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Saudi Arabia Considers Allowing Full Foreign Ownership Of Retail and Wholesale Business

The Saudi General Investment Authority (SAGIA) and the Ministry of Commerce and Industry (MOCI) have recently announced that they were preparing joint studies to implement the directives of King Salman, following his latest visit to the US, aimed at allowing US and other foreign investors to fully own retail and wholesale businesses in the Kingdom.

Both SAGIA and the MOCI stated that the Kingdom was committed to paving the way to foreign investors to invest in the retail and wholesale segments and allowing ownership levels exceeding those agreed by the Kingdom following its accession to the World Trade Organization and the current maximum level provided for by law (75%). According to the joint announcement, the objectives behind the King’s directives, may be summarized as follows:
      • encourage foreign manufacturers to invest directly in the Kingdom (rather than through local agents or distributors) and to manufacture their products locally;
      • increase competition;
      • provide better job opportunities to young Saudis;
      • enhance after sales’ services and maintenance;
      • provide adequate training of young Saudis in training centers managed and controlled by foreign manufacturers; and
      • transform the Kingdom into an international center for the distribution, sale and re-exportation of manufactured goods.
As part of the preliminary study process, SAGIA and the MOCI have invited international companies to submit proposals including their future manufacturing plans with clear timelines for implementation as well as the ways in which such plans would contribute to the Saudi economy in terms of transfer of know-how and technology, training and employment of young Saudis.

The new regime is likely to come into force next year and is widely seen as a commendable attempt by the Saudi government to attract foreign technologies and know-how, provide young Saudi with more technical and white collar jobs and maintain economic growth.

We will keep an eye on the developments and will report them in due course.
Published: September2015
Title: Saudi Arabia considers allowing full foreign ownership of retail and wholesale business
Practice: Corporate and M&A, Commercial
Author(s): Cyrille Naffah
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