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Foreign Capital Industrial Licensing

 

 

INDUSTRIAL LICENSING REGULATIONS AND
PROCEDURES FOR FOREIGN CAPITAL

Industrial projects involving foreign capital are governed by Foreign Capital Investment Act promulgated under Royal Decree No. M/4 dated 2 Safar 1399 H. (January 1, 1979). Under Article 2 of this Act, foreign capital can enjoy the concessions allowed in the Act only if it meets the following three conditions:

  • The foreign capital is for investment in economic development projects.
  • The foreign capital is accompanied by foreign technical expertise.
  • An industrial license has been obtained from the Ministry of Industry and Electricity, upon the recommendation of the Foreign Capital Investment Committee.

The Ministry of Industry and Electricity Resolution No. 11/G/O dated 17/7/1410 H., corresponding to 12 February 1990 (replacing Resolution No. 952 of 4 Zhul al Qa’dah, 1400 H.) considered the following five categories of development projects as qualifying for foreign investment:

a) Industrial Development projects.
b) Agricultural Development Projects.
c) Projects for the Development of Health Services.
d) Projects for the Provision of Services.
e) Projects for Undertaking Contracts.


However, Article Seven of the Resolution states the possibility that projects not mentioned in the list of development projects (detailed above) may be accepted on the proposal of the Foreign Capital Investment Committee.

Further, under this law, foreign investors can set up a project either exclusively on their own or in collaboration with Saudi partners (joint ventures). The rules of procedure for the implementation of the Law were issued by the Minister of Industry and Electricity Resolution No. 323 of 10th Jumada II, 1399 H., (1979).

The procedure for establishing industrial projects under Foreign Capital Investment Law requires that foreign investors planning to establish an industrial project in the Kingdom of Saudi Arabia should submit an application to the Evaluation and Licensing of Industrial Project Department at the Ministry of Industry and Electricity (see appendix I for address). This application should provide information about the proposed project’s product, production capacity, capital, location, etc. If the Department considers the project feasible, it will provide the applicant with a License Application form. The License Application form should be completed with all required data and documents. A copy of the initial partnership contract between the Saudi and the foreign investor must be attached to it. This is to prove that the foreign partner has the required experience in the manufacturing and marketing of the proposed products. The License Application form should be signed by the applicants or their authorized agents and submitted to the Foreign Capital investment Committee as follows:

 

A. Industrial Projects:

  1. The potential investor should indicate briefly the nature of the proposed project in terms of proposed products, output capacity, investment, etc. by writing to or visiting the Industrial Licensing Department of the Ministry of Industry and Electricity to inquire into the possibility of the project being considered for licensing.
  2. If there is a possibility that a license may be issued (depending on considerations such as the installed capacity of established industries, market situation, etc.), the potential investor will be provided with the necessary forms by the Industrial Licensing Department to submit an application.
  3. In the event that there is no possibility of the proposed project being considered for a license, due to lack of market, or for any other reason, a letter will be sent by the Industrial Licensing Department to the applicant informing him that the license application will not be considered and giving the reasons.
  4. If the project can be considered for a license, the foreign investor, and in the case of joint venture the foreign or local partner (as authorized by the other), or the legally authorized representative, should submit the license application to the Foreign Capital Investment Bureau, with the appropriate documents.

B. Transportation Projects:

  1. Land and Maritime transportation projects (as listed in Article Five of the Ministerial Resolution on Development Projects).
  2. Such projects require a license under the Foreign Capital Investment Law (FCIL), before the company is registered and incorporated under the Companies Law.
  3. The foreign investor, and in the case of joint ventures, the foreign or local partner (as authorized by the other ) or the legally authorized representative, should submit the license application to the Foreign Capital Investment Bureau, with the appropriate documents.

C. Projects for the provisions of services or undertaking contracts: 

  1. The types of projects for the provision of services or for undertaking contracts which involve foreign investment and for which licenses could be considered are indicated in Articles 5 and 6 of the Ministerial Resolution on Development Projects under FCIL.
  2. All such projects require a license before the company is registered and incorporated under the Companies Law for such activities.
  3. Companies which are already licensed under the FCIL and are registered and incorporated for certain services or contract work, and wish to undertake new or additional services or contract work require an amendment to the license previously issued.
  4. Foreign companies without a license under the FCIL, but which have obtained temporary registration from the Ministry of Commerce for a particular period to undertake a contract awarded by a Ministry or other Government Agency, require a license under the FCIL to establish themselves in the Kingdom for further contract work.
  5. In all such cases indicated above, the foreign investor, and in the case of joint venture the foreign or local partner (as authorized by the other) or the legally authorized representative, should submit the license applications to the Foreign Capital Investment Bureau, with the appropriate documents.

        If the application is approved, the applicant will receive the original license and a copy thereof will be sent to the Ministry of Commerce (Department of Commercial Registration) where further action for commercial registration of the company will be taken when the licensee submits all the required documents including the Articles of Association. 


For further details, please contact the Foreign Capital Investment Bureau, Ministry of Industry and Electricity (see appendix I for address).

 

 

 

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