The Relationship between Intellectual Property Regime and Foreign Direct Investment in Saudi Arabia: A Proposal for Structural Reforms

Abstract

Foreign direct investment offers many benefits to the investing companies, such as reduced labor costs and access to natural resources in the foreign market. It also offers many benefits to the host countries, such as increased economic growth and new job opportunities. Thus, governments pay special attention to the impact of policies on the inflow of foreign direct investment. In today’s world, many of the assets owned by companies in the developed world are intangible. This highlights the need for potential host countries of foreign direct investment to design intellectual property regimes that can attract these companies, enabling host countries to reap the benefits of their presence. This research explores the potential impact of Saudi Arabia’s intellectual property regime on the inflow of foreign direct investment, and identifies the reforms needed to the Saudi intellectual property regime in order to attract more foreign direct investment to the country. Using a descriptive and analytical approach, the research concludes that a stronger intellectual property regime in Saudi Arabia could increase the country’s inflow of foreign direct investment. It identifies three structural challenges facing the Saudi intellectual property regime: First, unclear directives, and lack of sufficient training. Second, the sale of counterfeit goods. Third, the country’s system of compensation for damages lacks sophistication, particularly regarding lost profits. To solve these issues, this research recommends that Saudi Arabia adopt explicit directives as a mandatory step in the legislative process, provide additional training for specialists in intellectual property, fight counterfeiting by conducting more inspections and incentivizing the public to report violations, and offer compensation for lost profits based on reasonable grounds, as done in most other legal systems around the world.