Saudi Arabia is the largest economy in the Arab world and is rapidly becoming a top business destination for international investors. Its young population of over 30 million people is highly educated and one of the most connected online in the world. Recent regulatory changes have opened up the Kingdom to foreign companies in an unprecedented way, making this once closed-off economy accessible to all.
In 2018, AstroLabs expanded into the Kingdom from Dubai, becoming the first international business incubator licensed in Saudi Arabia and since then has assisted over 80 companies from around the world with their local setup process and soft landing office in Riyadh. Companies from the region and the world are starting to realize the large opportunity and fundamental changes happening in the Saudi market and are deciding to set up locally.
Vision 2030 is the driving force behind reorienting the national economy from petrochemicals to a more diversified, private-sector led structure that is backed by one of the world’s largest sovereign wealth funds with many new initiatives seeking top international vendors. All of these government projects are only open to companies that are set up locally, so you need to have a local entity established to gain access to these tenders.
Beyond government projects, the consumer population is underserved locally with pent-up demand for a variety of services. As barriers to enter the market were historically high, local competition is now relatively low, with many opportunities to scale up a business in the Saudi market. The B2B market is also extremely interesting with over 2,000 companies that have over 1,000 employees, most of which are actively seeking out ways to digitally transform. As part of the wide-ranging transformation in the Kingdom, the Saudi government has opened up 100 per cent foreign ownership across a variety of industries and has made doing business in Saudi Arabia easier via the Ministry of Investment of Saudi Arabia (MISA).
What is MISA?
In February 2020, the Saudi Arabian General Investment Authority (SAGIA) became the Ministry of Investment of Saudi Arabia (MISA) and, consequently, elevated the status of SAGIA to a ministerial level, which reflects the high priority placed by the Saudi government on attracting foreign investment into the Kingdom. MISA is the Kingdom’s investment promotion agency, responsible to set up and govern the foreign investment regulation, facilitate the entrance of investors into the country and license investors. SAGIA company registration is now handled by MISA, with no practical difference to investors looking to launch a company in Saudi Arabia.
Why Now?
With many sectors now open for 100 per cent foreign ownership and with no minimum capital requirements for many, AstroLabs is seeing a growing number of businesses interested in expanding to the Kingdom. Although these may be unprecedented times, being an early entrant into an emerging market gives any firm an almost insurmountable head start. While competitors are pulling back due to the uncertainty around COVID-19, this is a unique opportunity to lean in and be in a position to build a durable first-mover advantage towards improving market share and profitability over a long period.
What Company Structure?
Companies looking to set up in Saudi Arabia usually select between a limited liability company (LLC) or a branch entity. Both are similar structures; however, AstroLabs usually advises companies to choose an LLC structure to assign any liabilities onto the subsidiary rather than the parent company.
With Saudi LLC registration, companies are able to engage in the full range of approved activities which fall under a category, both in the public and private sector, whereas a branch is limited to the same activities of the parent company. It is able to qualify for financing from the Saudi Industrial Development Fund at favorable rates for industrial projects. An LLC can also sponsor its employees for residency purposes and have new partners and shareholders.
How to start?
The company setup process in Saudi Arabia is decentralized and involves 16 separate steps at multiple government authorities and ministries. AstroLabs’ specialized team in Riyadh navigate this complex and time-consuming process, managing third parties and ensuring you are aligned with all requirements needed to help your company expand into the Kingdom quickly and seamlessly. Working with a knowledgeable, reliable local partner will reduce the setup timelines as opposed to trying to manage the process alone. There is a minimum timeline of three months to fully complete the setup process, although it can be longer for complex company structures. The business setup consultant will be able to guide you not only through the company set up process but also post setup, enabling you to have the best start with your business in Saudi Arabia. For more information, visit astrolabs.com/setup-in-saudi
