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

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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