Saudi Arabia

Saudi Arabia is the largest state on the Arabian Peninsula, a country of deserts and green oases, the cradle of Islam. Once upon a time, the most ancient Arab states arose here. It is here that the cities of Mecca and Medina, sacred to all Muslims, where the Prophet Mohammed preached, are located. Today, Saudi Arabia remains one of the most traditional Muslim countries.

General information

Official name of the country — The Kingdom of Saudi Arabia, it covers an area of 2,149 690 km² (12th in the world). The population is about 37,657 442 people (as of the beginning of 2023).

The vast majority of the population of Saudi Arabia are Arabs (Saudi Arabs — 74.2%, Bedouins — 3.9%, Gulf Arabs — 3%). In total, there are more than 100 tribal associations and tribes in the country.

The official language of Saudi Arabia — Arab. It is used in all business dealings and government transactions. English is the second unofficial language in the kingdom: it is spoken by the majority of society.

State religion — Sunni Islam (93%). The majority of the population professes Salafia. Shiites make up approximately 10-15% of the country's population. Representatives of other religions also live in the kingdom — Christians, Hindus, Buddhists, Sikhs, Baha'is. Saudi Arabian authorities allow people of other faiths to enter the country, but they are prohibited from worship.

The official currency of the country is the Saudi Riyal.

Riyadh — capital and largest city of Saudi Arabia. The residence of the king is located in Riyadh, where all central government institutions, which appeared in 1955, are concentrated. There is almost no industry in the city.

Jeddah (or Jeddah) — city in western Saudi Arabia. It is the second largest city in the country and its economic capital. The main sectors of Jeddah's economy are:

• logistics (large port and airport, highway junction);
• tourism (religious);
• banking sector;
• trade;
• construction;
• petrochemicals;
• high-tech sector (Saudi center for biotechnology, electronics and programming).

Mecca — the third largest in the country, and also the holy city of Muslims. It is considered the “cradle of Islam”. Mecca's economy is heavily dependent on the annual pilgrimage. Revenue from the Hajj largely fuels the economy of the entire Arabian Peninsula (also includes services for pilgrims). Saudi Arabian Airlines' profits come from pilgrimage revenues of 12%. Textiles, furniture and tableware are produced in Mecca. The majority of the economy is made up of the service sector. Businesses in the city include corrugated iron manufacturing, copper forges, carpentry shops, upholstery shops, oil presses, candy factories, mills, bakeries, poultry farms, frozen food imports, photo shops, ice factories, soft drink factories, hairdressers, bookstores, tourist agencies and banks.

Saudi Arabia is divided into 13 administrative regions, formerly also known as provinces, emirates or mintak, each of which is ruled by an emir (prince) from the royal family.

History, geography, culture, mentality

Arabian Peninsula — historical homeland of the Arabs. Tribes of this ethnic group settled in this area at least from the second half of the 2nd millennium BC.

In the middle of the 20th century, menhirs were discovered in the Tihama Valley on the Red Sea coast — giant Neolithic buildings made of stone slabs weighing up to 20 tons. Here, researchers excavated the remains of settlements, ceramics and copper tools dating back to approximately 2400 BC. And in 2017, in the hilly region of Shuwaimis, in the north-west of the Arabian Peninsula, an “art gallery” was found. Stone Age — rock paintings with hunting scenes.

Desert Arabia, lost on the distant outskirts of Eurasia, twice influenced the global development of the history of human civilization. In the 7th century, here, in the unknown town of Mecca, a world religion was born — Islam. And since the middle of the 20th century, the discovery of oil and gas fields allowed Saudi Arabia to assume a key role in the global distribution of energy resources and determine the direction of the vectors of world politics.

After the rapid Islamic expansion in the Early Middle Ages, the political centers of the Muslim world moved from Arabia to Damascus, Baghdad and Cairo. On the "maternal" Several small Arab principalities were formed on the peninsula, conquered in the 16th century by the Turkish Sultan Selim I, who captured Mecca and declared himself the guardian of Islam.

