In 2016, Saudi Arabia launched the Vision 2030 program, which aims to diversify its economy away from the oil industry.
Saudi Arabia has released new regulations in the last two years to bring more foreign investors into the kingdom. They also reassured the investors that the country is open for business and growth.
These laws include company law, civil transaction law, an amendment to labour law, and a newly updated investment law approved by the Council of Ministers. These aim to provide fewer barriers to entry for foreign and local businesses.
In the past week, two significant laws came out, that includes an update to the new investment law that puts Saudi and non-Saudi investors on equal footing and changes in the labour law likely to improve the relationship between employers and employees.
According to the law, instead of having a system to get a foreign investment license, there will be an investment register operated by the Ministry of Investment.
Additionally, as a part of the law, there is increased protection given to investor rights like protecting against expropriation, protection of intellectual property, and simplifying the settlement of disputes for foreign and local investors.
In 2016, Saudi Arabia launched the Vision 2030 program, which aims to diversify its economy away from the oil industry, promoting the expansion of the private sector, increasing the participation of women in the workforce, and lowering the country’s unemployment rate. As a part of this strategy, they are building new projects like the futuristic megacity Neom worth $500 billion.
Labour Law changes
Changes have been brought to the labour law to align with international standards and make Gulf more attractive to global talent.
Maternity leave is increased from 10 to 12 weeks with full payment. There are also three days of paternity leave and bereavement leave in case of the death of a sibling. Previously, the probation period could be 90 days and extended to another 90 days if employees agree. However, according to the new rules, the probation period is 180 days to reduce the administration burden and provide clarity and certainty to both parties.
Saudi Arabia is also simplifying the procedures for establishing various types of companies within the kingdom and offering greater clarity on how businesses operate, including board member elections, dividend distribution policies, accounting records, and financial statements, thanks to a company law unveiled last year.
Civil transactions
Another important law that came into force last year was the civil transaction that covers contract termination, contractual duties, and dispute resolution. Before, there were different laws to govern transactions related to a contractual perspective based on Sharia and Saudi laws. Now, the new law eliminates uncertainty and offers greater clarity.
It didn’t remove Sharia from the law but codified or put into paper concepts that combined worldwide best practices and Sharia law.
The new law clarifies how contracts work in infrastructure, construction, energy, and other sectors.
The new laws from Saudi Arabia, in the opinion of Jing Teow, director of consultancy economics and sustainability at PwC Middle East, mark a significant improvement for the Saudi economy.
The new laws introduced by the kingdom recently are helping to attract businesses to the region.
According to Savills, which released its results last month, more than 120 international companies moved their regional headquarters to Riyadh in the first quarter of 2024, marking a 477 percent increase over the previous year.
Saudi Arabia imposed a rule earlier this year requiring international businesses to establish regional offices within the kingdom or face losing out on government contracts.
Nonetheless, if the businesses with overseas operations don’t generate more than one million Saudi riyals, they can operate in the kingdom without any local headquarters.