Pursuant to Decision No. 377 dated 13 June 2016 (the "CM Decision"), the Saudi Arabian Council of Ministers approved criteria for the licensing of foreign companies desiring to engage in retail and wholesale trading in Saudi Arabia, through local corporate entities that they fully own. Previously, foreign investment in the trading sector was limited to 75 percent.

According to the CM Decision:

  1. Licensing applicants must have a presence in at least three different regional or international markets.
  2. The cash capital of the entity to be established locally must not be lesser than SAR 30 million.
  3. Licensing applicants must commit to invest at least SAR 200 million within five years from having obtained a foreign investment license from the Saudi Arabian General Investment Authority ("SAGIA"). The cash capital may be counted within such amount.
  4. Licensing applicants must commit to realize the Saudization proportions imposed by the Ministry of Labor and Social Development and must formulate a durable plan to place Saudi nationals in managerial positons within the first five years.
  5. Licensing applicants must commit to train at least 30 percent of their Saudi Arabian personnel each year.
  6. Licensing applicants must commit to fulfil at least one of the following objectives: (a) to manufacture locally at least 30 percent of all locally-distributed products, (b) to direct at least five percent of all sales revenues towards local research and development programs, and/or (c) to establish a local logistical and distribution center and to offer after-sale services. An exemption may be obtained in respect of this requirement for licensing applicants that commit to invest more than SAR 300 million within five years from having obtained a foreign investment license.

The CM Decision authorizes SAGIA's Management Board to grant exemptions, provided that exemptions are granted pursuant to clear, general, and unbiased criteria.

The CM Decision also requires SAGIA to assess the effectiveness of the above requirements, within the coming five years, and to propose any recommendations.

It is worthwhile to note that Dow Chemical Company became the first foreign investor to receive a trading license allowing 100 percent ownership.

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