When Saudi Arabia announced plans to become a global investment powerhouse as part of its ambitious “Vision 2030”, many questions followed. Before the announcement, issues were raised regarding the number of barriers that continued to exist, particularly around the issuing of foreign investment licences.

Although the announcement was welcomed, it remained clear that much still needed to be done to address challenges around bureaucracy and regulation if Saudi Arabia was serious about its plans to further open up to foreign corporates. The reforms that followed — and those that have been proposed — are encouraging. However, when entering any new market it is vital that potential investors understand the dynamics at play and the unique intricacies that exist there.

The Saudi Arabian General Investment Authority (Sagia) has been working to update its policies to expedite procedures to obtain foreign investment licences and simplify what was once a complicated process. Additionally, the body has revised its regulations on ownership, allowing foreign investors to own 100 per cent of the share capital in many instances.

More investor-friendly regulations and the largest population and economy in the Arabian Gulf is why many overseas firms are eager to become part of the kingdom’s growth story. And whilst the opportunities to invest are significant, it is imperative foreign organisations understand the differences between doing business in Saudi Arabia and the rest of the region.

Human capital is a key consideration for those wishing to invest and establish businesses in the Saudi market. While the country remains deeply committed to transforming into a thriving knowledge-based economy, this is not a vision that can be realised overnight. Saudi Arabia boasts an educated population, however companies that require those with highly specialised skills or professional service qualifications may struggle to source the workforce they require.

As the country continues to invest heavily in its people, this will, in time, improve. It also presents a firm opportunity for foreign organisations to work with local education authorities to offer training and skilled development experiences to local youths with the aim of contributing to economic diversification, while creating a sustainable stream of talent.

The organisational structure should be a top priority when looking to enter the Saudi market, and this is particularly relevant when selecting a local partner. Foreign businesses tend to be approached regularly by locals offering sponsorship opportunities. While this may, in many cases, lead to a flourishing business relationship, it is critical both parties work together to ensure their objectives, expectations and aspirations are well matched, in terms of the pace of growth, way of working and even the amount of capital to be invested.

The government announced plans to look increasingly to public private partnerships (PPPs) as opposed to traditional procurement models. The country has already completed a number of landmark infrastructure projects using the PPP structure, including Madinah Airport in 2012. But, concerns remain around the regulations and legislative frameworks that govern PPPs, and this will be particularly worrisome to those who do not have experience of working in the kingdom.

However, new laws that promise to regulate the role of the private sector in partnering with the public sector are sure to promote transparency and further encourage foreign investments, while promoting the kingdom as a key regional investment hub at an institutional level.

The industrial and logistics sectors continue to hold a lot of promise, as they remain integral to the kingdom’s transformation plans and continue to grow at an impressive rate. The profound effect that the new investor-friendly environment will have on the commercial, hospitality and retail real estate sectors should not be underestimated, especially following the recent announcement that the country will start to issue tourist visas later this year.

The Kingdom’s vision for economic diversification is undoubtedly ambitious, and the determination to emerge as an investment powerhouse is indeed admirable. However, the key challenge going forward will be to ensure that the nation’s regulatory and legislative frameworks develop in parallel with Saudi Arabia’s appetite for change.

It is important that foreign businesses choose the right partner to help them navigate this potentially fruitful, but complicated, market. It is also essential that local businesses manage the timeline expectations of their colleagues based away from the region.

Nick Maclean is Managing Director, CBRE M.E.