The Kingdom seeks to become an international investment powerhouse by stimulating the Saudi economy, diversifying sources of income, and supporting the investment and business environment in the Kingdom (1). Special Economic Zones (SEZs) are considered one of the Kingdom’s tools for diversifying its economy through the establishment of five SEZs, which contribute to the growth of the non-oil sector and the increase of GDP by attracting quality investments, transferring technology, and developing strategic sectors—all in line with the objectives of Saudi Vision 2030.
First: Definition of Special Economic Zones
Four economic zones were established, each targeting specific industries or services according to the nature of the zone’s location and the infrastructure available to it (2), and they are described as follows:
1- King Abdullah Economic City Special Economic Zone
Located in Makkah Province, less than 90 minutes from King Abdulaziz International Airport and the city of Jeddah, the zone covers an area of 60 km². It is strategically situated on the Red Sea, where 13% of global trade passes. The zone targets investments in several key sectors, including automotive supply chains and assembly, consumer goods, light electronics industries, pharmaceuticals, medical technologies, and logistics services (3).
2- Ras Al-Khair Special Economic Zone
Located in the Eastern Province on the Arabian Gulf coast, covering an area of 20 km² near Ras Al-Khair Port, the newest industrial port in the Kingdom. The zone specializes in attracting investments in shipbuilding and offshore rig platforms, as well as their maintenance, repair and operations. It hosts state-of-the-art shipyards and maritime clusters to provide integrated marine manufacturing services (4).
3- Jazan Special Economic Zone
This zone was established in the Jazan Region in the southwest of the Kingdom, in a strategic location on the Red Sea, near major mines, which provides an advantage of access to the Kingdom’s chemical, mineral, and agricultural industries. The zone targets investments in several sectors, including metal processing, food processing, and logistics services (5).
4- Cloud Computing and Information Technology Special Economic Zone
This zone is located in the Innovation Tower at King Abdulaziz City for Science and Technology (KACST) in Riyadh. However, it is not tied to a specific geographical location, representing the Kingdom’s own “Silicon Valley.” The zone aims to attract investments worth USD 20 billion in the data and artificial intelligence sectors by 2030 (6).
Second: Incentives and Facilitations Granted to Investors in the Special Economic Zones
1- Tax and Financial Incentives:
Investors enjoy several tax incentives, including reductions in corporate income tax, exemptions from withholding tax, and exemptions from value-added tax (depending on the sector or business activity). Investors also benefit from deferred customs duties on goods entering the Special Economic Zones and exemptions from labor fees for employees and their dependents (7).
Furthermore, investors are granted a reduced corporate income tax rate of 5% for 20 years, and a 0% (full exemption) permanent withholding tax on repatriated profits from Special Economic Zones to foreign countries, along with a full exemption from VAT on all goods traded within the Special Economic Zone or between SEZs (8).
2- Services Provided to Investors
International best practices are applied regarding company establishment applications and obtaining approvals and licenses for investors through a unified services platform. This platform ensures that investors can establish their companies and start their projects through smooth and clear procedures. These procedures begin with completing and signing allocation letters, certifying documents by the relevant government entities, choosing up to five trade names, then completing applications, paying fees, submitting licensing and registration forms, and confirming land allocation. Finally, the company’s Articles of Association are completed, followed by receiving licenses and registration certificates (9).
In addition, one-stop service centers have been established in the cities and special economic zones under the supervision and management of the Saudi Authority for Industrial Cities and Special Economic Zones. These centers include both governmental and non-governmental service entities, providing all types of services to developers, operators, investors, workers, and residents, according to their needs in the cities and Special Economic Zones. Article 10 of the Regulation of the Authority for Industrial Cities and Special Economic Zones stipulates that:
“…those entities must delegate their representatives with the powers necessary to ensure the speedy provision of services” (10).
3- Security Advantages
The highest standards of industrial and public security are provided in the SEZs. Article (17) of the Regulation of the Authority for Industrial Cities and Special Economic Zones states that:
“The Authority – in agreement with the Ministry of Interior – shall establish a security administration within the cities and Special Economic Zones under its supervision, operating 24/7 in coordination and integration with security agencies. The security administration shall develop traffic, monitoring, and mobility plans, including firefighting, rescue, and other emergency operations in the economic cities, to achieve comprehensive security. The security administration shall be provided with all necessary means and mechanisms to perform its tasks” (11).
