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Saudi Arabia’s new special economic zones are “important” to Saudi Arabia’s present and future as a global investment destination and offer opportunities for sustainable business growth. These next-generation regions will enable the country to “win and make a difference” in a rapidly changing global economic and geopolitical environment. These areas are part of an effort to strengthen our position as an investment hub and provide companies with a launch pad into new target markets. These SEZs will help transform Saudi Arabia’s economy, strengthen the non-oil sector, create value for investors, and help the kingdom attract high-quality talent. Capital formation in Saudi Arabia as a share of total investment is expected to grow by 31% year-on-year in 2022, surpassing SAR 1 trillion ($266.6 billion). Saudi Special Economic Zones offer competitive corporate tax rates and exemption from customs duties on imports, capital equipment, machinery and raw materials, as well as 100% foreign ownership.
Saudi Arabia’s new special economic zone, which opened last month, has attracted $12.6 billion from investors in the shipping, mining, manufacturing, logistics and technology industries. A further investment of $31 billion is in the works, it said at a recent forum in the Kingdom of Saudi Arabia. The zones are designed to provide financial and non-financial incentives for companies as the kingdom seeks to attract more foreign investment and position itself as a global economic hub. They will focus on advanced manufacturing, cloud computing, medical devices and marine, which are key growth areas. The special economic zones are King Abdullah Economic City, Jazan, Ras Haer and King Abdulaziz Science and Technology City in the cloud.
The new SEZ strengthens and supports the Kingdom’s vision of becoming a global economic center and will contribute to the achievement of the Kingdom’s 2030 economic development goals.
The newly established economic zones are as follows:
The new zones – King Abdullah Economic City (KAEC) Special Economic Zone, Ras Al-Khair Special Economic Zone, Jazan Special Economic Zone and Cloud Computing Special Economic Zone – are strategically located across Saudi Arabia. Together, they represent the initial stages of a major long-term plan for the special economic zone and complement the Riyadh Integrated Special Logistics Zone, which launches in 2022. Saudi Special Economic Zones include competitive corporate tax rates, exemption from customs duties on imports, inputs, machinery and raw materials, 100% foreign ownership of companies, and more. Flexibility to attract and hire the best talent from around the world.
The Regional Headquarters Program was created in 2020 to invite the regional headquarters of global companies to relocate to Saudi Arabia. This is a joint initiative of the Ministry of Investment and the Royal Commission of the City of Riyadh.
The areas were officially opened and licensed on Monday during the forum. Government officials at the forum argued for the continued relevance of economic regions around the world amid qualitative changes in FDI flows, investors becoming more critical and friends supporting the trend. Friend support means manufacturing and sourcing from allies. Globally, special economic zones have regained prominence as part of a broader return to industrial policy to attract foreign direct investment and supply chains.
Today’s SEZs must go beyond financial incentives and infrastructure to provide “soft incentives” such as overcoming bottlenecks in supply chains through Saudi Arabia’s pro-business regulations.
In October 2022, Saudi Arabia opened a Special Integrated Logistics Zone at Riyadh’s King Khalid International Airport as part of plans to increase cargo capacity, strengthen supply chains and become a global logistics hub. The development of the zone is part of the country’s wider economic transformation as part of Vision 2030 – an initiative to reduce the country’s reliance on oil, unlock the growth-boosting potential of the private sector, and introduce sweeping reforms to boost economic growth Reflect the competitiveness of enterprises.
The Kingdom has a domestic market of more than 30 million people and an economic growth rate of 8.7% in 2022, one of the fastest growing among the G20 economies. The country plans to use its strategic location and resources to develop the most promising industries, from advanced manufacturing to artificial intelligence, for sustainable economic growth in Saudi Arabia and the region.
Some 13% of world trade passes through the Red Sea, and the Kingdom’s strategic location allows access to 70% of the world’s population within an eight-hour flight.
Saudi Arabia puts “great emphasis” on launching a national agenda for special economic zones and developing a network of competitive zones to facilitate investment across a wide range of industries. As the Kingdom’s economy grows and investor needs change, we plan to expand our network of special economic zones in the future.
Existing networks provide strong infrastructure and connectivity, supportive regulation, attractive incentives, competitive costs, local talent and an environment that maximizes opportunity while minimizing business risk. Saudi Finance Minister Mohammed Al Jadaan told a panel discussion at the forum that the kingdom has put in place special “guardrails” to ensure that the SEZs do not compete with or hinder the growth of major economies.
The Kingdom’s obvious policy aims to ensure that they do not “cannibalize” the underlying economy or each other, otherwise there will be a race to the bottom. The project will offer investors 10 billion riyals in financial and non-financial incentives as the country looks to expand its transport sector and become a global logistics hub. Key benefits offered by SEZs in Saudi Arabia include competitive corporate tax rates, exemption from customs duties on imports, inputs, machinery and raw materials, ability for foreigners to fully own businesses, and flexibility to recruit and hire the best cadres and skills from around the world Around.
The new special economic zone aims to accelerate the development of key industries in Saudi Arabia – from medical technology to maritime transport – and attract foreign investors. In a challenging and uncertain global economy, Kingdom offers unrivaled opportunities and the government is fully committed to doing everything it can to make it more accessible to you. These SEZs are a very important project of Saudi Arabia’s Vision 2030 as they are expected to attract more foreign direct investment, encourage private sector participation and increase local content.
Dr. Nasser Alshareef
Chair of Business Administration Department at Majmaah University