Expanding Global Investment Opportunities: Kingdom of Saudi Arabia to develop four new special economic zones

His Royal Highness Prince Mohammad bin Salman bin Abdulaziz, Crown Prince and Prime Minister, has announced four new Special Economic Zones (SEZs) in Kingdom of Saudi Arabia’s (“KSA” or “Kingdom”) with an intent to promote and strengthen KSA’s position as a global investment hub. SEZs are geographically delimited areas that facilitate specialised economic activities such as investment, commerce and trade, and employment by offering competitive advantages and regulatory frameworks that differ from the base economy.

The Saudi Press Agency (SPA) reported that the aim for establishment of the new SEZs, which would be based in Ras-al-Khair, Riyadh, King Abdullah Economic City, and Jazan is, to open KSA to international investors across the globe. The introduction of the four new SEZs appears to be a step towards welcoming the investors from around the world by extending new avenues and opportunities to global businesses.

The new SEZs will not only impact/attract foreign investors but also strengthen the local economy by creating jobs and localising supply chains which shall contribute towards increasing KSA’s Gross Domestic Product (GDP). The SEZs will support the present national strategies and businesses, and also forge new ties with international platforms, capitalising on each region's competitive advantages to help critical industries such as logistics, advanced manufacturing, technology, and other priority sectors in the KSA, as per the SPA.

The SPA also added that the zones would be able to take advantage of the KSA’s ideal location to establish new business hubs in important growth industries, allowing them to launch and build firms and technologies that will impact the future.

The advantages for the organizations or companies operating in these SEZs would include –

(i)  exemption from customs duty on imports, production inputs, and machinery and raw materials;

(ii)  competitive corporate tax slabs;

(iii) flexibility in hiring of the best personal across the globe; and

(iv) 100% ownership of the company by foreign entities.

These SEZs shall represent a continuation of long-running measures aimed at transforming the Kingdom into a global investment destination and a critical hub for global supply chains by capitalising on its strategic location of being at the crossroads of global trade routes. As per the officials, on the back of a detailed programme of regulations and incentives, the special economic zones will provide rewarding and appealing benefits to foreign investors. According to them, the programme will also allow for the acceleration of reforms needed to facilitate business in all parts of the KSA.

The new SEZs build on the past free-zone initiatives taken up by the KSA, such as the recent opening of an integrated special zone for logistics at Riyadh's King Salman International Airport. Those were the first phase of a big, long-term programme to encourage foreign direct investment, recruit the best professionals from around the world, and boost entrepreneurship and economic development within the KSA, according to officials.

The SEZs will be governed by the Economic Cities and Special Zones Authority, which will offer new solutions to the obstacles that many global companies may encounter as well as assist the KSA in capitalising on key macroeconomic shifts to create a distinguished business marketplace by stimulating new sectors and value chains.

The zones which were launched cover a wide range of industries which are mentioned below:

The top location for innovative manufacturing and logistics, ranging from vehicle supply chain and assembly to consumer goods, ICT, and medical technology. Set in a strategic location on the Red Sea, less than 90 minutes from Jeddah Airport, this area which is spread over 60 km has unparalleled access to global trade routes via King Abdullah Port, which was named the World Bank's most efficient port in 2022. The SEZ has already announced that Lucid, a global EV industry leader, will produce 150,000 EVs per year from its base in KAEC SEZ.

A new Cloud Computing SEZ in King Abdulaziz City for Science and Technology (KACST), it will serve as a hub for development and innovation of technology. The Cloud Computing SEZ, a direct manifestation of the Kingdom's 'Cloud First' policy, is in line with the Kingdom's commitment to digital innovation and the rapidly rising tech sector. The zone is built on a novel hybrid concept that allows investors to set up physical data centres and cloud computing infrastructure across the Kingdom.

An industrial hub and vital trading platform for Africa and Asia's fast-growing markets. Jazan SEZ provides access to the region's largest port for goods export and material import, allowing investors to profit from and contribute to large-scale infrastructure projects in the Kingdom of Saudi Arabia and across the globe, which are backed by easy access to both natural and industrial resources. Jazan is located in the fertile southwestern section of the Kingdom, giving prospects for the manufacturing, processing, and distribution of food items to address growing regional demand and food security problems.

Ras Al-Khair SEZ is a fully integrated marine ecosystem on the Arabian Gulf, with a rich network of existing investors - 40% of the zone is already reserved - and a plethora of opportunities across shipbuilding and repair, offshore drilling, and maritime value chains.

The KSA’s establishment of the SEZs opens the Kingdom up to new investment opportunities and establishes itself on a global platform as a beacon of global business hub. BY embracing this innovative economic model, the Kingdom is showcasing its commitment to diversification and reducing its reliance on Oil and other natural resources.  This move will enhance the Kingdom’s strategic influence in the Middle East and beyond, signaling a new era of growth and prosperity.

These SEZs would also present new job opportunities for qualified individuals across the globe which would at the very least help in diversifying the culture of the Kingdom and portray itself as an inclusive global leader.

In conclusion, I believe the establishment of SEZs in Saudi Arabia is a significant step towards sustainable economic growth, promoting global trade and investment while creating opportunities for all.

Harsh Patel is an International Tax and Corporate Lawyer and the Founder & CEO of Water and Shark.