4- Legal and Legislative Protection
Intellectual property rights protection systems within the cities and Special Economic Zones are considered one of the key factors in attracting investments. The Authority is responsible for enforcing these systems and is entitled, for this purpose, to conclude the necessary agreements with relevant parties to ensure the protection of intellectual property rights and innovations within Special Economic Zones, in accordance with applicable laws and international agreements (12).
Moreover, flexible regulatory provisions are applied regarding the recruitment of foreign labor and talents from non-Saudis during the first five years (13).
Third: Definition of the Authority for Economic Cities and Special Economic Zones
The Authority for Economic Cities and Special Economic Zones is responsible for establishing the regulatory framework of the Special Economic Zones to facilitate the work of entities concerned with the establishment and operation of these zones (14). The Authority enjoys legal personality, as well as financial and administrative independence, and its headquarters is located in King Abdullah Economic City in Rabigh Province (15).
The Authority undertakes full administrative and financial supervision over the economic cities and Special Economic Zones in order to achieve their objectives of localizing national capital, attracting foreign investment, and fulfilling the objectives of the Kingdom’s development plans. In particular, it is tasked with the following:
- Concluding agreements and contracts, developing plans and programs, and conducting the necessary studies to develop the economic cities, support them, monitor their growth, and safeguard their achievements.
- Reviewing and approving the master plans of the economic cities, ensuring their proper implementation, and approving any amendments proposed by the developer after coordination with the relevant entity.
- Establishing regulations that define the best global specifications and standards for all infrastructure works in the economic cities, and setting requirements for the construction of buildings, roads, ports, industrial, commercial, and residential areas, as well as the provision of public services—while ensuring compliance with security, safety, environmental and public health requirements.
- Establishing the necessary regulations for the management, operation and safety of the industrial zones within the economic cities.
- Issuing licenses for all commercial, industrial, service, professional, educational, training, and healthcare activities, in accordance with regulations and standards set by the Board, including the method of supervising and monitoring these activities.
- Determining the fees for licenses and services provided within the economic cities and Special Economic Zones.
- Granting usufruct rights within the economic cities and Special Economic Zones under its supervision.
- Establishing companies or entering into partnerships, in accordance with applicable legal procedures, to fulfill the Authority’s mandated tasks and responsibilities.
- Monitoring compliance with design, construction, operation, and maintenance standards in the economic cities and Special Economic Zones.
- Establishing the regulations and procedures governing the work and responsibilities of the Chief Executive Officer of the economic city and the Chief Executive Officer of Special Economic Zones.
- Supervising and monitoring developers, investors, operators, contractors, workers, residents, and visitors in the economic cities and Special Economic Zones under its jurisdiction.
- Studying the need to establish new economic cities and Special Economic Zones.
- Receiving and reviewing applications to establish Special Economic Zones.
- Conducting comparative studies and research on exemptions and financial, customs, and tax incentives, among others.
- Coordinating with the relevant entity in charge of a given Special Economic Zones in all matters related to that zone.
- Following up on the implementation of exemptions, financial, customs and tax incentives, and monitoring the application of the regulations, rules, controls, and arrangements specific to each Special Economic Zones.
- Monitoring compliance with licensing regulations for all commercial, industrial, service, professional, educational, training, and healthcare activities.
- Concluding agreements with entities related to Special Economic Zones or others, granting them delegation to perform certain tasks of the Authority.
- Carrying out any other mission consistent with the nature of its work or the purpose of its establishment (16) (17).
What is the strategic purpose behind establishing Special Economic Zones in Saudi Arabia?
The strategic purpose behind establishing Special Economic Zones (SEZs) in Saudi Arabia is to support the overarching goals of Saudi Vision 2030 by serving as a primary tool for diversifying the Kingdom’s economy. These zones are designed to stimulate the economy, support the business environment, and help the Kingdom become an international investment powerhouse.
According to the sources, the specific objectives driving the creation of these SEZs include:
- Growth of the Non-Oil Sector: A major goal is to reduce economic dependence on oil by increasing the non-oil sector’s contribution to the national GDP.
- Attracting Quality Investment: The zones aim to attract foreign investment and quality projects while also localizing national capital.
- Technological Advancement: SEZs are used to facilitate the transfer of technology and the development of strategic industrial and service sectors.
