The Impact of Foreign Direct Investment on the Diversity of Income Sources in the Kingdom of Saudi Arabia A critical analysis of the Kingdom of Saudi Arabia’s legal reforms to encourage FDI

Abstract

As the world moves away from reliance on oil, the Kingdom of Saudi Arabia (KSA) is facing a potential economic crisis. To combat this, the Kingdom needs to diversify its income streams away from oil into new, modern, more balanced industries. Foreign direct investment (FDI) is a key part of this move, bringing not only additional finance, but also important foreign expertise and skillsets. KSA has issued an ambitious blueprint for a dynamic future, Vision 2030. However, for this to be successful, the legal system has to welcome FDI, encouraging investors to enter the Saudi market and protecting them once they do. To this end, over the past few years, the Kingdom has implemented significant legal changes. This paper critically analyses these reforms, highlighting the serious progress that has been made, with foreigners now allowed to invest without a Saudi partner, longer license’s, new corporate governance regulations and an UNCITRAL Model Law based arbitration system. However, further steps are needed, addressing Saudization of the workforce, gender diversity, Shari’a law familiarization and the status of government agencies regarding arbitration agreements.