How Saudi Arabia’s new economic zones will help attract foreign investment

The special economic zones will have special legislative systems and regulations for economic activities that would make them among the most competitive in the world. This will help attract qualitative foreign investment and assist in the development of the local economy, job creation, technology transfer, and industry localisation.

It will also help boost the Saudi business community, integrate with existing economic structures, and provide fertile ground for achieving sectoral strategies within Vision 2030, which will allow Saudi companies to benefit from the added value of the zones in various sectors.

In an exceptional experience for investors on Saudi soil, the economic zones will serve as integrated logistical and industrial platforms, establishing the Kingdom's position as a transit gateway to the Middle East and Africa and as a link between East and West markets.

This coincides with initiatives to transform the Kingdom into a global destination for investment, and a vital centre that supports global supply chains — especially after the launch of the Special Integrated Logistics Zone within King Salman International Airport in Riyadh.

Attracting international companies

The Economic Cities and Special Zones Authorities, which regulate the work of the four zones, seek to attract international companies during the first stage and to promote the growth of future qualitative sectors by providing modern world-class infrastructure to serve local and international investors, supported by an integrated and developed system of regulations.

Incentives offered to companies include competitive tax rates and exemptions on customs duties for imports, production inputs, machinery, and raw materials, in addition to allowing 100% foreign ownership.

The launch of the economic zones coincides with an increase in foreign investment in the Kingdom at the end of the third quarter of 2022, which amounted to 2.43 trillion riyals (about $648 billion), about 2% compared to the same period in 2021, according to data released by the Saudi Central Bank.

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Foreign investments are distributed across foreign direct investment, which represents 41% of total investments, amounting to about 1 trillion riyals (about 268 billion dollars), in addition to portfolio investments that are distributed over property rights, shares of investment funds, and debt securities, amounting to 822.5 billion riyals (about 219 billion dollars), and other investments worth 605.8 billion riyals (about 161.5 billion dollars).

The launching of the Special Economic Zones promises to boost the volume of these investments in the Saudi economy and attract hundreds of leading international companies, thus diversifying the economy and boosting growth.

The Minister of Investment and Chairman of the Board of Directors of the Economic Cities and Special Zones Authorities, Eng. Khaled Al-Falih, stresses the importance of launching special economic zones and their role in strengthening the Kingdom's position on the global map of the business sector which, in turn, will contribute to generating huge opportunities for local companies, entrepreneurs, and Saudis in many sectors.

The zones are expected to play an active role in achieving the goals of the national strategy of the industry by empowering national industries, increasing and diversifying the Kingdom's non-oil exports, enhancing the Kingdom's competitive capabilities and national competencies, promoting an industrial renaissance, and supporting the establishment of local start-ups and accelerating their growth.

Unique selling points

The Special Economic Zone of King Abdullah Economic City is located north of the thriving city of Jeddah on the Red Sea — one of the world's main trade corridors. This economic city is seeking to redraw the map of regional trade routes.

One of the advantages of this special zone is that it builds on the competitive capabilities provided by the most modern full-service commercial port in the Kingdom, which was named the most efficient port in the world by the World Bank in 2022.

King Abdullah City is also working to strengthen the Kingdom's position as a major destination for advanced manufacturing sectors, including those that reflect the growing trend in the Kingdom and the world toward clean energy sources.

Two of the most important electric car manufacturers have announced the signing of agreements to establish their business in this zone, which will turn the Kingdom into an integrated centre for the electric car industry in the region. The supplier yard also provides immediate services to provide supply chains for international companies.

The ambitions of King Abdullah Economic City extend to include the medical technology field, as it provides an important opportunity to manufacture products locally instead of importing them, which will later lead to reaching developing regional markets.

The Jazan Special Economic Zone is located next to mining and mineral resources and close to the third-largest seaport in Saudi Arabia, which makes it an attractive location for mining and heavy industries.

Jazan's geographical location, which overlooks trade routes between east and west, north and south, provides an opportunity for companies looking to expand in Africa.

The southwest region of Jazan is also distinguished by its fertile lands suitable for agricultural production, which provide great potential for manufacturing, processing, and distributing food products to meet the growing regional demand and the food security challenges throughout the region.

The Ras Al-Khair Special Economic Zone is located near the eastern region, which represents the industrial centre of the Kingdom, and it is close to the oil and gas production routes in the Arabian Gulf. It provides international and regional companies with world-class infrastructure and a major market for marine industries, which allows them to establish their businesses and start their operations immediately.

The Kingdom's newest industrial port also provides unique access to major regional and global markets, and the direct rail that links to the Kingdom's mines provides important access to raw materials.

In addition, the zone allows investors to work within a dynamic and global group and to lead innovations in the fuel supply and shipbuilding fields. The presence of major international companies allows second and third-level suppliers to join the leading marine group in the region.

The Cloud Computing and Informatics Special Economic Zone is a direct embodiment of the Kingdom's Cloud First policy. It confirms Saudi Arabia's commitment to advancing the path of digital innovation and promoting the fast-growing technology sector.

The zone adopts an innovation-driven business model that allows investors to establish physical data centres and cloud computing infrastructure in multiple locations within the Kingdom, which establishes the cloud's position as a leading and prominent regional platform for companies working in the Internet of Things (IoT), Blockchain Technology, big data, artificial intelligence, and innovations of the third-generation Internet, (Web 3.0).