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Insights   >   Unveiling Saudi Arabia's Economic Powerhouses: A Deep Dive into Special Economic Zones

Unveiling Saudi Arabia's Economic Powerhouses: A Deep Dive into Special Economic Zones

Author: Mahmoud Itani, Sarah Alsubaihi
May 3, 2024
Employers • KSA

In April 2023, Saudi Arabia marked an epic stride in its economic evolution with the launch of four specialised economic zones (SEZs). These zones, introduced under the visionary leadership of His Royal Highness Prince Mohammed bin Salman, Crown Prince and Prime Minister, represent a pivotal milestone in the ambitious Vision 2030 agenda. Administered by the Economic Cities and Special Zones Authority (ECZA), these zones are strategically dispersed across the Kingdom, each offering a unique set of incentives and advantages to attract local and international investment.

Economic cities and special zones are distinct entities in the territory of economic development. Economic cities, such as King Abdullah Economic City in Saudi Arabia, are planned urban areas designed to foster growth and innovation across various industries. On the other hand, special zones, like the Shenzhen Special Economic Zone in China, are specific geographical areas subject to unique economic policies and incentives to encourage trade and investment. While economic cities focus on creating diverse economic opportunities within planned urban spaces, special zones concentrate on offering favourable conditions for business activities, often near ports or international borders. Both aim to stimulate economic progress but through different approaches tailored to their respective contexts.

Positioned as catalysts for economic diversification and growth, these SEZs hold the key to unlocking boundless opportunities for businesses seeking to establish a presence in Saudi Arabia. Let's delve deeper into the advantages and opportunities presented by these specialised zones, and their significance in shaping the Kingdom's economic landscape.

Tax Advantages:

One of the most fascinating features of the SEZs is the favourable tax regime they offer. While the standard corporate tax rate in Saudi Arabia stands at 20%, businesses operating within these zones can benefit from a reduced rate of just 5% for up to 20 years. Additionally, they enjoy exemptions on capital transfers, further enhancing the attractiveness of these zones for investors.

Hiring Flexibility:

In a bid to attract top talent and foster a conducive business environment, the SEZs offer flexibility in hiring practices. While Saudization policies typically require a certain percentage of Saudi nationals to be employed, these zones are exploring more relaxed quota systems, providing foreign-owned businesses with greater hiring autonomy.

Targeted Sector Growth:

Each SEZ is strategically aligned with specific industries, allowing for targeted sector growth and specialisation. From logistics and pharmaceuticals to MedTech and cloud computing, these zones serve as innovation hubs, nurturing industries at the forefront of technological advancement.

Now, let's examine each of the four SEZs and the unique opportunities they present.

1. King Abdullah Economic City (KAEC) - West:

Positioned along the Red Sea, KAEC offers unparalleled access to global markets, particularly in Africa and Europe. With a focus on sectors such as automobile supply chain, consumer goods, and ICT, KAEC serves as a vibrant hub for innovation and commerce.

2. Ras Al Khair Special Economic Zone - Northeast:

Located in the Eastern Province, Ras Al Khair leverages its strategic maritime location to drive growth in industries like shipbuilding and rig platforms. As Saudi Arabia aims to develop a robust maritime industry, Ras Al Khair emerges as a key player in this endeavour.

3. Jazan Special Economic Zone -:

With its ideal location on the Red Sea and proximity to key mining assets, Jazan SEZ is poised to become a hub for food processing, metal conversion, and logistics. By harnessing the Kingdom's mining industry, Jazan aims to carve a niche in global markets.

4. Cloud Computing in King Abdulaziz City for Science and Technology (KACST) - Central (Riyadh):

Focused on the burgeoning cloud computing sector, this SEZ, headquartered in Riyadh, aims to attract investments in data and AI-driven technologies. With projected investments of £13 billion by 2030, KACST represents a significant opportunity for businesses in the digital space.

In conclusion, Saudi Arabia's Special Economic Zones represent a gateway to unparalleled opportunities for businesses looking to expand their footprint in the Kingdom. With their strategic advantages, targeted sector growth initiatives, and investor-friendly policies, these zones are poised to drive economic diversification and propel Saudi Arabia towards a prosperous future. As the Kingdom continues on its journey of transformation, the SEZs stand as beacons of progress, offering a glimpse into the limitless potential of the Saudi economy.

Ready to tap into the boundless opportunities of Saudi Arabia's Special Economic Zones?

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