Saudi Arabia's New Investment Law; reshaping the Middle East FDI Competitiveness

How Saudi Arabia’s Investment Law Creates a New Era for Global investment in the Middle East

Foreign investment is one of the main drivers of economic growth, job creation, and innovation. As a result, governments worldwide actively compete to attract foreign companies and capital. Their strategies vary, but they often include tax incentives, regulatory reforms, investment protection treaties, and direct financial support.

In the past decade, the Middle East has emerged as a major economic growth hub, driven by strategic reforms, infrastructure projects, and business-friendly policies. At the forefront of this transformation is Saudi Arabia, which has positioned itself as the top destination for investment in the region.

The Kingdom’s approach to economic modernization and investment attraction has included major structural reforms, sector liberalization, and incentives for multinational corporations. Among these reforms, one stands out as a milestone in Saudi Arabia’s legal and economic transformation: the Saudi Investment Law, which was announced in August 2024 and officially took effect in February 2025. This law is designed to reshape the business landscape in Saudi Arabia by offering more protections, incentives, and clearer rules for investors.

Breaking Down the Saudi Investment Law

The new Investment Law is a comprehensive legal framework that governs both foreign and local investments in Saudi Arabia. It replaces the previous Foreign Investment Law (2000) and introduces equal treatment between Saudi and foreign investors, a simplified registration process, stronger investor protections against unfair expropriation, a clearer dispute resolution system, and investment incentives encouraging long-term foreign capital inflows.

The law consists of 16 articles, each focusing on different aspects of investment regulation as the following:

Foreign Investment Provisions (Articles 1-5)

These articles define the rights, registration process, and obligations of foreign investors. They emphasize that foreign investors will be treated on equal footing with local investors, removing previous ownership restrictions in many sectors. The streamlined registration process ensures easier market entry, reducing bureaucratic delays.

Investor Guarantees (Articles 6-9)

These sections provide legal protections against expropriation, unfair treatment, and restrictions on capital transfers. Investors are guaranteed fair compensation in cases where expropriation is deemed necessary for public interest. Furthermore, capital and profit repatriation is allowed without government intervention, ensuring financial security for businesses.

Investment Incentives & Licensing (Articles 10-12)

These articles outline the benefits and approval processes for foreign investors. Investors may qualify for tax exemptions, reduced tariffs, and access to special economic zones. Licensing procedures have been simplified, ensuring faster approvals for businesses willing to invest in priority sectors like technology, infrastructure, and renewable energy.

Dispute Resolution Mechanisms (Articles 13-14)

Investors are granted the right to seek arbitration, mediation, or court rulings in case of disputes. The government aims to improve the efficiency and transparency of legal proceedings, ensuring fair outcomes. These articles align Saudi Arabia with international best practices in investor dispute resolution. 

Regulatory Oversight & National Security (Articles 15-16)

These articles define the role of authorities in overseeing foreign investments. The government retains the right to restrict or regulate investments in sectors deemed critical to national security. While this provision raises concerns about discretionary power, it aligns with global practices, where national security interests often override free market access.

Excluded Activities: A Common Practice in Investment Law

One key aspect of the new law is the list of excluded activities—sectors where foreign investment is either restricted or requires special approval. While this may raise concerns about investment limitations, it is not unique to Saudi Arabia. Most major economies also restrict foreign investment in strategic industries. The United States restricts foreign ownership in defense, energy, telecom, and AI sectors. The European Union, through the EU FDI Screening Regulation, limits foreign investment in critical infrastructure, cybersecurity, and dual-use technology. Japan requires government approval for foreign investments in finance, defense, and advanced technology. Saudi Arabia’s restrictions are in line with global investment norms, ensuring that national security and strategic interests are protected while keeping the economy open for foreign capital in most sectors.

Impact on the Saudi Economy and Implications for Investors

The Saudi Investment Law is not just a legal reform—it is a key pillar of the Kingdom’s economic strategy. From an economic perspective, its impact is significant. Higher foreign direct investment (FDI) inflows are expected as clearer regulations and stronger investor protections make Saudi Arabia a more attractive destination for global businesses. Economic diversification is encouraged through investment in non-oil sectors such as technology, manufacturing, and finance, aligning with Saudi Vision 2030’s goal of reducing oil dependency. The law also facilitates job creation and skills development, increasing employment opportunities for the Saudi workforce while enabling knowledge transfer from multinational firms. Additionally, by improving ease of doing business, Saudi Arabia is positioning itself as a strong competitor to Dubai and Singapore in attracting global headquarters.

For investors, the new law removes many of the past hurdles that made entering the Saudi market challenging. Foreign investors now have greater market access and can fully own businesses in more sectors than before. Stronger legal protections ensure no forced local partnerships, clear dispute resolution mechanisms, and protection from expropriation. The transition from licensing to registration simplifies the business setup process, and various incentives such as tax benefits, government-backed financing, and subsidies enhance investment returns.