The beginning of the statehood of Saudi Arabia was laid by Emir Muhammad ibn Saud, who ruled in the mid-17th century in the tiny principality of Diriyah, located in the center of the Arabian Peninsula — where the capital city of Riyadh is now located. Having entered into an alliance with the religious leader Muhammad ibn Abd al-Wahhab, the emir vowed to free Arabia from Ottoman rule. In 1744, Ibn Saud's troops won their first victory over the Turks. Thus, a powerful Saudi dynasty emerged in the political arena, based on a new trend in Islam — Wahhabism, which professes a return to the ancient sources of the religious teachings of the Prophet Muhammad and denies later innovations in the interpretation of the Koran. The struggle for Arabia's independence continued until the beginning of the 20th century. In the political arena, the Arabs were supported by France and Great Britain, who fought the Ottomans during the First World War.

The Kingdom of Saudi Arabia was formed within its modern borders in 1934. Within a few years, colossal oil reserves were discovered on the Arabian Peninsula. Since 1945, the extraction of black gold has been carried out with the participation of American oil corporations.

In the second half of the 20th century, the country took a leading position in the world energy market, which gave a powerful impetus to its development and prosperity.

Saudi Arabia occupies about 80% of the territory of the Arabian Peninsula. It borders Jordan, Iraq and Kuwait to the north, Qatar and the United Arab Emirates to the east, Oman to the southeast and Yemen to the south. It is washed by the Persian Gulf in the northeast and the Red Sea — in the west.

In the west of the country, along the coast of the Red Sea, the al-Hijaz mountain range stretches. The highest point in Saudi Arabia — peak of Jabal al-Lawz. The Asir resort area is also located there, attracting tourists with its greenery and mild climate.

Most of the territory of Saudi Arabia is occupied by deserts and semi-deserts, which are inhabited by nomadic Bedouin tribes. The population is concentrated around several large cities, usually in the west or east near the coast.

Almost all of Saudi Arabia does not have permanent rivers or water sources; temporary streams form only after intense rains. They are especially abundant in the east, in Al-Hasa, where there are many springs irrigating the oases. The solution to the water supply problem is carried out through the development of seawater desalination enterprises, the creation of deep wells and artesian wells.

Saudi Arabia's rich heritage and traditions are shaped by its historical role as a center of trade and the birthplace of Islam. In recent years, significant cultural changes have occurred in the kingdom, thanks to which centuries-old customs harmoniously fit into the new picture of the modern world.

A feature of local reality is the strictest norms of compliance with Islamic law, since ordinary law in its European sense is replaced by Sharia norms. Any discussion of the existing political or religious system is prohibited. Violation of the canons of Islam is subject to severe punishment, and this is strictly monitored.

Religious police are active in the capital — "Mutawa", whose representatives and agents in civilian clothes constantly patrol the streets and public institutions. However, for minor violations, foreigners are usually subject to only preventive conversations and rather light (according to local standards) reprimand measures. The law does not prohibit foreigners from dressing outside of Islamic traditions, but both women and men are advised to dress modestly when entering the country. In any case, a short skirt or shorts, bare arms above the elbow (even for men) and an uncovered head for women may cause complaints from representatives of the religious police. The traditions of social behavior here are extremely conservative and this should under no circumstances be neglected — Violating local rules usually results in immediate expulsion from the country. It is categorically not recommended for a foreigner to wear local clothes: since the style, cut, color and decoration of many elements of a traditional Arab costume indicate that the owner belongs to one or another clan, therefore an attempt by a European to try it on himself can be regarded quite negatively. However, this applies only to the most conservative representatives of the local population.

In 2006, the Saudi Arabian government lifted the ban on photography in public places, but permission is still required to photograph private property, government or military installations, infrastructure or individuals.

One of the peculiarities of shopping in Riyadh is that men over 16 years old, unaccompanied by women, are not allowed into large supermarkets. The ban on single men entering was introduced in order to protect the moral foundations of the country's female population.

For non-Muslim foreigners entering Saudi Arabia, there is a ban on visiting the holy cities of Mecca and Medina.

