Saudi Arabia: An Overview Of Saudi Arabia's Foreign Investment And Employment

Last Updated: 2 October 2015
Article by Sumit Soni

In recent years businesses in Saudi Arabia, or those seeking to commence business operations, have dealt with a rapidly changing legislative landscape.

The introduction of Nitaqat (literally 'Zones'), which place employers in various colour-coded classifications based on the percentage of Saudis employed, heralded an increased focus on the hiring and retention of Saudi nationals. The Saudi Arabian General Investment Authority ('SAGIA') has instituted an overhaul of the foreign investment license application process which continues to be refined today.  And finally, there was the widespread work visa checks conducted in late 2013 and 2014, which resulted in the deportation of nearly one million undocumented and other illegally resident expatriates.  According to some sources, more than four million workers corrected their work permit status during this period which is an impressive feat by any measure.

In each case, businesses in Saudi Arabia were required to understand the new legislation, implement systems in order to comply with it and take steps to ensure that those systems were complied with by the local teams in Saudi Arabia.  This was by definition a reactive process with many companies initially finding themselves in a lower tier than expected of Nitaqat, or with a rejected foreign investment license application, or in some cases even without workers. 

These legislative changes do not occur in a vacuum, and for the leadership of businesses in Saudi Arabia, or businesses that conduct business with Saudi Arabia, it can be helpful to understand the underlying policy objectives behind these regimes. With an understanding of the policy objectives, companies doing business in Saudi can begin to proactively develop their operations in line with the objectives and in this way reduce the possibility of loss of competitiveness.  

For example, a large and increasingly well-educated young Saudi national workforce looking for opportunities means that businesses must provide opportunities to allow Saudi nationals to train, develop and take on leadership opportunities as they arise.  Similarly, the Kingdom's strategic plan to diversify away from a petroleum-based economy means that there are and will continue to be significant opportunities for businesses in sectors that build on other strengths of the Saudi economy (including its vast deposits of minerals and other natural resources).  These and other policy considerations will continue to inform legislative changes in the future.

Examples of such legislative changes abound.  For example, SAGIA continues to modify its policy with respect to the issuance of foreign investment licenses to fine-tune the balance between those applications that are successful and those that are rejected.  In late 2014, SAGIA introduced a "fast track" application process.  For those applicants that meet one of a number of criteria, a reduced set of documentation requirements and a promise of a quicker approval process awaits.  The criteria makes clear the types of applicants that the Kingdom is seeking: for example, companies publicly listed in their home jurisdictions, or those seeking to establish regional hubs for their operations in Saudi Arabia. In the future, those companies that successfully bid on major infrastructure and other projects could avail themselves of the "fast track" mechanism in order to comply with any requirements to establish, for example, Saudi manufacturing facilities in order to supply those projects.

Saudi Arabia's Wage Protection System ('WPS') requires employers to provide salary payment data to the Ministry of Labour and for salaries to be paid via electronic funds transfer.  In addition to ensuring that all employees are documented and all monthly salaries are paid to employees according to the terms of the relevant employment agreements, the WPS allows the Ministry of Labour to determine what percentage of payroll is being paid to Saudis vs. non-Saudis.  In time, this insight will permit the Ministry of Labour to analyse the seniority of Saudi nationals in organisations and to develop policies to encourage Saudi nationals to take on senior leadership functions. 

The previously described Nitaqat, the centrepiece of the Kingdom's Saudisation strategy, will also be developed further.  The third phase of this program, which was due to be implemented on 20 April 2015 but has been delayed for an unspecified period, will in some cases (based on sector or industry) significantly increase the percentage of Saudis required to be employed by larger businesses.  It will also more directly target small to medium enterprises.   

The Nitaqat regime introduced for the first time the possibility of employees being able to take on new employment without obtaining consent from the previous employer in the form of a so-called "no objection" letter.  For those companies finding themselves in the lower tiers of Nitaqat (namely yellow and red), the "poaching" of Saudi-based employees by local competitors in the higher tiers (premium and green) became a reality for the first time.  This introduction of the concept of a workforce that is able to move freely between employers may be expanded in due course, and in the long term employers should prepare for a possible liberalisation (or possible end altogether) of the sponsorship system.

Finally, at the time of writing the Ministry of Labour has recently announced a number of amendments to the Labour Law, including increased requirements for employers to train Saudi nationals.  The full impact of these additional amendments will become clearer in time.

There are three main points to be taken from the above:

  • Recognise the shifting legal landscape.  Those businesses that are ready for and can anticipate legislative changes will be best situated to respond quickly when change does occur.  
  • Stay apprised of new developments.  Often proposed changes in legislation will be publicly debated at length before being implemented. For example, the introduction of an eight-year residency limit for expats has been discussed recently by the Ministry of Labour.  While it does not appear this proposal will become law in the near future, knowledge of this proposal can be kept in mind when employers work through succession planning for expat employees.
  • Show value to the Kingdom.  While the legislative landscape will continue to change, the policy objectives will not. Those businesses that can objectively show a record of hiring and training Saudi nationals, building plants and infrastructure, and transferring technology onshore will continue to be valued and will be able react to new requirements in the most agile manner.

Recent developments indicate that the pace of legislative development (and business opportunity) in Saudi Arabia are set to continue to increase in the near term.  For those businesses that are willing to invest in the Kingdom and partner with Saudi authorities, access to those business opportunities will also continue to grow.  Jeddah, being a key commercial hub in Saudi Arabia as well as a major international seaport, will certainly be a central focus for such business opportunities. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions