Starting a Business in Saudi Arabia

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Starting a Business in Saudi Arabia

Saudi Arabia has been recognized for their macroeconomic stability, low debt, and a strong budget surplus. The business and cultural environment of Saudi Arabia is highly conservative. Corporate law in Saudi Arabia is similar to that in western countries.

Economy of Saudi Arabia

Saudi oil reserves are the second largest in the world, and Saudi Arabia is the world’s leading oil exporter and second largest producer. Proven reserves, according to figures provided by the Saudi government, are estimated to be 260 billion barrels (41 km3), which is about one-quarter of world oil reserves. Petroleum in Saudi Arabia is not only plentiful but under pressure and close to the earth’s surface. This makes it far cheaper and thus far more profitable to extract petroleum in Saudi Arabia than in many other places. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP. Saudi Arabia’s oil reserves and production are largely managed by the state-owned corporation Saudi Aramco.

As of October 2018, Saudi Arabia is the largest economy in the Middle East and the 18th largest in the world

Another 40% of GDP comes from the private sector. An estimated 7.5 (2013) million foreigners work legally in Saudi Arabia, playing a crucial role in the Saudi economy, for example, in the oil and service sectors. The government has encouraged private sector growth for many years to lessen the kingdom’s dependence on oil, and to increase employment opportunities for the swelling Saudi population. In recent decades the government has begun to permit private sector and foreign investor participation in sectors such as power generation and telecom, and acceded to the WTO. During much of the 2000s, high oil prices enabled the government to post budget surpluses, boost spending on job training and education, infrastructure development, and government salaries.

Saudi Arabia Economic Indicators

Saudi Arabia GDP Growth Rate

Saudi Arabia has an oil-based economy. Shipments of oil account for 87 percent of total exports and for 46 percent of GDP. In recent years, in order to diversify the economy, the government has been investing in telecommunications, petrochemicals, natural gas exploitation and power generation sectors.

Saudi Arabia GDP Growth Rate
Source: OECD
Saudi Arabia Interest Rate

In Saudi Arabia the interest rates decisions are taken by the Saudi Arabian Monetary Agency (SAMA). Central bank official interest rate is the Official Repo Rate (ORR).

Saudi Arabia Interest Rate
Source: Saudi Arabian Monetary Agency
Saudi Arabia Inflation Rate

In Saudi Arabia, the most important categories in the consumer price index are Food and beverage (22 percent of total weight); Housing, water, electricity, gas and other fuels (21 percent); Transport (10 percent); Furnishings, household equipment and routine household (9 percent); and Clothing and footwear, and Communication (8 percent each). The index also includes: Miscellaneous goods and services (7 percent); and Restaurants and hotels (6 percent). Recreation and culture, education, health and tobacco account for the remaining 9 percent.

Saudi Arabia Inflation Rate
Source: Central Department of Statistics & Information, Saudi Arabia
Saudi Arabia Unemployment Rate

In Saudi Arabia, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Saudi Arabia Unemployment Rate
Source: Central Department of Statistics and Information
Saudi Arabia Government Dept to GDP

Saudi Arabia recorded a government debt equivalent to 22.80 percent of the country’s Gross Domestic Product in 2019. Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields.

Saudi Arabia Government Debt to GDP
Source: Saudi Arabian Monetary Agency
Saudi Arabia Balance of Trade

Saudi Arabia has been recording trade surpluses since 1968 due to shipments of oil (87 percent of total exports). Main imports are: machinery, mechanical appliances and electrical equipment; transport equipment and parts thereof and base metals. Main trading partners are: United States (14 percent of total exports and 12.6 percent of imports), China (12 percent of exports and 13 percent of imports) and Japan (13 percent of exports and 6 percent of imports). Others include: South Korea, United Arab Emirates, India and Germany. Saudi Arabia recorded a trade surplus of 10258 Million SAR in the second quarter of 2020.

Saudi Arabia Balance of Trade
Source: Saudi Arabian Monetary Agency
Saudi Arabia Currency Riyal

The USDSAR spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the SAR.

Saudi Arabia Currency Riyal

Saudi Arabia Stock Market (TASI)

The Tadawul All Share Index (TASI) is a major stock market index which tracks the performance of all companies listed on the Saudi Stock Exchange. The index has a base value of 1000 as of 1985 and it was reorganized on June 30, 2008.

Saudi Arabia Stock Market (TASI)

Saudi Arabia Ease of Doing Business

Saudi Arabia is ranked 62 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Saudi Arabia improved to 62 in 2019 from 92 in 2018. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operationstronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Saudi Arabia Ease of Doing Business
source: World Bank
Saudi Arabia Consumer Confidence

Consumer Confidence in Saudi Arabia decreased to 104 points in the second quarter of 2020 from 121 points in the first quarter of 2020.

In Saudi Arabia, the Consumer Confidence Index is part of The Nielsen Global Survey of Consumer Confidence and Spending Intentions. The survey is conducted every quarter by the Internet and measures the level of optimism that consumers have about job prospects, personal finances and spending intentions. Twice a year, the survey also includes questions regarding consumer habits and opinions on a number of other issues, ranging from climate change to online shopping and food safety. The index levels above 100 indicate optimism and below 100 indicate pessimism.

Saudi Arabia Consumer Confidence
Source: Nielsen
Saudi Arabia Corruption Rank

Saudi Arabia is the 51 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.

Saudi Arabia Corruption Rank
Source: Transparency International
Saudi Arabia Credit Rating

Standard & Poor’s credit rating for Saudi Arabia stands at A- with stable outlook. Moody’s credit rating for Saudi Arabia was last set at A1 with negative outlook. Fitch’s credit rating for Saudi Arabia was last reported at A with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Saudi Arabia thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for Saudi Arabia as reported by major credit rating agencies.

King Abdullah Financial Center
King Abdullah Financial Center

Taxation in Saudi Arabia

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Corporate tax Personal income tax VAT or sales tax Social Security Rate for Companies Social Security Rate for Employees
20% 2.5% (capital assets of natives)
0% (foreigners)
15% 12% 10%

Starting a Business in Saudi Arabia

Saudi Arabia is among the countries with the most notable improvement in doing business according to the World Bank Group’s Doing Business 2020 report. The country jumped 30 places to rank 62nd in ease of doing business compared to the last year.

According to the World Bank, Saudi Arabia has conducted several reforms. These reforms have been made in eight business areas which are: starting a business, getting construction permits, getting electricity, getting credit, protecting minority investors, trading across borders, enforcing contracts, and resolving insolvency.

Previously, the country rated as the 92nd for ease of doing business, according to the World Bank in its annual “Doing Business” report issued for 2018. Since 2013, the Kingdom has declined in the overall Doing Business rankings, from 22nd to 92nd.

Saudi Arabian companies dominate 2009’s “MEED 100”, with companies listed on the Tadawul, accounting for 29 out of the region’s 100 biggest publicly quoted companies ranked by market capitalisation. Just three of the 20 companies that have dropped out of the top 100 over the past year are listed on the Saudi stock exchange.

Foreigners are allowed to wholly own limited liability companies in the majority of industries. Non-Saudi nationals are required to obtain a foreign capital investment license from the Saudi Arabian General Investment Authority (SAGIA).

With a total of 291 foreign investor licenses were issued in the second quarter of 2019, the Kingdom has witnessed an increase in international investment, reflecting the economic reforms under the Saudi Vision 2030. Obtaining a foreign investor license became more straightforward as it requires only two documents, and it is processed in three hours.