Saudi Arabia

The Kingdom of Saudi Arabia (KSA) is the largest state in West Asia that functions as a major global energy superpower and an essential geopolitical stabilizer in the Middle East region. As a state governed by an absolute monarchy led by King Salman bin Abdulaziz Al Saud and Crown Prince Mohammed bin Salman, KSA is facing a state-driven socio-economic revolution based on the vision of Saudi Vision 2030. As a state development strategy implemented through the efforts of the Public Investment Fund (PIF), the vision seeks to drastically diversify the economy, which is based on the traditional exploitation of crude oil and revenue from Saudi Aramco. In particular, huge investments are made in unprecedented megaprojects such as NEOM, as well as in logistics, tourism, and IT industries. While there are great opportunities for foreign direct investment, KSA creates a complicated business environment characterized by regional geopolitics, changing regulations, and state centrality.

With regard to the risk profile of the Kingdom, one can say that it features high risks associated with geopolitical and security-related issues. As the country is a strong power in the region, there are regular asymmetric risks posed by Iran-aligned Houthis, who operate in neighboring Yemen. This poses immediate risks to operational security, as seen in cases of attacks via drones and missiles on key energy facilities and the Kingdom’s civilian infrastructure, including Riyadh’s King Khalid International Airport. However, financially, one cannot identify any expropriation risks in the country. Legally, international organizations will have to deal with a complex legislative environment featuring royal decrees and Islamic Sharia law.

With regard to regulatory and compliance issues, foreign corporations need to contend with the stringent state policies that have been put in place to ensure that wealth and human talent are localized. The most critical of such policies is the Nitaqat policy, which entails that all corporations need to have a certain quota of locals in their labor force. Further, under the government policy of RHQ, it is imperative for foreign corporations to have their Middle Eastern headquarters in the Kingdom if they want to secure lucrative government contracts.

As far as sanctions and financial crimes go, the sovereign nation of Saudi Arabia does not have any comprehensive global trade embargoes and sanctions imposed on it by organizations such as the UN, the USA OFAC, or the European Union. That being said, there are selective sanctions and freezing of assets against specific individuals and companies in connection with regional terrorism or human rights violations. Being a full member of the FATF, Saudi Arabia has strong legislation in place to fight money laundering and financing of terrorism. Still, multinational companies need to undertake stringent KYC and EDD procedures due to UBO complexity.

The government structure in the Kingdom is highly centralized; in fact, all legislative, executive, and judicial powers lie with the King and Crown Prince. The consultative Shura Council formulates and proposes legislation, but does not have any binding authority itself. The kingdom has in the past few years actively sought to ensure that accountability becomes institutionalized through the Oversight and Anti-Corruption Authority (Nazaha), and has rigorously dealt with corruption in the public and private sector alike. Although the crackdown by Nazaha has ensured that all business dealings become clean, sovereign-level decision-making and the rulers' finances continue to be shrouded in secrecy.