Financial and Economic Screening

FOREIGN INVESTMENT POLICY Saudi Arabias policy is to welcome foreign capital and invite it to participate in economic development projects in cooperation with Saudi business. The governments established policy is not to impose any restrictions on the movement of capital into and out of the Kingdom and always to respect private ownership. In addition, foreign investment that fulfills the requirements of the Foreign Capital Investment Code enjoys all privileges of national capital and is entitled to the same treatment, protection, and incentives accorded to national capital. The Code requires that foreign capital be invested in economic development projects (which, under the Code, do not include petroleum and mineral projects) and that it be accompanied by technical knowledge. Provided that the share of national capital is at least 25 percent, industrial or agricultural projects enjoy the following benefits:

An income tax holiday of up to 10 years from the commencement of commercial production. Ownership of land according to the regulations governing land ownership by non-Saudis. For industrial projects, the same privileges as those enjoyed by Saudi capital under the National Industries Protection and Encouragement Regulations. These include:

a. Exemption from customs duties on machinery, equipment, tools and spare parts imported for industrial products. b. Exemption from customs duties on primary raw materials, semi-finished goods, containers, etc., necessary for industrial projects (provided that similar items are not sufficiently available locally). c. Provision by the government of plots of land at a nominal rate for factories and residential quarters for workers. d. Low electricity and water rates. e. No restriction on repatriation of profits. f. Preferential treatment for local products in government procurement in addition to preferential treatment accorded to national products by Arab League and Saudi Arabian bilateral trade agreements.

Economical position of Saudi Arabia The government has begun establishing six "economic cities" in different regions of the country to promote foreign investment and plans to spend $373 billion between 2010 and 2014 on social development and infrastructure projects to advance Saudi Arabia's economic development. Some Major figures in Saudi Arabias Economy GDP (purchasing power parity) GDP - per capita GDP - composition by sector Labor force Labor force - by occupation Unemployment rate Public debt Inflation rate (consumer prices) Current account balance Imports Exports Central bank discount rate Minimum wage $622.5 billion (2010 est.) country comparison to the world: 23 $24,200 (2010 est.) country comparison to the world: 55 industry: 61.9% , services: 35.4% (2009 est.) 7.337 million, country comparison to the world: 62 industry: 21.4% , services: 71.9% (2005 est.) 10.8% (2010 est.) country comparison to the world: 119 16.7% of GDP (2010 est) country comparison to the world:114 5.7% (2010 est.) country comparison to the world: 156 $52.03 billion (2010 est.) country comparison to the world: 6 $99.17 billion (2010 est.) country comparison to the world: 32 $235.3 billion (2010 est.) country comparison to the world: 19 2.5% 1,500 Saudi riyals a month unofficially for citizen workers in the private sector, for non-citizens working in the private sector, there is no minimum wage and it can be as low as 300 Saudi Riyals per month

Impact of global financial crisis on Saudi Arabias economy Saudi Arabia is financially stable country and was not materially affected by the global financial crisis. In fact, while many economies around the globe, especially developed countries, were severely and negatively affected by the crisis in 2008 and 2009, the Saudi economy continued to show resilience and strong economic growth.

Economic developments in Saudi Arabia Viewing the history of Saudi Arabia many economical indicators shows constant growth in the economy for example; during the five year period 200408, the Saudi Arabian economy fared well by international standards, with an average real GDP growth rate of 4.4%, and an average government fiscal surplus of 19%. Saudi Arabia enjoyed a current account surplus of 28% of GDP and a record trade surplus of 45% of GDP. The plan (2005-2010) focused on economic diversification in addition to education and inclusion of women in society. The plan called for establishing new universities and new colleges with technical specializations. Privatization as well as emphases on a knowledge-based economy and tourism would help in the goal of economic diversification. The plan (2010-2014) aspires to eliminate poverty and increase development in infrastructure, medical services, educational capacity, and residential housing. The plan also aims to increase real GDP by 15% over 5 years and calls for substantial government investment in human resource development, in order to decrease Saudi unemployment from 9.6% to 5.5%

Financial position
The strength of the Kingdoms banking sector A major factor affecting the experience of international and Saudi banks was the sound performance of the Saudi banking sector, which continued to show strong profitability and growth. Saudi banks are well-capitalized by international standards, and showed an average Basel capital adequacy ratio of 15.9% in September 2009. Banks continued to be highly liquid, with liquid assets representing an average of 30% of total customer deposits in 2009. Domestic bank funding Notwithstanding the global financial crisis, domestic funding of Saudi banks continued to be strong, with total deposits growing by more than 10% (per annum) up to September 2009. There was significant growth in deposits from households and non-financial corporations. Funding from other domestic financial institutions increased from SAR 16 billion (at end-2007) to SAR 26 billion (60% growth) at end-2008, and to SAR 39 billion (50% growth) by September 2009, mainly due to the increase in the number of new financial institutions licensed as securities firms and insurance companies. This also indicates that the domestic financial institutions had decided to park their funds with Saudi banks which were less risky than international and regional counterparts.

Impact of the crisis on the local debt market The financial crisis did not have any impact on the local currency debt market due to the policy followed by the government prior to the crisis to redeem its outstanding debt and to investors preference to keep such debt on its books. The corporate bond market was still at an early stage of evolution and was therefore not affected in any way. References: http://www.saudia-online.com/foreign_investment.htm http://www.theodora.com/wfbcurrent/saudi_arabia/saudi_arabia_economy.html