Hi Spot; A new dawn for Saudi market, scepticism on Dubai.

Hi Spot; A new dawn for Saudi market, scepticism on Dubai.

Saudi Arabia announces plans to open its course to foreigners leading experts to expect a bullish response from investors.

Following last month’s news that the Tadawul exchange will open up to direct foreign investment, more than two thirds of leading investors have expressed their interest in increasing their stakes in the $550 billion valued STOCK MARKET, a Reuters survey has found.

Although there has been no official indication, the move is set to pave the way for Saudi Arabia’s inclusion in the MSCI EMERGING MARKETS index.

Speaking to AMEInfo’s sister publication TRENDS, head of Mena Equities, Bassel Khatoun, explained: 

“Entry into the MSCI EM index would likely boost TRADING volumes, enhance market liquidity and potentially bring down transaction costs through improved scale effects.”

The benefits to the Saudi economy will be vast, as the government attempts to revamp its non-oil industries. 

Namely, the introduction of foreign investors is also likely to accelerate M&A activity, as its private sector will be monitored more closely. 

Anum Saleem of the Eversheds Saudi Arabia office says 

“this will bode well for the Saudi private sector as their BUSINESS VALUATIONS are likely to increase serving as an impetus to entrepreneurship and employment opportunities for the local population.”

Moreover, according to Mena Equities, 

“such measures are likely to lead to an increase in initial public offerings (IPOs), thus leading to a much-needed deepening of the equity market in the region and improved sentiment from global investors.”

While sentiments and investor confidence in the region may well boom with this development, concerns have been raised that companies and shareholders from around the GCC may redirect much of their capital to Riyadh.

According to the Reuters survey, INVESTMENT MANAGERS have responded bearishly to the UAE’s market forecast, with only seven per cent willing to increase their equity allocations and 47 per cent expected to slow down their UAE activity. 

Citing overheated prices and inadequate regulation, particularly brought to light throughout Arabtec’s market roller coaster in previous months, the opening of Tadawul to foreign investors may redefine the appeal of the Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX).

In saying this, experts remain adamant that there will be no mass outflow of funds from other GCC MARKETS into the Tadawul. Instead, new capital will be created. Moreover, with development giants Damac and Emaar’s retail branch, Emaar Malls, expected to be listed on the DFM in the coming weeks, with a total market capitalisation of $12.5 billion, Dubai’s market is also set for an exciting H2.

Hi Challenges & Rewards for Wind Engineers.

(Hi) 'Challenges & Rewards for Engineers in Wind:

By Lawrence Willey, Robert Budny, and Sandeep Gupta – Clipper Windpower LLC

Notwithstanding the sluggish pace of the economic recovery and the cost of nearly everything seemingly on the rise, renewable energy production continues to be an important sector of the global economy. The adverse consequences of climate change, together with the shared global reality of governments, businesses, and individuals feeling a collective pain at the pump due to high oil prices, are spurring society to find ways to reduce fossil fuel consumption and develop alternative energy sources. While advances in traditional and alternative energy production are occurring, large utility scale wind energy is currently the most viable renewable solution available.Today, engineers looking to make an impact in the world need look no further than the challenges and rewards facing the wind energy sector.

There are many advantages that wind brings to the energy mix. For one, wind turbines do not produce combustion byproducts and can generate electricity for comparatively low costs, in many cases comparable to some of the lowest cost traditional methods such as natural gas fired combined cycle power plants. Some additional advantages for large utility scale wind energy include revitalization of rural communities, fewer government subsidies, free fuel, price stability, cost effective electricity production, and significant job creation.Wind energy projects create new short- and long-term jobs. Employment includes developers, surveyors, meteorologists, structural engineers, assembly workers, lawyers, bankers, and technicians to name just a few. Per unit of electricity generated, wind creates nearly 1/3 more jobs than a coal plant and nearly 2/3 more than a nuclear power plant.

