Zeyad Khoshaim, Managing Partner, Khoshaim & Associates: Viewpoint

Viewpoint: Zeyad Khoshaim

In 2016 Saudi Arabia launched its ambitious economic transformation plan, Vision 2030. The long-term Vision 2030 involves diversifying the Saudi Arabian economy by steering the country away from its traditional dependence on oil. The ambition and scope of Vision 2030 is unprecedented, and the plan will promote the Kingdom’s regional, cultural and religious significance to globally harness the Kingdom’s massive investment capabilities and utilise its strategic geographic location.

Implementing Vision 2030 requires a legal infrastructure that is capable of accommodating the needs of the evolving Saudi economy and, on this front, the Kingdom has delivered. The government has implemented major legislative reforms since 2016, which included updating and amending the laws regulating companies, dispute resolution, bankruptcies and government tenders. These changes, among others, have led Saudi Arabia to be labelled the most improved country in terms of doing business by the World Bank in October 2019.

As part of the legal overhaul, the Kingdom opened its markets to foreign investors. Foreign financial institutions and investors can now directly acquire shares in listed companies and benefit from all the rights attached to the shares thanks to the Capital Market Authority’s foreign strategic investor and qualified foreign investor rules. Furthermore, the Ministry of Investment, which is the authority responsible for granting investment licences to non-Saudi investors, has increased the number of sectors in which foreigners can invest and participate. These changes are aimed at attracting foreign capital to the Kingdom’s many business opportunities, and particularly those that have arisen because of the implementation of Vision 2030, such as those in publishing and audiovisual media.

Moreover, the Kingdom has also been providing immense support for small and medium-sized enterprises (SMEs). The General Authority for SMEs ( Monshaat) and the Public Investment Fund (PIF) have been key players in facilitating the growth of SMEs in Saudi Arabia. Monshaat provides technical and logistical support to the country’s SMEs, while the PIF, through its fund of funds, provides financial support for small businesses by investing in venture capital and private equity funds that, in turn, invest in local SMEs. This will help to turn SMEs into the engine that drives and sustains the Kingdom’s economy.

Among the Vision 2030 initiatives, the Kingdom aims to boost the contribution of the mining, manufacturing, energy and logistics sectors to GDP, from 17% to 33% by 2030, a goal that will cost an estimated SR1.6trn ($426.6bn). With low oil prices, the Kingdom is increasingly looking to public-private partnerships (PPPs) as a way to gather the necessary capital and expertise required. This will present a huge investment opportunity for both local and foreign companies.

To that end, the National Centre for Privatisation and PPP (NCP) is a government entity charged with enabling the privatisation programme by formulating regulations and providing templates, among other responsibilities. The NCP has taken a prominent role in the market. It has issued a draft of the upcoming Private Sector Participation Law, which takes a pragmatic approach to PPPs and aims to adjust onerous legal requirements, thereby easing the burden on local and foreign investors in relation to certain PPP projects.

Saudi Arabia took a proactive approach to managing the economic impact of Covid-19, which demonstrates its ability to respond to adverse circumstances. Indeed, the Kingdom quickly introduced a number of measures to mitigate the adverse impacts of the pandemic, including a SR120bn ($32bn) financial stimulus package providing loans and grants to businesses across different sectors; exemptions from, and deferrals of, government taxes and fees; and directions to banks to offer immediate support to businesses. Moreover, government entities – including the judicial system – have implemented electronic services to ensure the continuity of business while employees work remotely.