Saudi Arabia General Investment Authority, the kingdom’s state-backed inward investment agency, streamlined the business licensing process to encourage investment – reducing the time to secure a licence from 53 working days to just four.
"Sagia aims to attract more investments through facilitating and improving procedures," said Ibrahim Al Suwayel, Saudi Arabia's deputy governor for investors' services and consultancy. The streamlined procedures apply to issuing, amending and renewing investment licences for businesses operating in the country.
Previously, eight documents were required to issue any business licence. Now a company can obtain a licence by producing only a financial statement and certified commercial registration. A company can also renew its licence through a self-service feature on Sagia's website.
The kingdom has been overhauling its economy as part of the National Transformation Programme and Vision 2030 initiative which aims to improve the business environment and encourage more foreign companies to set up in the country. The non-oil sector accounts for about 40 per cent of GDP at present.
Saudi Arabia aims to increase foreign direct investment to around 5.7 per cent of GDP by 2030 from 3.8 per cent, with about 65 per cent of that coming from the private sector, according to the Vision 2030 document published in 2016.
Sagia said it has issued 17 licences over a two-week period since the new system became operational, and analysts welcomed the move.
"It is good news," said James Reeve, chief economist at Samba Financial Group, one of Saudi Arabia's largest lenders. "The success of the National Transformation plan is at least partially dependent on attracting sufficient foreign direct investment – not so much for the money, though this is of course helpful – but rather the technology transfer, in terms of transfer of skills, technology, marketing techniques and so on from foreign companies to Saudi ones.
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“Foreign investors can also help to enliven the non-oil export sector by providing access to new markets,” Mr Reeve said.
However, he warned “there are other issues that need to be addressed – not least access to visas [for foreign employees].”
As Opec’s biggest oil producer, Saudi Arabia still relies heavily on the sale of hydrocarbons for revenues, and with crude oil prices having slumped from their mid-2014 peak of $115 per barrel to lows of below $30 per barrel in 2016, it felt under pressure to diversify.
In recent weeks, oil prices have rallied to more than $60 per barrel and appear to be still rising. The Saudi central bank’s foreign reserves rose in December for a third consecutive month, a sign that higher oil prices may be easing pressure on the government’s finances.
However, analysts say they are unlikely to ever reach their 2014 peak again. The kingdom is striving for fiscal sustainability through energy reform, cutting subsidies, privatising state-controlled assets, boosting FDI and creating jobs in new industries.
Saudi Arabia’s current account will remain "in surplus throughout the next decade, although a return to double-digit surpluses is off the cards as oil prices remain low by historical standards and as import demand picks up in light of economic diversification," BMI Research said in a report on Monday. "Recovering oil exports will be used to resume foreign reserves accumulation, but the government will also increasingly seek to reinvest them abroad, in a bid to diversify revenues."
The state sovereign wealth fund, Public Investment Fund, or PIF, has been actively seeking investment opportunities in the past two years, teaming up with global and regional players to find alternative revenue lines.
Among its recent investments are a $3.5 billion stake in ride-hailing app Uber in 2016, and its move to become an investor, with the UAE's sovereign wealth fund Mubadala, in Japanese SoftBank Group's $100bn technology-focused Vision Fund.