Wind energy can diversify the economies of rural communities, adding to the tax base and providing new income. All energy systems are subsidized, and wind is no exception. However, wind receives considerably less than other forms of energy. The Government Accountability Office determined that fossil fuels received nearly five times as much in tax incentives as renewable energy did between fiscal years 2002-2007, with $13.7 billion going to fossil fuels compared to $2.8 billion for renewables.[1

Unlike other forms of electrical generation, wind generates electricity at the source of fuel.Wind does not need to be mined or transported, removing expensive elements from energy costs.The cost of wind-generated electricity has fallen from nearly 40¢ per kWh in the early 1980s to 2.5-6¢ per kWh today depending on wind speed and project size.

Modern land based utility scale wind turbines are in the 1.5-3.0 MW range.They consist of large structures designed to handle extremely high loads, and unusually high fatigue cycles.They must also operate over a wide range of environmental conditions, have a low maintenance requirement, and most importantly – they must be low cost. Comparison of the estimated cost of a helicopter and wind turbine blade highlights the difference in cost requirements; helicopter blades are about $1000 per pound compared to $5 to $20 for a wind turbine blade.

A model by Electric Power Research Institute,Technical Advisory Group (EPRI – TAG), is commonly used to calculate cost of energy (CoE) of utility scale wind turbines.

Where: FCR = Fixed charge rate, Cost Capital = Total capital cost of the project, and CostO&M = Operations and maintenance cost per unit of energy.

From this relationship, FCR, Capital Cost, and O&M must be as low as possible, and at the same time the AEP should be as high as possible. Using 9% cost of money and assuming installed 2.5MW turbine example levels of Capital Cost, O&M, and AEP of $1.43M/MW, $25/MWh, and 8300 MWh respectively, the resulting CoE is about $64/MWh. If this example turbine was in an area where retail electricity cost consumers $80-90/MWh, the wind turbine owner would stand to make a healthy profit, even without government subsidies.

Many opponents of wind energy try to point to the intermittency of wind and the need to provide backup power or storage. Fortunately, with a holistic systems level view of the grid, this argument doesn’t stand up. In fact, large and abrupt changes in demand for electricity can and do adversely affect the output of conventional electric generation sources - such as grid operators facing the sudden loss of a large power plant - whereas wind output changes are typically more gradual and predictable.This is easily understood by thinking of the continuous parade of storm fronts day to day, moving generally west to east in many regions, with wind plant after wind plant in the path of these storms taking their turn to spin up and generate electricity.

Designing and maintaining a wind turbine is a challenging task, requiring close interaction between engineers of many different disciplines.The fundamental challenge in designing a wind turbine is for it to operate reliably and safely for twenty years or more; produce as much power as possible, and with the lowest possible initial and life cycle costs.

Wind turbines are often referred to as three blades on a stick.“I can understand why engineers have that perception. The reason is usually a lack of understanding of complexities and challenges involved in wind turbine design” says Clipper’s Sandeep Gupta. He relates this perception to this own personal experience.“As an engineer with aerospace background, I was in the same boat once.When I joined the University of Maryland for my doctorate program, my advisor offered me a research project on wind turbine aerodynamics. My first reaction was disappointment. However, I decided to give it a shot and that was one of the best decisions I ever made. As I got to understand the complexities of wind turbine technology and the challenges involved, I fell more and more in love with the technology.”

If we begin considering a wind turbine from the ground up, we start with the turbine foundation.Wind turbines are exposed to massive over turning moments, requiring a well designed foundation, containing thousands of yards of concrete and hundreds of tons of steel.

The tower, which transmits the turbine loads to the foundation, must meet the extreme loads and fatigue life requirements of the turbine, as well as stability requirements.The tower comprises a large portion of the cost of the wind turbine due to the large amount of steel required for fabrication, and due to the high costs required to transport the tower to the site.These costs are driving innovation in wind turbine towers, which have evolved from lattice type construction in the early days of wind, to the tubular steel construction which is most common today. Examples of newer tower technologies include concrete pre-tensioned segments; lattice towers with architectural covers, which lower transportation costs; towers with vibration damping systems that increase the fatigue life of the tower and reduce materials costs; and self-erecting tower tech nologies to reduce construction costs.Towers are also growing taller to access higher speed wind, which will require additional innovation in order to meet the load carrying and life requirements while not increasing CoE.

