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Saudis move closer to more foreign investments
Dubai, Feb 14th, 2001
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.
Source: Gulf News 

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15 February 2001 06:40:48 PM

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