Saudi Arabia may further ease restrictions on foreign ownership in the economy and overhaul one of the world’s most restrictive visa systems as the kingdom seeks to draw investors to help reduce its reliance on oil exports.
The world’s biggest oil exporter is considering allowing foreigners to own 100 percent of a company in at least four industries in addition to retail, the only one that’s currently permitted, Mohanud Helal, secretary general of the Economic Cities Authority, said in an interview in Riyadh.
The role of foreign investors in the economy has always been a controversial issue in Saudi Arabia, which follows an austere version of Sunni Islam. Yet as oil prices plummet to around $30 a barrel, authorities are racing to find alternatives to revenue from crude exports to finance a budget deficit about 15 percent of economic output.
Foreign investments in non-oil industries are also crucial to to create jobs for Saudi nationals in the private sector in a country where youth unemployment stands at about 30 percent. Almost 90 percent of private sector jobs created in five out of the six-nation GCC between 2000 and 2010 went to expatriates, according to the International Monetary Fund. Nationals filled over 70 percent of public-sector jobs.
“The decision had already been made on some of the industries,” Helal said. The Saudi Arabian General Investment Authority, known as SAGIA, has identified about four sectors in which full foreign ownership may be permitted, he added without elaborating. Calls made to SAGIA after office hours weren’t immediately returned.
The slump in oil prices has already pushed Saudi authorities to cut spending, issue more debt and draw down the kingdom’s foreign-currency reserves. Officials are also weighing plans to sell stakes in state-owned entities from hospitals to airports and even Saudi Arabian Oil Co, the kingdom’s biggest oil company, known as Aramco.
The country is also reviewing its restrictive visa system by looking for ways to accelerate the process of issuing work and visit permits, according to Helal, who heads the regulatory body governing four economic cities, including King Abdullah Economic City.
“It is a very important and much needed step,” said Mohammed Alsuwayed, the Riyadh-based head of capital and money markets at Adeem Capital. “We need foreign investors to contribute to the expansion of the Saudi economy, specifically the private sector and for them to better understand what or where they are putting their money in, they need to be allowed better access into the kingdom.”
The kingdom last year started allowing direct foreign investments in its stock market, the Arab world’s biggest. The benchmark Tadawul All Share Index has dropped 36 percent over the past year, compared with a 27 percent-decline in the MSCI Emerging Markets Index.
Authorities are looking at allowing visitors, including pilgrims, to visit landmarks in various parts of the country through tourist visas. Enabling workers to bring family in easily is another area which is being considered, Helal said.
“These are all things that are being looked at as we speak today and very quickly we will hear how some things are quickly changing to further the invitation of the international community,” he said.