As we continue to move up the turbine, we come to the bedplate, typically a ductile iron casting that supports the turbine drivetrain and rotor.The bedplate is also exposed to large extreme loads and to a challenging fatigue load environment, and often must be relatively stiff to ensure the correct alignment of drivetrain components.The bedplate supports the drivetrain, which typically consists of a gearbox and a generator.

The purpose of the gearbox is to increase the speed at which the generator turns in order to reduce the cost of the generator. It is here that we begin to see the collaboration required between the mechanical engineers who design the gearbox and the electrical engineers who design the generator, as the design of each component affects the other. The higher the gearbox ratio, the higher the cost of the gearbox (with lower the reliability due to increased part count) and lower the cost of the generator.

The challenge for the design team is to produce a drivetrain system that has the lowest overall costs and highest reliability, and to recognize the effect that each component has on the balance of the system.Wind turbine drivetrain reliability has been an issue in the past, and is spurring a large amount of innovation in drivetrain topologies. Some of the latest drivetrain technologies include direct drive generators, low speed generators with a simple gearbox (a compromise between current high speed technology and direct drive technology) and hydraulic speed increasers as an alternative to a gearbox.

From the drivetrain, we move to the rotor blades, the most visible part of the turbine, and perhaps the component requiring the most interaction between engineering disciplines.A rotor blade must be as efficient as possible, quiet, and relatively insensitive to fouling from insects and dust. It must have at least a 20 year fatigue life, withstand hurricane force winds and lightning strikes, and have sufficient stiffness to avoid striking the tower under any operating condition.

Meeting these requirements requires the participation of aerodynamicists, structural analysts, materials engineers, process engineers, and controls engineers, each of whose design decisions affect those of other members of the rotor, turbine, and Wind Power Plant (WPP) design teams.

A formal coursework in wind turbine engineering in the United States has been relatively scarce until recently. University of Massachusetts,Amherst has a long history of providing formal education in wind energy. In addition to this,Texas Tech University, University of Colorado at Boulder and University of California, Davis also offer focused programs for wind energy research.With the increase in funding for basic research in wind energy and the rapid growth of wind energy, the last few years have seen a substantial increase in the number of universities offering courses focused on wind energy, making it easier for engineers to meet the challenges and reap the rewards in wind.

The growth of large utility scale wind power is fast paced and generating unprecedented demand for engineers and technicians. For those heeding the call – The technical challenges and rewards are second to none.

References

1. “Federal Electricity Subsidies: Information on Research Funding, Tax Expenditures, and Other

Activities That Support Electricity Production,” GAO, October 26, 2007.

Hi Social Media Plays 'A Key Role' In Employment in Saudi Arabia.

In Hi' summary: "Social Media"

Social media is significantly impacting entrepreneurship and helping create employment opportunities in the Arab world, according to the first ever comprehensive study on the connection between social media and Mena employment, launched this week.

Close to 5,000 respondents from around the region contributed to the Dubai School of Government (DSG) report titled "Social Media, Employment and Entrepreneurship - New Frontiers for the Economic Empowerment of Arab Youth", which indicated that social media is playing a key role in promoting social advancement, job creation and business growth in the region, particularly in terms of supporting SMEs and facilitating start-ups.

"It is critical that companies use social media to engage both existing and aspiring employees.

Harnessing value from the flow of big data generated from social media is critical for driving greater operational efficiency, cutting costs, boosting profits and unlocking new routes to innovation," said Sam Alkharrat, Managing Director of SAP Mena, who was a partner in the study.

Nearly 80% of those surveyed agreed that social media, and associated technology, helps provide access to important job market data, allowing users to both advertise and locate job opportunities, with 75% agreeing that a new 'virtual job market' has emerged as a result of engagement with social platforms.

