Saudi Arabia has
told foreign investors which projects in its lucrative economy are off
limits to full foreign ownership, but left some gray areas in its bid
to attract foreign capital, economists said yesterday. They said the
announcement of the "negative list" by the Supreme Economic
Council on Sunday moved the kingdom closer to its goal of opening up
its economy and allaying concerns by foreign investors who until now
could only invest in joint ventures with Saudi nationals.
"It is obvious they want to keep control of vital sectors,"
said one Saudi economist, who refused to be named. "It is still
not fully clear in which sectors foreigners would be allowed full
ownership. This is important if you were an investor who did not want
to be left guessing," he added. "(But) it is one step closer
to more foreign investment and the feeling is now there might be more
inquiries on projects by foreign investors."
The list is part of a new investment law issued last April allowing
full foreign ownership of projects for the first time. The economists
said they were slightly surprised by some off-limits sectors.
"The list included Telecoms, education and insurance which is
surprising considering that is where they need investments," one
Western economist based in Riyadh said. "The services part is a
bit murky and they did not detail that."
The list bars foreigners from fully owning projects in oil
exploration, drilling and production, insurance and real estate
investment in the holy cities of Makkah and Medina. It also includes
telecommunications - which the government is in the process of privatizing
- fishing, education, sea and air transport, pipelines, space projects
and services and projects relating to Muslim pilgrimage.
Other sectors are television and radio, the distribution of
electricity, some health services, wholesale and retail trade, defense-related
industries, security and publishing. "I feel that they want to
open up, but at the same time they are worried of offering too much
too fast. On one hand they want to open up but on the other they want
to hold on to the 49 per cent stake for foreigners," the Western
economist said.
"Although they need to clarify some more points, there is no
doubt they are moving fast with the investment law and are determined
to make it work," he said. Beshr Bakheet of Saudi-based Bakheet
Financial Advisors said the announcement of the list was an
"incredible achievement. If a foreign investor does not know
Saudi Arabia he might thing it is not satisfactory, but if you are a
Saudi watcher you will see it as a successful achievement," he
said.
He said the kingdom could not open some sectors, like financial
services, Telecoms and education, to full foreign ownership before it
sorts out Saudi investments in them. "A Saudi cannot invest in Telecoms
or education yet. They can't allow foreigners before the Saudis. I am
sure once they sort out the Saudi role it will be open to all,"
he said. "It is definitely not the finalized list. The idea was
to get it out and start something workable, then see."
He said the General Investment Authority (GIA), set up last year to
provide the mechanism for the investment law, had strongly resisted
pressure from various ministries to include many other sectors on the
list. "A lot of the credit goes to Prince Abdullah bin
Turki," he added, in reference to the GIA head who has a
reputation as one of the biggest free-market advocates within the
royal family.
Saudi Arabia is also opening up its energy sector, but talks with
foreign oil giants are separate to the investment law. The investment
law also relaxes rules for sponsoring foreign employees, permits
foreign ownership of project-related property and lowers tax on
companies' profits. GIA has already set limits for the amount of
investment needed for foreigners to qualify for owning projects in
several sectors, including agriculture and industry.
Saudia-Online.com
Source: Gulf News
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