Saudi Arabia aims high with SEZs

For special economic zones to thrive and not cannibalize a country's base economy, they need to have a clear purpose in filling gaps and have guardrails that complement national regulatory policies, said speakers at a forum in Saudi Arabia on Monday.

The speakers were part of a panel at the Saudi Special Economic Zones Investment Forum, which was held in Riyadh, just a month after Saudi Arabia introduced four new SEZs that will offer incentives for companies seeking to expand their business in the country. The panel also discussed the SEZs' ecosystem.

SEZs are areas within a country that usually have different regulations. The event also included a ceremony awarding the four SEZs their licenses, namely the King Abdullah Economic City SEZ, Ras Al-Khair SEZ, Jazan SEZ and the Cloud Computing SEZ. The SEZs have already attracted $12.6 billion from investors in the maritime, mining, manufacturing, logistics and tech sectors. An additional $31 billion in investments are in the works.

Saudi Finance Minister Mohammed Al-Jadaan said SEZs need to have a clear purpose and "not just create a special zone for creating a special zone", and that they need to fill a gap in the country's economy. He also said the SEZs need to be designed as a policy to give investors as much freedom as possible as they are largely export-oriented.

"We wanted to make sure that investors feel the freedom to select the talents that they need and not be constrained by the base economy regulations. Third, they need to complement and not compete against or cannibalize against the base economy," Al-Jadaan said.

He noted that "predictability" is key as incentives would be one of the things investors would be looking at, so the authorities have made it clear that incentives will be fixed for a certain period of time.

Saudi Human Resources and Social Development Minister Ahmed Al-Rajhi announced that one of the incentives is the exemption from Saudization requirements. Saudization is a nationalization scheme, which requires companies and enterprises to fill their workforce with Saudi nationals based on a quota.

"The SEZs that have been announced today are sector-specific and their aim is to attract global firms and certain industries," Al-Rajhi said.

Nabil Khojah, secretary-general of the Economic Cities and Special Zones Authority, said it has created specific tools to ensure the base economy is minimally impacted to protect it. One of those is the eligibility criteria because they "wanted to avoid migration from the base economy into the zones".