While perhaps being weaker in terms of case studies and quantitative research on how social media engagement is leading to successful entrepreneurship, the study did cover the range of uses for social media.

"Of course this is just based on peoples' perception and it doesn't necessarily translate onto the ground yet," Racha Mourtada, Research Associate with Dubai School of Government told AMEinfo. "But we do know that people are willing to utilise social media to create enterprises and promote job creation, so the willingness is there as well as the realisation of the benefits of social media."

"It's mostly been a qualitative approach, but we did have a few questions about peoples' actual experience with social media. We specifically asked entrepreneurs what they use social media for - mostly promotion and outreach. We're not quite at the stage where [social media] is used as more of a collaborative tool for crowd sourcing and crowd funding."

Report shows enthusiasm toward social media in business:

Close to 5,000 respondents from around the region contributed to the Dubai School of Government (DSG) report titled "Social Media, Employment and Entrepreneurship - New Frontiers for the Economic Empowerment of Arab Youth", which indicated that social media is playing a key role in promoting social advancement, job creation and business growth in the region, particularly in terms of supporting SMEs and facilitating start-ups.

"It is critical that companies use social media to engage both existing and aspiring employees.

Harnessing value from the flow of big data generated from social media is critical for driving greater operational efficiency, cutting costs, boosting profits and unlocking new routes to innovation," said Sam Alkharrat, Managing Director of SAP Mena, who was a partner in the study.

Nearly 80% of those surveyed agreed that social media, and associated technology, helps provide access to important job market data, allowing users to both advertise and locate job opportunities, with 75% agreeing that a new 'virtual job market' has emerged as a result of engagement with social platforms.

While perhaps being weaker in terms of case studies and quantitative research on how social media engagement is leading to successful entrepreneurship, the study did cover the range of uses for social media.

"Of course this is just based on peoples' perception and it doesn't necessarily translate onto the ground yet," Racha Mourtada, Research Associate with Dubai School of Government told AMEinfo. "But we do know that people are willing to utilise social media to create enterprises and promote job creation, so the willingness is there as well as the realisation of the benefits of social media."

"It's mostly been a qualitative approach, but we did have a few questions about peoples' actual experience with social media. We specifically asked entrepreneurs what they use social media for - mostly promotion and outreach. We're not quite at the stage where [social media] is used as more of a collaborative tool for crowd sourcing and crowd funding."

Report shows enthusiasm toward social media in business

The landmark report excels in providing vital clues to the mood of young professionals - the majority of those surveyed were in their twenties. The research team from DSG had a specific profile in mind to reflect the demographics and gender breakdowns on which the study was focussed, which was about a 60% male and 40% female, leaning more towards younger people under 30. Respondents were mostly within the private sector, but generally all were social media savvy.

"We were pleasantly surprised about the overwhelmingly positive view that social media can impact entrepreneurship and employment," explained Mourtada.

The big surprise is due to the fact that, for young Arabs, the job market outside of the public sectors of wealthy GCCmember states is not at all bright. A UN survey released earlier this year referred to Arab youth unemployment as 'disturbingly high', while noting that Middle East and North African countries had the highest unemployment youth rates in in the world in 2011 - at 26.2% and 27.1%, respectively.

However, DSG's report tells a sunnier tale, hailing social media as a vital component for start-ups in the Arab world, with 86% of respondents agreeing it contributed to success. Among the reasons cited were the multifaceted marketing potential (90%), a capacity to tap into wider markets (86%), substantial customer engagement options (85%) and its overall potential to raise awareness and instill entrepreneurial mindsets (84%).

Social media is significantly impacting entrepreneurship and helping create employment opportunities in the Arab world

Fadi Salem, Director of the Governance and Innovation Program, DSG, and co-author of the report, said in a statement: "Despite having few stable economies in the region today, the most active part of the Arab population; the youth, is increasingly feeling empowered. Our on-going research over the past two years has shown that close to 50 million Arabs are actively connected to social media and primarily use the platforms to change social and political realities in their countries.

