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Wed 15 Jun 2016 01:43 PM

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Saudi Arabia approves 100% foreign ownership in retail

Licensed businesses must invest $53m in five years and operate in minimum of three international markets

Saudi Arabia approves 100% foreign ownership in retail

Foreign investors may own 100 percent of retail businesses in the kingdom for the first time under a decree issued by ministers on Monday.

The planned reforms were announced last September – to hike the maximum foreign ownership of retail and wholesale operations from 75 percent to 100 percent.

A cabinet statement announcing the decree this week reportedly said: “The decision is in line with [Saudi Arabia’s] Vision 2030 [and aims to] to ease restrictions on ownership and foreign investment in the retail sector to attract regional and international brands and contribute to the creation of job opportunities for citizens in this sector.”

However, foreign firms licensed to own 100 percent of retail and wholesale businesses in Saudi Arabia under the new laws will have to invest at least SR200 million ($53 million) in the first five years after obtaining a licence, reported Saudi Gazette.

They must also have minimum capital of SR30 million ($7.9 million) and operations in at least three international markets, the newspaper said, quoting commerce and investment minister Majed Al Qasabi.

Al Qasabi said: “The terms and conditions will be published on the official website of the Saudi Arabian General Investment Authority (SAGIA).

“The company has to achieve the percentage of Saudisation as fixed by the Ministry of Labor and Social Development, and implement plans for providing training to a fixed number of Saudis and appointing them in key posts, as well as ensuring their job security.”

Al Qasabi, who is also president of the board of SAGIA, said the new rules will be instrumental in attracting multinational retail and wholesale companies to the kingdom.

He added: “SAGIA will offer all the required support and facilities for these investors in a way serving the national economy with easing restrictions for ownership and foreign investment.”

The cabinet’s decision prompted mixed reviews from analysts in the kingdom. James Reeve, deputy chief economist and assistant general manager at Samba Financial Group, was quoted as telling Arab News: “This is a welcome move that will boost competition in the retail sector, hopefully leading to an improvement in the retail experience for customers, and lower prices in the shops.”

Reeve added: “In general, more foreign investment is a good thing for any economy, since it has the potential to create jobs, transfer technology, and does not create debt.”

However, Tamer El Zayat, senior economist at the National Commercial Bank, told the newspaper: “There is an expected medium to long-term negative impact on the profit margins of local companies in the retail sector.

“This threat might turn to be an opportunity if these companies restructured their balance sheets and concentrated on niche markets.”

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Muhammad Kashaf 3 years ago

much much more expensive than uae

Adam 2 years ago

i really felt happy when i read the headlines , but when i continued to read in depth i got crushed off my happiness. 53 million in 5 years ? difficult for foreign startups to invest here. Hope things ease off soon