Power

The first legal documents establishing the general principles of government and governance of the country were adopted in March 1992. According to the Fundamentals of the Government System, Saudi Arabia is an absolute theocratic monarchy, ruled by the sons and grandsons of the founding king Abdul Aziz bin Abdul Rahman al-Faisal Al Sauda. The Holy Quran serves as the constitution of the country, which is governed by Islamic law (Sharia). The highest authorities include the head of state and the crown prince; Council of Ministers; Advisory Board; High Council of Justice. However, the actual structure of monarchical power in Saudi Arabia is somewhat different from how it is presented in theory. To a large extent, the king's power rests on the Al Saud family, which consists of more than 5 thousand people and forms the basis of the monarchical system in the country. The king rules based on the advice of leading members of the family, in particular his brothers. His relations with religious leaders are built on the same basis. Equally important to the stability of the kingdom is the support of noble families such as the al-Sudairi and Ibn Jiluwi, as well as the religious Al ash-Sheikh family, a subsidiary branch of the Saudi dynasty. These families have remained loyal to the Al Saud clan for almost two centuries.

The head of state is the king. Currently, Saudi Arabia is led by the son of the country's founder, King Abdullah bin Abdulaziz al-Saud. The head of state has full executive, legislative and judicial powers. His powers are theoretically limited only by Sharia law and Saudi tradition. The king is called upon to maintain the unity of the royal family, religious leaders (ulema) and other elements of Saudi society. According to the constitution, the king heads the government (it has existed in its current form since 1953) and determines the main directions of its activities.

The Council of Ministers combines both executive and legislative functions. All its decisions, which must be compatible with Sharia law, are made by a majority vote and are subject to final approval by royal decree. The Cabinet consists of the Prime Minister, the First and Second Deputy Prime Ministers, 20 ministers (including the Minister of Defense, who is the Second Deputy Prime Minister), as well as government ministers and advisers appointed as members of the Council of Ministers by decree of the king. The most important ministries are usually headed by representatives of the royal family. Ministers assist the king in carrying out his powers in accordance with the constitution and other laws. The King has the right to dissolve or reorganize the Council of Ministers at any time.

There is no legislative body — the king rules the country through decrees. Since December 1993, the Monarch has had an Advisory Council (CC, Majlis al-Shura), consisting of scientists, writers, businessmen, prominent members of the royal family and representing the first public forum in the history of Saudi Arabia. The Constitutional Court is called upon to develop recommendations to the government on issues of socio-economic development of the country, to prepare opinions on various legal acts and international agreements. At least 10 members of the Council have the right of legislative initiative. They can propose a new bill or additions and changes to existing legislation and submit them to the Chairman of the Council. All decisions, reports and recommendations of the Council must be submitted directly to the King and the Chairman of the Council of Ministers for consideration. If the points of view of the two councils coincide, the decision is made with the consent of the king; if the points of view do not coincide, the king has the right to decide which option will be accepted.

In accordance with a royal decree in 1993, Saudi Arabia was divided into 13 provinces (emirates). By decree of 1994, the provinces were, in turn, divided into 103 districts. Power in the provinces belongs to governors (emirs) appointed by the king. The most important cities, such as Riyadh, Mecca and Medina, are headed by governors belonging to the royal family. Local affairs are administered by Provincial Councils, whose members are appointed by the king from representatives of the most noble families.

Economy

Today, Saudi Arabia — one of the main exporters of oil and petroleum products in the world. Through OPEC — Organization of Petroleum Exporting Countries — the kingdom controls a significant part of the world oil market.

Saudi Arabia's revenue for 2022 amounted to 1.27 trillion rials or 340 billion US dollars. Of these: 

• more than 857 billion rials (228 billion US dollars) — income from the export of oil and petroleum products
• more than 220 billion rials (58 billion US dollars) — income from taxation 
• about 123 billion rials (32 billion US dollars) — income from investment projects 
• about 70 billion rials (18 billion US dollars) — income from tourism.