Finding the balance between the UAE public, private sector

Salem chaired an expert panel at the launch of the report in order to facilitate discussion around where the responsibility lies in facilitating employment and business growth, in the context of an increasingly digital environment.

Speaking after the discussion, Mourtada admitted there was 'a bit of a way to go': "The panellists have been very candid about what needs to be done, their weaknesses and what issues need to be addressed - it seems from what's been discussed that the public sector is carrying a lot of the burden for job creation and the private sector needs to step up. So, I think just recognising this is an important step," she said.

It may be true that the government route may be a safety net for many, particularly in the UAE, though there is no shortage of incentives. The emirates are peppered with Free Zones, where businesses can be established at very limited cost, though Mourtada pointed to a shift in attitude being the real key.

"In the UAE there hasn't been that much of a hunger or need to succeed, because things are provided on so many levels, which is another contributing factor. It's about creating public-private partnerships. I think both have a lot to shoulder, but both need each other in order to create any sustainable initiatives."

"I think the government has been a bit of a safety net for a lot of people. A lot of youth expect to finish school and go into a stable government job, but now a lot of young people are changing and a lot of people want to create their own jobs and be their own boss. That's a big step forward," she continued.

Hi Featured Business Article of The Month!.

Hi Featured Business Article of The Month!.

Saudi Arabia: Wednesday, October 10 - 2012 at 10:44

In recent years, Saudi Arabia has been developing key economic sectors including services, industry and real estate, and in 2000 the kingdom's cabinet approved the Foreign Capital Investment Law. It stemmed from a recognition by King Abdullah that certain sectors require foreign expertise to grow and prosper, and was introduced to regulate outside investors keen to do business in Saudi Arabia.

This overview provides some general guidance on the laws and principal legal factors that must be considered when doing business in Saudi Arabia. Since the kingdom's laws can often be confusing, and even contradictory, it is recommended that foreign investors seek specific legal advice before entering into a business venture in the country.

The foreign investment licence;

Those who are keen to invest in Saudi Arabia must obtain a foreign capital investment licence from the Saudi Arabian General Investment Authority (Sagia).

All Saudi companies, or those registered within other GCC countries, are treated as GCC nationals if they are wholly owned by citizens or governments of GCC member states. GCC firms with foreign shareholders, foreign businesses, or any investor who is not a national of one of the GCC countries must obtain a foreign capital investment licence.

The Foreign Capital Investment Law allows the establishment of companies with 100 per cent foreign ownership within most economic sectors.
When an investment is licensed under the Investment Law, a business enjoys all the privileges and incentives offered to wholly Saudi-owned firms. These include: ownership of freehold property (if that property is necessary for the company to carry out its licensed activities); privileges granted by the anti-double-taxation treaties to which the kingdom is a party; legal protection against expropriation or confiscation of investments; and the right to repatriate profits.

Incorporating a local entity;

Saudi company regulations regulate the establishment and governance of corporate entities in the kingdom. The limited liability company (LLC), joint stock firm and branch of a foreign business are the most common forms of legal entities. Others include sole proprietorship, scientific offices and temporary commercial registration (TCR), which is granted to foreign entities that sign contract agreements with a government or semi-government department to execute a project. A TCR is limited to one contract and lasts until that contract's final date.

Limited liability companies (LLCs);

An LLC is the most common corporate vehicle for equity participation by foreign investors. It must have a minimum of two shareholders, and not more than 50. People and corporate entities may be shareholders. Generally, shareholders are liable for the debts of the company only to the extent of their respective interests in the firm's shares.

Transfer of shares between parties is effective on the date of notarising the articles of association amendment to reflect that transfer, and the liability of a selling shareholder ceases from that date. Sagia regulations and requirements are applied to new foreign shareholders who form a licensed LLC, and the procedures are the same for existing shareholders.

Joint stock companies;

A joint stock company must have a minimum of five shareholders, but there is no maximum.

