A level playing field is still elusive in Saudi Arabia

23 March 2010

Riyadh must step up efforts to ease bureaucratic hurdles for doing business to attract foreign investors

Saudi Arabia has traditionally been a difficult market  to enter for foreign investors, but after a series of financial and legal reforms introduced from 2004 onwards it now leads the Middle East and North African for ease of doing business.

The kingdom has cleaned up its act since being was ranked at 67 in the world in the Washington-headquartered World Bank’s Ease of Doing Business Index in 2004; it jumped to 13 in 2009, up from 15 in 2008. 

But bureaucratic hurdles for international investors still persist.

Although Saudi Arabian companies can be licensed to do business within a few days, foreign firms must obtain and maintain a series of licences and visas, which can take weeks or months to secure. Further, while locally-owned companies pay a modest 2.5 per cent a year in tax on their total holdings, foreign companies are required to pay 20 per cent in annual corporation tax.

Making money to pay that tax comes only after meeting the right people, businessmen in the kingdom say.

Whether or not Saudi Arabia has achieved its ambitions of a top 10 placing in 2010 index will be revealed when the latest rankings are announced in May. More interesting than its headline score will be the kingdom’s placings in the index’s sub-categories.

Closer inspection reveals that Saudi Arabia fell two places to 140 in the ‘enforcing contracts’ rankings in 2009, while in the ‘employing workers’ grouping it dropped to 73.

In 2008, Riyadh announced it wanted to attract up to $900bn in foreign investment over 10 years in the energy, power, financial services and real estate sectors. As long as the playing field remains as uneven as it is now, that target will likely remain elusive.

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