2.1 Legislation on trade and investment

Saudi Arabia became the 149th member of the World Trade Organization (WTO) on December 11, 2005, committing that in areas such as the protection of intellectual property rights, the application of technical regulations and standards, as well as the protection of food safety and human, animal and plant life and health, it would fully implement the relevant WTO Agreements. To this end, the Saudi Arabian government has promulgated trade and investment related legislation over the past few years, including Import Licensing Guidelines & Procedures, Sanitary and Phytosanitary Measures, Foreign Investment Act, Law on Ownership of Real Estate by Non-Saudis, Saudi Arabian Standards Organization Technical Directives, Negative List excluded from Foreign Investment, Trade Information Law, Enhanced Money Laundering Regulations, Executive Rules of the Foreign Investment Act, Tax Law, Real Estate Law, Capital Markets Law and Anti-dumping Law. Regulations under preparation and review include Commercial Agency Regulations, Companies’ Law, Unfair Competition Law, Customs Valuation Guidelines, Labor and Workmen Law, Residence and Sponsorship Regulations, and Tourism Guidelines.

2.2 Trade administration

2.2.1 Tariff system

The tariff rate in Saudi Arabia averages 5 percent (ad valorem CIF price). Members of the Gulf Cooperation Council (GCC) are granted duty- free treatment when certificate of origin or accreditation certificates are provided.

2.2.2 Import and export administration

Saudi Arabia applies free trade policy to general products, placing no quantitative or price cont rols on imports. However, Saudi law prohibits importation of the following products: weapons, alcohol, narcotics, pork, pornographic materials, distillery equipment, and certain sculptures.

There are health and sanitation regulations for all imported foods. The Ministry of Commerce and Industry has issued a number of directives aimed at preventing outdated goods from entering the Kingdom and requiring point of origin labeling.

2.2.3 Foreign exchange administration

Saudi Arabia imposes no foreign excha nge restrictions on capital receipts or payments by residents or nonresidents, beyond a prohibition against transactions with Israel. In practice, Saudi Arabia pegs its currency, the Saudi Riyal, to the U.S. Dollar.

2.3 Investment administration

According to the Negative List excluded from Foreign Investment issued by Saudi Arabia in 2003, foreign investment is prohibited in three manufacturing sectors, including oil exploration, drilling and production; manufacturing of military equipment, devices and uniforms; and manufacturing of civilian explosives, as well as 16 service sectors, including catering to military sectors, security and detective services, insurance services, real estate investment in Makkah and Madina, real estate brokerage, printing and publishing, and telecommunications services. However, according to the Report of the Working Party on the Accession of the Kingdom of Saudi Arabia to the World Trade Organization, Saudi Arabia has committed to open sectors such as insurance, telecommunications services, wholesale and retail trade. For example, foreign insurance companies will be permitted to open and operate direct branches in Saudi Arabia, or to form a joint venture insurance company with local insurers, in which foreign participation is limited at 60 per cent. In the sector of basic telecommunications, foreign participation in a facilities-based joint venture is limited at 49 per cent, 51 per cent by the end of 2007, and 60 per cent by the end of 2008. For wholesale and retail trade, foreign participation is limited at 51 per cent, and 75 per cent after the end of 2008.

According to the Foreign Investment Act, solely foreign funded enterprises or joint ventures are allowed in Saudi Arabia. Except sectors outlined in the Negative List excluded from Foreign Investment, foreign investment is allowed in all other sectors. The minimum level of investment for agricultural projects is SR25 million (approximately RMB53.33 million), for industrial projects SR5 million (approximately RMB10.66 million), and for service projects SR2 million (approximately RMB 4.27 million). Foreign investors are not required to look for local partners and are allowed to own company assets. Solely foreign owned enterprises are entitled to apply loans from the Saudi Industrial Development Fund (SIDF).

2.4 Competent authorities

The Saudi Arabian Ministry of Commerce & Industry is responsible for foreign trade administration. The mandate of the ministry in the area of trade administration includes the making of trade laws and regulations, the formulation and implementation of trade policies, bilateral and multilateral consultations on economic and trade issues with other countries and international economic and trade organizations, making decisions on import ban, trade negotiations with foreign countries and international organizations, settlement of trade disputes and other existing issues, the administration over local business organizations such as the National Chamber of Commerce, and the instruction to and supervision over commercial activities in the country.

The Saudi Arabian General Investment Authority (SAGIA), reporting to the Supreme Economic Council (SEC), is responsible for investment administration. The Board of Directors established under SAGIA is made up of deputy ministers and private business representatives. The mandate of the Board includes preparing state policies designed to promote and enhance local and foreign investment and submitting them to the Council, proposing implementation plans and criteria to improve the investment climate in the Kingdom and submitting them to the Council, making decisions on foreign investment application, monitoring and evaluating the performance of local and foreign investment and drafting a periodical report in this regard, and proposing the Negative List excluded from Foreign Investment and submitting it to the Council.