Shareholders may be people or corporate entities. A minimum of SR2m ($533,000) of share capital must be used to establish a closed joint stock company, and the firm's foundation is subject to approval by the Ministry of Commerce & Industry.

Branches of foreign companies;

Branches of foreign firms in Saudi Arabia are subject to regulations, laws and rules applicable to their activities. As with LLCs and joint stock companies, foreign businesses that establish branches in Saudi Arabia must deposit capital in a local bank. The deposited capital will be blocked until the Ministry of Commerce & Industry issues a certificate of registration for the branch.

Contracting firms must have at least a third-class contractor's classification certificate and completion certificates for projects undertaken outside Saudi Arabia. They must be able to prove they are financially solid and require minimum capital of SR1m. If they are working on an industrial project, the capital required will depend on a feasibility study carried out by the investor. If the project's capital requirements are more than SR5m, Sagia allows the company to deposit only 25 per cent of the capital in the bank.

Laws;

Some of the legislation that companies operating under the Foreign Capital Regulation Law must adhere to include:

Anti-cover-up Law
The Anti-cover-up Law prohibits non-Saudis from conducting or investing in any business in the kingdom without a foreign capital investment licence issued by Sagia and prohibits any Saudi person from assisting in such activity.

Environmental Law
The Presidency for Meteorology and Environment (PME) is the entity responsible for regulating pollution control and related environmental matters. The PME (previously known as the Meteorology and Environmental Protection Administration, or Mepa) has issued environmental protection standards regarding ambient air quality, air pollution sources, receiving-water guidelines, direct discharge performance and discharge pre-treatment guidelines.

Saudi Arabia has also approved the General Environmental Regulation and the Environmental Assessment Regulation for the GCC. The General Environmental Regulation prohibits any act or failure to act that may result in adverse environmental effects and requires that precautionary and pre-emptive measures be implemented to ensure that such adverse effects do not occur as a result of the construction of any project. The Environmental Assessment Regulation applies to a long list of projects that may have an environmental impact and requires that an environmental assessment be conducted on projects that fall under its coverage.

Immigration;

Non-Saudi citizens (other than GCC nationals) must obtain visas to enter the kingdom and must obtain permits to reside there. Visas and permits are not granted on arrival and must be obtained in advance.

Companies are required to register their employees' contracts with the Ministry of Interior before a residency permit can be issued. Each firm is permitted to have a certain quota of residency visas. Employees with residency visas who earn above a threshold salary may sponsor family members. Residency visas are valid for up to one year. Employees cannot work for anyone other than their sponsor and sponsorship cannot be transferred until the employee has worked for his original sponsor for at least two years.

Real estate;

'Ownership of real property is evidenced by title deeds.'

There is a central registry under the Ministry of Justice and the Ministry of Municipalities and Rural Affairs where all real property rights are recorded. A long-awaited mortgage law was approved in July and should become effective in the near future.
A non-GCC investor in possession of a foreign investment licence from Sagia may own real property in the kingdom, provided the property is necessary for the investment project. This includes real estate used to house the project's employees.

Requirements for setting up a company;

Commercial activity in Saudi Arabia has been broken down into eight categories:

Industrial
Commercial
Agricultural
Contracting
Real estate
Specialised services
Non-specialised services
Consultancy

To operate in any of these activities, a firm must fulfil specific requirements before it is licensed by Sagia.

Industrial activity;

1 The company must inform the Saudi Arabian Standards Organisation and Sagia whether it will be using Saudi, American or European specifications for its products and methods of manufacturing. It must then ensure the specifications of the product it wishes to manufacture are met and make sure the techniques of production adhere to the kingdom's rules. If Saudi certification is not available, certification from the US or EU can be used.
2 The company's capital must be at least SR1m.
3 It must provide a schedule for completing each stage of its project.
4 The investor must produce paperwork from the Saudi Industrial Property Authority (Modon) to show it is leasing or buying industrial land for the purpose of its investment activity.
5 If the company's capital is more than SR5m, each partner must submit a bank certificate for 25 per cent of its share of the capital. If the capital is less than SR5m, a bank guarantee for the whole sum must be submitted to Sagia. This must be done through a bank licensed in Saudi Arabia after the firm shows its investment licence and submits the deposit certificate. Sagia's commercial registration department will not issue a licence until this has been done.

