand companies and technologies that will shape the future.
Crown Prince Mohammed bin Salman stated that the new special economic zones will create tens of thousands of jobs. Equally important, the Crown Prince stated that the SEZ will contribute billions of riyals to the country’s gross domestic product. The zones will support existing national strategies and build new links with international frameworks. The zones will leverage the competitive advantages of each region of the country to support key sectors such as logistics, advanced manufacturing, technology, and other priority sectors in the Kingdom.
Opportunities in the Special Economic Zones
Companies operating in the SEZs will enjoy a range of benefits, including competitive corporate tax rates, exemption from customs duties on imports, production inputs, machinery, and raw materials, 100 percent foreign ownership of companies, and flexibility to attract and hire the best talent worldwide.
In addition to the benefits for international investors, the SEZs will also provide significant opportunities for developing the local economy, generating jobs, and localizing supply chains. These zones represent a continuation of the Kingdom’s long-running initiatives to transform itself into a global investment destination and a vital hub for global supply chains, leveraging its strategic location at the heart of global trade routes.
The new SEZs come with a host of competitive benefits. Firstly, a 5% Corporate Income Tax rate for up to 20 years, 0% withholding tax on repatriation of profits from SEZ into foreign countries. Then, customs duties are deferral for goods inside SEZ or 0% Custom duties on capital equipment and inputs inside SEZ. Also, there will be 0% VAT for all intra-SEZ goods exchanged within and between the SEZs.
In addition, the SEZs will have flexible and supportive regulations around foreign talent during the first 5 years. There will be the special tax treatment in line with OECD principles to avoid double taxation. Furthermore, there will be a competitive rate of utilities exemption from operational fees for employees and their families.
Special Economic Zones Role in Diversification of the Saudi Economy
The establishment of these new SEZs is a significant milestone for Saudi Arabia as it seeks to diversify its economy and attract more foreign investment. Evidently, the new SEZs offer a unique opportunity for businesses looking to expand into the Middle East region.
By creating a business-friendly environment with attractive incentives, the Saudi government is demonstrating its commitment to accelerating economic growth. Moreover, the SEZ are supporting job creation and promoting innovation across the country. This is why, the SEZs are expected to become key drivers of growth. The Special Economic Zones help to create new industries and unlock new opportunities for investment and development.
In conclusion, the establishment of these new Special Economic Zones is a welcome development for Saudi Arabia and the broader Middle East region. The competitive incentives and business-friendly environment they offer are obviously expected to attract significant investment and drive economic growth in the coming years. As such, they represent a unique opportunity for businesses looking to expand their operations in the region and take advantage of the numerous benefits on offer.
The Special Economic Zones
King Abdullah Economic City (KAEC) SEZ
The premier destination for advanced manufacturing and logistics, from automobile supply chain and assembly to consumer goods, ICT to MedTech. Set in a prime location on the Red Sea, KAEC is less than 90 minutes from Jeddah Airport. And then, this 60km2 site offers unrivaled access to global trade routes through King Abdullah Port. Positively, the King Abdullah Port is ranked the world’s most efficient by the World Bank in 2022. Anchor investor Lucid, for example, a leader in the global EV industry, will produce 150,000 EVs a year from its base in KAEC SEZ.
Jazan Special Economic Zone
Jazan SEZ is an industrial center and a key platform for trade with fast-growing markets in Africa and Asia. The SEZ offers access to the largest port in the region for the export of goods and import of materials. Besides it is helping investors benefit from and contribute to large-scale infrastructure projects in Saudi Arabia and around the world, backed by easy access to both natural and industrial resources. What’s more, Jazan is part of the Kingdom’s fertile southwestern region. Thus, Jazan Special Economic Zone provides opportunities for the manufacturing, processing, and distribution of food products to cater to growing regional demand and meet food security challenges across the region.
Ras Al-Khair SEZ
A launchpad on the Arabian Gulf for leaders in the maritime industry, Ras Al-Khair SEZ is a fully integrated marine ecosystem. The SEZ has a rich network of existing investors – 40% of the zone is already reserved. Equally important, Ras Al-Khair SEZ has myriad opportunities across shipbuilding and repair, offshore drilling and maritime value chains.
Cloud Computing SEZ, located in King Abdulaziz City for Science and Technology (KACST)
In King Abdulaziz City for Science and Technology, a new Cloud Computing SEZ will serve as a hub for emerging and disruptive technologies. The Cloud Computing SEZ underlines the Kingdom’s commitment to digital innovation and the fast-growing tech sector. Also, the Zone is based on an innovative hybrid model that allows investors to establish physical data centers and cloud computing infrastructure in multiple locations within the Kingdom.
If you wish to find out more about the salient features of these zones, feel free to reach out to us for support.