In 2016, the kingdom's Crown Prince Mohammed bin Salman presented his own plan for economic and social reforms called Vision 2030. Saudi Arabia's sovereign wealth fund has been called the basis of an economic plan designed primarily to diversify the country's oil economy through development:

• technology
• health
• tourism
• sports.

The Sovereign Fund currently manages capital of US$700 billion, with plans to expand to US$3 trillion by 2030.

Saudi Arabia has well-developed food and glass industries, handicrafts and the building materials industry, in particular cement.

Back in the 1st millennium BC. the inhabitants of the Arabian Peninsula mined gold, silver and copper from deposits located approximately 290 km northeast of Jeddah. Currently, these deposits are being developed again

Saudi Arabia is completely devoid of permanent watercourses. Land suitable for cultivation occupies 7 million hectares, or less than 2% of its territory. Despite the fact that the average annual rainfall is only 100 mm, agriculture in Saudi Arabia, using modern technology and machinery, is a dynamically developing industry.

Barley, corn, millet, coffee, alfalfa and rice are also grown in the country. An important industry is livestock farming, represented by the breeding of camels, sheep, goats, donkeys and horses.

Business climate

Saudi Arabia — it is one of the states in the Middle East with large oil and gas reserves. However, the country's government is not limited to the development of the oil and gas sector, but is constantly working on ways to diversify the economy, including by attracting foreign capital. Thanks to these efforts and policies, energy, telecommunications, infrastructure, services, education, construction, and tourism have reached a high level of development in Saudi Arabia. Opening a company in Riyadh or any other major city in Saudi Arabia is potentially profitable due to the following advantages of the country.

The decision to open a company in Saudi Arabia can provide the following benefits of doing business in the region:

• stable political and economic situation;
• advantageous location;
• openness to foreign investors;
• ease of creating and maintaining business activities;
• high level of security in the country, including economic;
• the opportunity to take advantage of the terms of more than 50 treaties on the avoidance of double taxation (among others, such treaties were signed with the UK, China, Switzerland, Japan).

You can register a business in Saudi Arabia in one of several forms:

• Private limited company — One of the most popular companies in Saudi Arabia, the liability of its shareholders is limited to their investment in the enterprise. Number of participants — from 2 to 50. Minimum authorized capital — 500,000 Saudi riyals, but for certain industries this amount may be higher.
• Joint stock company — a type of company that involves issuing shares and provides the opportunity to attract external financing. The liability of shareholders is always limited to the amount of shares they own, and the number of shareholders of a JSC should not be less than 5. The minimum amount of authorized capital for a JSC — 2 million Saudi riyals, and for a company that carries out a public offering of shares — 10 million Saudi Riyals. At the time of registration, at least 50% of the amount of the authorized capital must be paid.
• Branch — the easiest option for starting the activities of a foreign company in Saudi Arabia with minimal financial costs. In this case, a simplified registration procedure with the Ministry of Trade of Saudi Arabia is applied. The parent company is fully responsible for the results of the branch's activities.

A foreign investor can create a company in Saudi Arabia by going through a number of interrelated stages:

• Choice of the most optimal open-end business and types of activities for the future enterprise.
• Selection of a unique name for the future company.
• Collection of information about the founders, managers and beneficiaries of the future company.
• Selecting and registering an official address for a future company in Saudi Arabia.
• Preparation and execution of constituent documents and registration forms. Constituent documents are signed by the founders in the presence of a notary.
• Applying for a license from the Saudi Arabian General Investment Authority (SAGIA).
• Applying for permission from the Ministry of Commerce of Saudi Arabia.
• Opening a bank account to deposit authorized capital.
• Entering data about the new company into the Commercial Register of Saudi Arabia in case of a positive decision on registration.
• Publication of information about the new company in one of the local official publications.
• Registration for the purposes of paying taxes and mandatory social charges.
• Issuance of a license for certain regulated activities.

Saudi Arabia is a Muslim country, so before visiting and starting activities, you should find out as much detail as possible about the features of doing business in the country. In general, we can talk about a loyal attitude towards foreign investors, but in this region reputation is of great importance.

