In issuing a “negative list” on February 11th, Saudi Arabia is setting its limits on full foreign ownership in key sectors in an effort not to open the door too widely to outside investment, sources said on February 13th.
In its list, the kingdom’s Supreme Economic Council barred foreigners from fully owning projects in areas including oil exploration, drilling and production, telecommunications, insurance and real estate in Mecca and Medina, education, the distribution of electricity, defense-related industries and some health services.
The announcement of the list was seen as an effort by Riyadh to move further on opening up its economy to outside investment and alleviating concerns by foreign investors who have been frustrated at being restricted to joint venture projects with Saudi nationals.
The list is said to be only partial, as the Saudi government wanted to weigh the response both internally and externally.
The list is part of a new investment law that was announced in April of 2000 allowing full foreign ownership of Saudi projects.
The General Investment Authority (GIA), which was established to provide the mechanism for the investment law, had reportedly faced demands from a number of ministries to add more areas that would ban full foreign ownership.
The law relaxes rules for sponsoring foreign employees, permits foreign ownership of project-related property and lowers taxes on companies’ profits.
The investment law is separate from the negotiations being conducted by the Saudi government and international oil firms for foreign participation in the kingdom’s upstream natural gas and infrastructure-related sectors.
The kingdom in early December grouped 12 Western oil firms into three potential consortia for three key gas projects.
On January 10th, it was announced that Saudi Arabia could establish special foreign investment decrees covering those three core projects, giving the international companies more leverage in dealing with the Saudi ministerial negotiating team.
© 2001 Mena Report (www.menareport.com )