Commercial activity;

1 The company must submit to Sagia a commitment that up to 75 per cent of its management and technical employees will be Saudis.
2 A Saudi partner must own at least 25 per cent of the firm. Foreign partners may not own more than 75 per cent of the capital, but their share must exceed SR20m.
3 The business must submit a commitment to train more than 15 per cent of its Saudi employees each year to Sagia.
4 The company must submit a bank certificate showing each foreign investor has access to a percentage of SR20m proportionate to its shares in the firm. This must be ratified by the Saudi embassy in that investor's home country.

Agricultural activity;

1 The minimum investment must be SR25m.
2 A company's activities are subject to approval by the Ministry of Agriculture.
3 The firm must submit to Sagia a bank certificate indicating each foreign investor has access to at least 25 per cent of its shares in the company. This must be ratified by the Saudi embassy.
4 The business must submit to Sagia a schedule for completing each stage of the project.

5 A company must commit to deposit its capital in a bank licensed in Saudi Arabia after Sagia has issued an investment licence. It must submit the investment and deposit certificates to the commercial registration department of the Ministry of Commerce & Industry.

There is a branch of this department within Sagia.

Contracting activity;

1 The investor must submit three financial statements for its operations outside the kingdom, covering the three years before it has requested its licence. The statements must be prepared by a certified accounting firm and ratified by the tax office and Saudi embassy in the investor's home country. They will be used to demonstrate the investor's operations are financially sound.
2 The investor must submit to Sagia completion certificates for major projects it has undertaken in the same field in which it plans to invest.
3 The company must be classified in its home country in the same activity and must be classified as at least a third-class contractor or its equivalent. Its classifications must be ratified by the Saudi embassy in its home country.
4 The firm must submit to Sagia a bank guarantee proving each partner has access to at least SR250,000, and this must be ratified by the Saudi embassy. (Recently, Sagia stopped allowing individuals to invest in contracting, preferring investment to come from large companies with more experience.)
5 Consultancy work may only be carried out by an LLC.
6 The business must submit a schedule for completing each stage of the project to Sagia.
7 The company must commit to deposit its capital in a bank licensed in the kingdom after Sagia has issued an investment licence. It must submit the investment and deposit certificates to the commercial registration department of the Ministry of Commerce & Industry.

Real estate activity;

1 Foreign investors may only deal in properties worth more than SR30m.
2 The property must be developed and leased or sold within five years of the investor beginning its activity on the project.
3 The property must be outside the borders of Mecca and Medina.
4 The company must submit a bank certificate for the capital or the share of each partner. This must be ratified by the Saudi embassy in the firm's home country.
5 The company must submit a schedule for the completion of each stage of the project to Sagia.
6 Before it can invest in property, the business must submit a study from a local, approved engineering firm showing the value of the land and the aggregate cost of the scheme.
7 A company must commit to deposit its capital in a bank licensed in Saudi Arabia after Sagia has issued an investment licence. It must submit the investment and deposit certificates to the commercial registration department of the Ministry of Commerce & Industry.

Specialised services;

Under Sagia's classifications, specialised services include communications and tourism.
1 The firm must obtain permission from the government body that regulates the field in which it will operate. For example, the Communications and Information Technology Commission, or the Saudi Commission for Tourism and Antiquities.
2 The company must submit a schedule for the completion of each stage of the project to Sagia.
3 The business must submit to Sagia a commitment to invest its capital in a bank licensed in Saudi Arabia, once Sagia has issued its investment licence. If the capital is more than SR5m, the company does not have to deposit the whole amount but can deposit 25 per cent of it. It must submit the investment and deposit certificates to the commercial registration department of the Ministry of Commerce & Industry.