You can register a company in Saudi Arabia within 2-4 weeks. The local government is constantly working to simplify the rules for registering and doing business, among other things, this is reflected in the provision of advice from representatives of local authorities, as well as the possibility of registering a company online.

The decision to register a company in Saudi Arabia must be assessed along with the following tax aspects:

• Corporate tax — 20%
• NDFL — not applicable
• VAT — 15%
• Tax on source of income (for non-residents) — (1) dividends — 5%, (2) percent — 5%, (3) royalties — 15%
• Capital gains tax (for non-residents) — (1) corporate — 20%, (2) individual — does not apply.

Investment climate

Saudi Arabia has been doing business with the outside world for decades. Traditionally, this has been done through oil exports. But petrochemicals, energy, telecommunications, healthcare and even tourism are now big businesses, attracting foreign investment and bringing new life and business opportunities to this vast territory.

The Kingdom continues to open its doors to a global business world that extends far beyond oil. Every year, the heads of the largest companies gather at the “Future Investment Initiative” (dubbed “Davos in the Desert”) in Riyadh.

Entrepreneurship is also thriving in the country as the government prioritizes the creation of small and medium-sized enterprises (SMEs). The highly ambitious development plan Saudi Vision 2030 accelerates the integration of the economy into the global system. Meanwhile, foreign investment in non-traditional sectors of the economy is growing.

The kingdom's Crown Prince Mohammed bin Salman intends to make Riyadh the largest city in the world by 2030, doubling its population to 15 million people.

To attract capital, the kingdom is easing religious restrictions and preparing new laws.

In the north-west of Saudi Arabia in the province of Tabuk they also began to build a “city of the future” Neom. According to the plan, by 2045 it will become a state within a state with a population of 9 million people. The key object here is — mirror skyscraper The Line, 500 m high and 120 km long.

The most powerful investments are also being made in Riyadh, as well as in the east of the country, where all the main oil resources are located, next to Bahrain and Qatar. There are also huge opportunities in terms of agriculture, landscaping, and numerous tourism programs have been introduced. Investors may also be interested in everything related to the consumer sector, medicine, setting up production facilities and, to a large extent, development.

Saudi Arabia was ranked sixth in last year's Agility Emerging Markets Logistics Index, which measures logistics competitiveness and business climate.

Business and investment support structures

Saudi Arabia offers a variety of support structures and programs for business and investment. These initiatives are designed to attract foreign investment, stimulate economic growth and diversify industries. Here are some key organizations and initiatives that provide support to businesses and investors in Saudi Arabia: 

• Saudi Arabian General Investment Authority (SAGIA)SAGIA is the main body responsible for attracting foreign investment into the country. It provides various services such as issuing licenses, investment advice, and assistance in obtaining necessary permits. 
• Saudi Arabian Industrial Development Fund (SIDF) SIDF provides financial support for industrial projects in Saudi Arabia. The fund can also provide loans and guarantee loans for the development of production and infrastructure.
• Saudi Industrial Property Authority (MODON).MODON manages industrial parks and zones in Saudi Arabia, providing investors with access to modern infrastructure and amenities.
• Saudi Arabian Monetary Authority (SAMA) SAMA is the central bank of Saudi Arabia and regulates the banking system. Also provides information about the financial stability and economic climate of the country.
• Vision 2030. This is an ambitious strategic initiative aimed at diversifying the economy and reducing dependence on the oil industry. Vision 2030 includes many reforms and investment programs that promote the development of new industries and stimulate investment.
• Saudi Arabian National Development Fund. This fund was created with the aim of financing various development projects including infrastructure, education and healthcare. It can also support investment projects.
• Invest SaudiThis is the official portal for investors and entrepreneurs, providing information on business opportunities, investment conditions and resources available in Saudi Arabia. 
• Saudi Exports Development Authority (SEDA). SEDA specializes in supporting the export of Saudi goods and services to world markets and provides information and financial support to exporters.

These organizations and initiatives provide a variety of tools and resources for businesses and investors looking to invest in Saudi Arabia.