Saudi Arabia’s Growing Status as an Investment Hub

The Saudi economy is one of the largest in the Middle East, with a GDP exceeding $1 trillion and ambitious plans for further expansion. The country’s Vision 2030 program aims to increase the FDI contribution to GDP from 3.8% to 5.7% by 2030 while raising private sector contributions from 40% to 65% of GDP. With these growth targets, Saudi Arabia is emerging as a top destination for multinational companies, particularly in high-value industries such as finance, technology, energy, and industrial manufacturing.

The Investment Law is not the first major step Saudi Arabia has taken to attract global companies. Prior to this, the Kingdom introduced the Regional Headquarters (RHQ) Program, which offered tax and operational incentives for companies setting up their Middle East HQs in Saudi Arabia.

Several major multinational corporations have already established their RHQs in Saudi Arabia. BlackRock has expanded its presence in asset management and finance, while General Electric (GE) has invested in the Kingdom’s energy and industrial sectors. PepsiCo has strengthened its food and beverage operations, Siemens has grown its footprint in industrial automation and smart cities, and Schneider Electric has supported energy efficiency and digital transformation efforts.

Taking This to Practice: Setting Up a Business in Saudi Arabia 

The new Investment Law has simplified the process of establishing a company in Saudi Arabia, making it primarily online through the Ministry of Investment of Saudi Arabia (MISA) portal. However, depending on the legal structure and industry, some steps still require in-person approvals.

Setting up a company involves three main steps:

1.Reserve a Company Name

The first step is reserving a unique company name through the Ministry of Commerce portal.  The name must comply with Saudi regulations and should not be identical to any existing business name. This step is fully online. A small fee applies, depending on the type of business activity. Approval typically takes 1-3 business days.

2. Obtain an Investment License

Foreign investors must apply for an investment license through MISA. This license grants foreign businesses legal permission to operate in Saudi Arabia and access certain investment incentives. Holding an investment license allows businesses to own and manage companies, apply for additional sectoral approvals, enter commercial contracts, and proceed with the formal company registration. The process is fully online and usually takes 5-7 business days.

3. Register the Company

Once the investment license is approved, businesses must register their company with the Ministry of Commerce to obtain a Commercial Registration (CR) certificate, which officially recognizes the business entity.

The new Investment Law outlines different legal structures, each with specific requirements:

• Limited Liability Company (LLC) – The most common structure for foreign investors. No statutory minimum capital, but foreign-owned LLCs typically require SAR 500,000+.

• Joint Stock Company (JSC) – Suitable for larger businesses, requiring a minimum capital of SAR 500,000.

• Branch Office – Operates as an extension of a foreign parent company, with no specific capital requirement, but financial stability must be demonstrated.

• Representative Office – Used solely for marketing and promotion, not allowed to conduct commercial activities or generate revenue.

The registration process is mostly online, but some documents, such as the Articles of Association, may require notarization in person at a notary public. The process usually takes 1-3 business days, though additional approvals may extend the timeframe.

Once the Commercial Registration (CR) certificate is issued and any required in-person approvals are completed, the company is legally registered. Investors can then proceed with tax registration, employment visas, and additional sector-specific licensing as required.

Saudi Arabia’s Rise as a Global and Regional Economic Power

To conclude, Saudi Arabia has firmly established itself as a leading economic force, both regionally and globally. The new Investment Law marks a significant step in the Kingdom’s continuous efforts to enhance its business environment, attract high-value investments, and strengthen its position as a premier global hub for commerce and innovation. This reform is not just about making it easier to do business, it is a testament to Saudi Arabia’s long-term vision of fostering economic growth, diversification, and global competitiveness.

At the core of this transformation is Vision 2030, an ambitious strategy that is shaping Saudi Arabia into a center for technology, finance, and industrial excellence. The Kingdom’s commitment to modernization, streamlined regulations, and investor-friendly policies reflects a broader ambition: to be a top destination for multinational corporations and a key player in shaping the future of global trade and investment. By combining regulatory clarity, economic incentives, and world-class infrastructure, Saudi Arabia is not just keeping pace with the world’s leading economies, it is actively shaping the future of investment in the region and beyond. With an open, competitive, and forward-looking market, the Kingdom is reinforcing its role as a dynamic and strategic economic powerhouse on the global stage.

Stay tuned for further publications eyeing the medium and long term implications of the Saudi new investment law. 

Bibliography

Official Government Sources

• Ministry of Investment of Saudi Arabia (MISA) – https://misa.gov.sa
• Ministry of Commerce (MC) – https://mc.gov.sa
• Zakat, Tax, and Customs Authority (ZATCA) – https://zatca.gov.sa
• Saudi Vision 2030 Official Portal – https://vision2030.gov.sa
• General Authority for Foreign Trade (GAFT) – https://gaft.gov.sa

Legal and Business Consulting Firms

• DLA Piper – Doing Business in Saudi Arabia – https://www.dlapiperintelligence.com
• PwC Middle East – Saudi Arabia Investment Guide – https://www.pwc.com/m1/en
• Creation Business Consultants – Saudi Business Setup – https://www.creationbc.com

Business and Economic News Outlets

• Arab News – Economy Section – https://www.arabnews.com
• Saudi Gazette – Business News – https://www.saudigazette.com.sa
• Reuters Middle East – Saudi Arabia Economy – https://www.reuters.com/markets/middle-east