Injaz Company recently hosted a delegation from the Kurdistan Government in Madrid on February 23rd. The delegation, led by Sarwar Kamal Hawari, the Deputy Minister of Trade and Industry, was interested in learning more about Portugal and Injaz Company to explore the potential of establishing bilateral relations between Kurdistan and Portugal.
During the meeting, Injaz Company’s CEO, Ugur Injaz, provided the delegation with valuable insights into the economic and political situations in Spain and Portugal. He discussed how Injaz Company offers services to help governments establish and bolster their partnerships with other nations.
The Kurdistan government delegation was impressed with Injaz Company’s expertise and commitment to supporting businesses, and governments, and they expressed their interest in collaborating with Injaz Company in the future.
This visit is a positive step towards establishing stronger economic and diplomatic relations between Kurdistan and Iberian countries, and Injaz Company is proud to have played a role in facilitating this important exchange.
Consumers in the Middle East are changing their buying behavior. International companies looking to do business in the Middle East must take these points into consideration. Then, they must adjust to the new trend.
BUSINESS & INVESTMENT
What is the Middle East?
The Middle East has been referred to as the crossroads of the world because it connects the three continents of Asia, Africa, and Europe. The Middle East is used with different definitions. Some use it for Gulf Cooperation Council (GCC), which is in six countries: the United Arab Emirates, Saudi Arabia, Oman, Kuwait, Qatar, and Bahrain. However, the Middle East is more than GCC.
A variety of countries make up the Middle East. Saudi Arabia, Kurdistan, Qatar, Israel, and Lebanon are some of them. We are talking about a population of 700 million, which is roughly 10 percent of the global population and $4 trillion of GDP.
The complexity of the region is very interesting. The region has some of the world’s oldest civilizations—be it Egypt or Mesopotamia, —and some of the youngest countries. The majority of the countries were created in the middle part of the 20th century.
There are some of the richest countries. If you take the GDP per capita of the richest country and the GDP of the poorest country, it’s almost 100 times while it’s around 15 times in Europe. So that gives us a big sense.
We also look at population. There is a population of 70 million in Kurdistan, and 90 million-plus in Egypt. Bahrain’s population is 1.5 million.
The contrast between the different countries actually is quite stark. That’s what makes the region very complex. People talk about the Middle East as one setup, as one country but it’s not.
Business and Investment
Looking in from the outside, the Middle East has been through a bit of a rough patch. Fluctuations in oil prices, political instability, the war against ISIS, etc.
On the one hand, there are other people who basically say, “Well, let’s wait and see,” because they’re skeptical about the geopolitical situation. They’re skeptical about this kind of volatility of economic activity, which is also driven a lot by oil prices over the last few years. Most importantly, this group is skeptical about the success of the transformation
On the other hand, however, there are people that actually are very bullish about the region because they see the ambitious transformation. They see a young population that is thriving and wanting to make a difference. They see a market that actually could be attractive and that is very big. Thus, they see some of the big investments. So, glass half empty, or glass half full.
The Business Strategy
If you’re a CEO looking to do business in the Middle East and thinking about “What’s my Middle East strategy?”, it is very important for to think about this region in a much more granular way. Country by country, city by city. If we think about Saudi Arabia, it is different than Iraq. Or in Saudi itself, every region is very different. The regional differences are quite big. Thinking about this region in a granular way is the number-one step for any strategy that should be set here in the region.
Let’s look a bit from a historical view. Over time, a lot of international companies came into the region. These companies had only sales kinds of operations, which means that everything was produced outside. Everything was developed outside, in countries like the USA, Germany, South Korea, and the UK.
Nevertheless, now the consumers in the Middle East are much more demanding. Consumers are changing their buying and consuming behavior and they are spending even more cautiously than they have in previous years. Also, they are requiring something that is much more tailored to them, their lifestyle, and their customs. Moreover, consumers are also becoming less brand loyal, more health-oriented options and locally sourced products.
Therefore, requires international companies to be closer and closer to this market and to learn the market. You cannot just apply what you’ve done in other markets and come here.
Companies that expand to the Middle East come in with hubris. They say, “We bring this product, and this is the best for you.” This is a misconception too. Hence, that’s the thing I urge international companies to think about, is to be humble and respect the knowledge of the local players here. On that account, that would require them to invest time and money to understand who the local players are that they need to partner with.
At the same time, the costs of doing business in the Middle East keep inching up. In the last 4 years, companies in the Middle East were affected by new value-added taxes and reductions in utility subsidies.
We expect these trends to have staying power. That means companies won’t survive unless they undertake a strategic refocus—and quickly.
Yet this tough business environment should not discourage new entrants. International companies in the Middle East must adjust to the new trend. It’s no easy task. But by staying abreast of changing consumer trends, they can deliver what consumers want. Assertive start-ups, for example, have entered the fray and are growing fast.
