SAGIA STREAMLINIING THE INVESTMENT PROCESS

C O N F I D E N T I A L SECTION 01 OF 02 JEDDAH 000483 SIPDIS SIPDIS RIYADH, PLEASE PASS TO DHAHRAN, DEPARTMENT FOR NEA/ARP, INR/B; PARIS FOR ZEYA; LONDON FOR TSOU E.O. 12958: DECL: 07/17/2031 TAGS: BTIO ECON ETRD PINR SUBJECT: SAGIA STREAMLINIING THE INVESTMENT PROCESS REF: A. JEDDAH 000469 B. JEDDAH 000460 Classified By: Consul General Tatiana Gfoeller for reason 1.4 (b) and ( d). ¶1. (C) Summary. On June 28 Pol/EconOffs met Mr. Mohammed Al Khosheim, Director General of the Saudi Arabia Investment Authority (SAGIA) in Jeddah. Al Khosheim described the type of investors coming to Jeddah and the process they have to complete in order to operate here. Al Khosheim touts the decreased time to process investment licenses as one of SAGIA's better achievements and detailed initiatives that are being worked on for the future. With the construction of the Economic Cities, Al Khosheim has a very positive outlook for Jeddah's economic development and SAGIA's role in the future of foreign investment in the Kingdom. End Summary. JEDDAH'S FOREIGN INVESTOR PROFILE ¶2. (C) SAGIA currently has only one investor's center in Jeddah but is planning to open five more in the next few years with up to 150 centers Kingdom-wide. Al Khosheim's office is responsible for assisting foreign investors in the entire Western region, with the King Abdullah Economic City (KAEC) in Rabigh, their most important project. SAGIA is planning to build its largest office in the Western region in KAEC and will offer foreign investors more amenities including a short stay hotel for investors to use while they are conducting business at SAGIA. Al Khosheim boasted that SAGIA reduced the time needed to register foreign investments in Jeddah to under an hour in 85 percent of the cases and quoted ten days as the maximum amount of time needed to process investment licenses. Previously, investors had to wait several months for their projects to get approval because they had to go to each ministry separately. Now every required ministry from Interior to Commerce is available at a window in the investor's center. SAGIA is also trying to update its website to allow investors to register their projects online, according to Al Khosheim. ¶3. (C) Al Khosheim said that the majority of investors he serves are individuals setting up small businesses with Saudi partners but about 40 percent are large companies. Investors cover a range of nationalities but he has noticed a major increase in Asian investors, particularly Korean and 
Japanese, over the past three years (reftel A). Aside from Asians, most of the investors come from other Arab countries, particularly the United Arab Emirates. SAGIA/Jeddah also has a women's services center but it is not readily used as only 22 women utilized its services this year. Al Khosheim also hopes that eventually SAGIA will move from focusing on foreign investment to serve local investors as well. AREAS FOR IMPROVEMENT ¶4. (C) Now that SAGIA has trimmed the time to register, they are focused on improving the products available to foreign investors, particularly visas. In the past, foreign investors had to have a Saudi sponsor and could only get a one year multiple entry visa or a two year iqama; now the Saudi sponsor is not needed and SAGIA is working with the Ministry of Interior to offer two year multiple entry visas and four year iqamas. Al Khosheim said that foreign investors are still required to adhere to Saudization regulations in theory but investors can get an exemption of the requirements for selected industries that are deemed critical by the government. SAGIA is continually working with the Ministry of Labor to ease the Saudization percentages for investors to placate their concerns about the Saudi labor pool. ¶5. (C) Al Khosheim feels that SAGIA's major problem is getting various ministries to let go of their responsibilities and to allow SAGIA to coordinate the investment effort. However he feels this problem may be minimized as SAGIA continues to expand and demonstrate its efficacy to the Saudi bureaucracy. He wants investment that will provide more job opportunities for Saudis and said that increasingly Saudis are willing to take jobs that they would not have in the past. For example, Procter and Gamble and TetraPak have factories in the Jeddah area with Saudi JEDDAH 00000483 002 OF 002 employees. ¶6. (C) Al Khosheim said that SAGIA is also working on setting up commercial courts that are based on Shariah law for business disputes. These courts would be separate from the current Board of Grievances that foreign investors currently use to resolve business disputes (reftel B). He said that now all of the contracts signed in Saudi have to be based on Sharia law and SAGIA has legal advisors on site to ensure this process. He does not view this requirement as a barrier to investment. RAISING JEDDAH'S STATUS ¶7. (C) When asked about the development of KAEC, Al Khosheim said that he has received an overwhelming response from potential investors but would not give specifics on who exactly was interested or the types of businesses they are starting. He said that this is just the beginning of Jeddah's economic development and views Jeddah as in direct competition with Dubai. He said that KAEC would operate like the free zones in the UAE but when pressed on if that meant that aspects of the UAE environment like women driving, not wearing abayas, and alcohol consumption would be permitted, he demurred saying that it would be a free zone operating within Saudi's culture. He said that Saudi Arabia's share of the import/export market is expected to greatly increase as companies operating in the economic cities then use the new port in Rabigh and the Jeddah Islamic Port instead of Dubai. He also claims that geographically Jeddah has an advantage for businesses because it is cheaper to use Saudi's port instead of Dubai's. ¶8. (C) Comment: While SAGIA has made considerable strides in improving Saudi Arabia's investment climate, Al Khosheim's estimate of the time needed to register investments seems exaggerated. If, in fact, most investors do take only one hour to register, this could leave an opening for nefarious activity to occur under the guise of foreign investment. Al Khosheim's major plans for the future of the Jeddah region as a major economic hub may also be overzealous as the Kingdom is not as advanced as its Gulf neighbors in altering culture for the sake of economic development. Saudi Arabia still must contend with the religious establishment and conservative populace before this can occur. Gfoeller