Non-specialised services;

1 The company must submit to Sagia a commitment that 10-50 per cent of workers in its facilities will be Saudis.
2 After Sagia has issued its investment licence, the firm must submit a schedule for the completion of each stage of its project.
3 The company must submit a bank certificate to Sagia proving each partner has access to SR250,000.

This must be ratified by the Saudi embassy in each investor's home country.
4 Non-specialised services may only be carried out by an LLC.
5 The company must submit three balance sheets ratified by the tax office and the Saudi embassy in the investor's country to Sagia.
6 The company must submit to the commercial registration department at the Ministry of Commerce & Industry an acknowledgement that it has deposited its capital in a bank licensed in Saudi Arabia and that its investment licence has been issued by Sagia. It will then be granted commercial registration.

Consultancy activity;

1 The applicant for the licence must have a bachelor's degree or a higher qualification in the field in which he is consulting. This must be ratified by the Saudi embassy in his home country.
2 He must submit to Sagia three recommendation certificates from consultancy facilities. These must be ratified by the Saudi embassy.
3 He must submit to Sagia experience certificates proving he has worked as a consultant in his specialism for at least five years.
4 A consultancy must submit to Sagia a commitment that 75 per cent of its employees will be Saudi.

The negative list;

A list of sectors in which foreign investment is not allowed can be found on the Supreme Economic Council's website, Click Here.

Sectors that are restricted or partially restricted include:

Oil exploration, drilling and production
Manufacturing of military equipment, devices and uniforms
Manufacturing of civilian explosives
Catering to military sectors
Security and detective services
Real estate investment in Mecca and Medina
Tourist orientation and guidance services related to Hajj and Umrah
Recruitment and employment services, including local recruitment offices
Real estate brokerage
Printing and publishing
Audiovisual and media services
Land transportation services, excluding intra-city passenger transport by trains
Some medical services
Fisheries
Blood banks, poison centres and quarantines

Key contact;
Ministry of Commerce & Industry
Website: www.mci.gov.sa
Tel: (+966) 1 401 2220/4708

Applicable laws; 'Regulations that a branch of a foreign company must adhere to include':

Anti-cover-up Law
Competition Law
Immigration Law
Labour and Labourer Act
Social Insurance Act
Zakat and taxes regulations
Sharia Appeals Act
Act of Criminal Procedures
Law Act
Regulation of commercial registration
Regulation of commercial fraud
Banking regulations
Regulations protecting intellectual property
Trademarks Act
Copyright Protection Act
Patents Act
Residence Act
Foreign Investment Act (and its executive regulations and supplementing resolutions)
Regulations governing foreign ownership of real estate
Act of Encouraging and Protection of National Industries

Key contact;
Presidency for Meteorology and Environment
Website: www.pme.gov.sa
Tel: (+966) 2 651 2312/9868

Key contact;
Ministry of Interior
Website: www.moi.gov.sa
Tel: (+966) 1 401 1944

Key contact;
Ministry of Justice
Website: www.moj.gov.sa
Tel: (+966) 1 405 7777/5399

Key contact;
Ministry of Municipalities & Rural Affairs
Website: www.momra.gov.sa (Arabic only)
Tel: (+966) 1 441 5434

Key contact;
Saudi Arabian Standards Organisation
Website: www.saso.org.sa
Tel: (+966) 2 675 1013

Key contact;
Ministry of Agriculture
Website: www.saso.org.sa
Tel: (+966) 1 401 6666

Key contact;
Communications and Information Technology Commission
Website: www.citc.gov.sa
Tel: (+966) 1 461 8000

Key contact;
Saudi Commission for Tourism and Antiquities
Website: www.scta.gov.sa
Tel: (+966) 1 880 8855

*About the writer;

Hazem Midani is director of Jumana House, a Riyadh-based specialist in company regulation, foreign investment and business formation: 'Click Here To Visit Jumana House Website'.

"The laws for setting up a business in Saudi Arabia can be complex."