Percent of the World's Proven Term Paper

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Consequently, his observations concerning the business climate in Saudi Arabia with respect to the significance of religion in the Kingdom can be considered authentic. According to Indris, with respect to the perception of performance and contractual obligations among Saudis, "It should be noted that the issue is not with the belief itself but rather with people's misguided interpretations of the belief and Islam teachings. While Islam teaches that ultimate control is in the hands of God, it also teaches that people should exert their utmost efforts to better their lives" (p. 38). These issues have special salience for foreign direct investors who may experience disputes based on such misinterpretations that cannot be predicted but must be expected. In this regard, Idris concludes that, "Misguided interpretations have a strong impact on the business environment and the commitment to setting and meeting goals and targets in the kingdom. Accountability in running businesses is weak, and it is not uncommon to attribute business mistakes to fate" (2007, p. 38).

Notwithstanding these fundamental differences in worldviews, the Saudi government has launched a number of initiatives that are specifically designed to attract new foreign direct investment. Pursuant to these goals, the Saudi government established the Saudi Arabian Investment Authority which has been tasked with:

1. Creating a pro-business environment;

2. Providing comprehensive services to investors; and,

3. Fostering investment opportunities in energy, transportation and knowledge-based industries (Investing in Saudi Arabia 2011).

The Saudi Arabian General Investment Authority (SAGIA) cites the following factors as being among the more compelling for attracting foreign investors to the kingdom today:

1. Saudi Arabia is ranked 4th in the world for "fiscal freedom" and it is the seventh most rewarding tax system in the world;

2. According to the World Economic Forum, Saudi Arabia is the seventh freest labor market in the world;

3. Saudi Arabia is 23 among the world's 25 largest economies and has the largest economy in the Middle East-North African (MENA) region;

4. Saudi Arabia is one of the world's fastest growing countries: per capita income is forecasted to rise from $20,700 in 2007 to $33,500 by 2020;

5. Saudi Arabia is the world's fastest reforming business climate and the largest free market in the MENA;

6. Saudi Arabia economy accounts for 25% of total Arab GDP;

7. Saudi Arabia ranks 13th out of 181 countries for the overall ease of doing business globally and seventh in terms of ease of paying taxes;

8. Saudi Arabia is ranked first for ease of registering property and it is the largest recipient of foreign direct investment in the Arab world (The Hard Facts 2011).

In sum, the SAIG emphasizes that, "As well as a progressive regulatory environment, generous financial incentives and one of the world's most stable currencies, the Kingdom offers an excellent standard of living -- thanks to our huge experience in hosting expatriate workers and professionals from around the world" (Investment Climate 2011, p. 1)

In addition, the administrative steps that are needed to form a business in Saudi Arabia have been simplified and the process is now fairly straightforward and can be accomplished relatively quickly (Investing in Saudi Arabia 2011). The first step in forming a company in Saudi Arabia involves simply obtaining a foreign investment license and commercial registration (Investing in Saudi Arabia 2011). In those cases where the new enterprise involves industrial projects, investors can opt to obtain an interest-free loan from the Saudi government, but this option requires a feasibility analysis; in the alternative, industrial projects can opt to take advantage of Saudi government-leased land but this option requires engineering drawings as a prerequisite (Investing in Saudi Arabia 2011).

Controlling Legislation for New Businesses in Saudi Arabia

The Saudi regulatory guidance for companies provides for the following types of organizations:

1. Joint-liability company;

2. Limited partnership;

3. Particular partnership;

4. Joint stock company;

5. Stock partnership company;

6. Limited liability company;

7. Company with changeable capital; and,

8. Cooperative company (Applications & Procedures 2011)

All of the foregoing legal entities, with the exception of the particular partnership, are regarded as being a legal person under Saudi law; however, the Saudi government emphasizes that, "This legal person does not invoke against third parties until declaration procedures are finalized (managers or members of board of directors announce company contracts and amendments thereto, according to the Regulations for Companies)" (Applications & Procedures 2011, p. 3).

The salient articles of the Saudi Foreign Investment Law (promulgated 10 April 2000) for the purposes of this study are set forth in Table 1 below.

Table 1

Salient Articles of the Saudi Foreign Investment Law (10 April 2000)



Article Two:

1. Without prejudice to the provisions of the laws and agreements, the authority shall issue a license for foreign capital investment in any investment activity in the Kingdom, whether permanent or temporary.

2. The authority shall act on the investment's application within thirty days of the submission of all the documents required by the regulations. If the specified period lapses without the authority acting on the application, it shall issue the required license to the investor.

3. If the authority rejects the application within the prescribed period, the decision must be justified, and the party whose application has been rejected shall have the right to appeal such decision according to laws.

Article Three:

The council shall have the authority to issue a list of activities excluded from foreign investment.

Article Four:

Subject to the provisions of Article 2, the foreign investor may obtain more than one license for different activities, and the regulations shall specify the necessary requirements.

Article Five:

Foreign investments licensed under the provisions of this Law may be in either of the following forms:

1. Firms jointly owned by a national and foreign investor.

2. Firms wholly owned by a foreign investor.

The legal form of the firm shall be determined in accordance with laws and directives.

Article Six:

A project licensed under this Law shall enjoy all the benefits, incentives and guarantees extended to a national project, according to laws and directives.

Article Seven:

A Foreign Investor may repatriate its share that is derived either from the sale of its equity, the liquidation surplus, or from profits generated by the firm, or to dispose of it in any other lawful manner. The foreign investor may also transfer the amounts required to settle any contractual obligations related to the project.

Article Eight:

A foreign firm licensed under this Law may acquire necessary real estate as needed for operating the licensed activity, or for housing all or some of its staff, subject to the provisions governing real estate ownership by non-Saudis.

Article Nine:

The foreign investor and its non-Saudi staff shall be sponsored by the licensed firm.

Article Ten:

The authority shall make available to all interested investors required information, clarifications and statistics as well as provide them with all services and carry out all procedures to facilitate and complete all investment related transactions.

Article Eleven:

The foreign investor's investments may not be confiscated, wholly or partially without a court judgment. Moreover, they may not be subject to expropriation, wholly or partially, except for public interest, against a fair compensation according to laws and directives.

Article Twelve:

1. The authority shall notify the foreign investor in writing of any violation of the provisions of this Law and its regulations, in order to rectify such violation within the period of time the authority deems appropriate for the rectification of the violation.

2. Without prejudice to any harsher penalty, the foreign investor shall be subject to any of the following penalties if the violation persists:

a. Withholding all or some of the incentives and benefits given to the Foreign Investor.

b. Imposing a fine not exceeding 500,000 (Five hundred thousand Saudi riyals).

c. Revoking the foreign investment license.

3. The penalties referred to in paragraph (2) above, shall be imposed pursuant to a resolution by the board of directors.

4. The resolution issued may be appealed before the Board of Grievances in accordance with its Law.

Article Thirteen:

Without prejudice to agreements to which the Kingdom of Saudi Arabia is party:

1. Disputes arising between the government and the foreign investor in relation to its investments licensed in accordance with this Law shall, as far as possible, be settled amicably. Failing such settlement, the dispute shall be settled according to the relevant laws.

2. Disputes arising between the foreign investor and its Saudi partners in relation to its investments licensed in accordance with this Law shall, as far as possible, be settled amicably. Failing such settlement, the dispute shall be settled according to relevant laws.

Article Fourteen:

All foreign investments licensed under this Law shall be treated in accordance with applicable tax provisions and amendments thereto in the Kingdom of Saudi Arabia.


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