- Sector-Specific Targets: Each zone has strategic targets tailored to its location; for instance, the Cloud Computing SEZ aims to attract USD 20 billion in data and AI investments by 2030.
- Fulfilling Development Plans: The Authority oversees these zones to ensure they fulfill the broader objectives of the Kingdom’s national development plans
What are the four primary Special Economic Zones and their focus areas?
The four primary Special Economic Zones in Saudi Arabia, each targeting specific industries based on their location and infrastructure, are as follows:
- King Abdullah Economic City Special Economic Zone: Located in Makkah Province on the Red Sea, this zone covers 60 km². It focuses on automotive supply chains and assembly, consumer goods, light electronics industries, pharmaceuticals, medical technologies, and logistics services.
- Ras Al-Khair Special Economic Zone: Situated in the Eastern Province on the Arabian Gulf coast near Ras Al-Khair Port, it covers 20 km². This zone specializes in shipbuilding, offshore rig platforms, and their maintenance, repair, and operations, providing integrated marine manufacturing services.
- Jazan Special Economic Zone: Located in the Jazan Region in the southwest of the Kingdom on the Red Sea, it is positioned near major mines. Its primary focus areas include metal processing, food processing, and logistics services.
- Cloud Computing and Information Technology Special Economic Zone: Located at the Innovation Tower in Riyadh, this zone acts as the Kingdom’s “Silicon Valley” and is not tied to a single geographical location. It aims to attract significant investment specifically in the data and artificial intelligence sectors
Overview of Investment in Special Economic Zones
Saudi Arabia is establishing Special Economic Zones (SEZs) to diversify its national economy and attract global investment in alignment with Vision 2030. These zones, including sites in Makkah, the Eastern Province, Jazan, and a virtual hub in Riyadh, target specific sectors such as maritime services, cloud computing, and advanced manufacturing. Investors are incentivized through significant tax reductions, exemptions from customs duties, and streamlined administrative procedures via a unified service platform. The Economic Cities and Special Economic Zones Authority provides the regulatory framework, ensuring robust legal protection for intellectual property and high standards for industrial security. This strategic initiative aims to transform the Kingdom into a global investment powerhouse by fostering innovation and increasing the non-oil gross domestic product.
Sources:
(1) Executive Summary of the Updated Investment Law for the Year 1446 AH / 2024 AD, published on the official website of the Saudi Ministry of Investment.
(2) Promising Opportunities to Develop and Expand Business Operations and Innovate Technologies, a Growing Network of Special Economic Zones in the Kingdom of Saudi Arabia, ECZA Website <Saudi Special Economic Zones Launch Event>.
(3) Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website, p. 39 <ECZA Brochure ARABIC.pdf>.
(4) Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website, p. 49 <ECZA Brochure ARABIC.pdf>.
(5) Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website, p. 55 <ECZA Brochure ARABIC.pdf>.
(6) Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website, p. 63 <ECZA Brochure ARABIC.pdf>.
(7) Special Economic Zones, Saudi Vision 2030 Website <Special Economic Zones>.
(8) Saudi Arabia Launches Four Special Economic Zones, Report published by UNCTAD on 13 April 2022 \<Saudi Arabia – Launches four special economic zones (SEZ) | Investment Policy Monitor | UNCTAD Investment Policy Hub>, and Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website <ECZA Brochure ARABIC.pdf>.
(9) Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website, p. 29 <ECZA Brochure ARABIC.pdf>.
(10) Economic Incentives, a Growing Network of Special Economic Zones in the Kingdom of Saudi Arabia, ECZA Website <Saudi Special Economic Zones Launch Event>.
(11) Article (10) of the Regulation of the Economic Cities and Special Economic Zones Authority, issued under Royal Decree No. (A/19) dated 10/3/1431 AH, and amended by Royal Decree No. (A/240) dated 1/4/1441 AH.
(12) Article (17) of the Regulation of the Economic Cities and Special Economic Zones Authority, amended by Royal Decree No. (A/240) dated 1/4/1441 AH.
(13) Kingdom of Saudi Arabia – Investment in Special Economic Zones, Report issued by the Economic Cities and Special Economic Zones Authority, published on its official website <ECZA Brochure ARABIC.pdf>.
(14) Article (23) of the Regulation of the Economic Cities and Special Economic Zones Authority, amended by Royal Decree No. (A/240) dated 1/4/1441 AH.
(15) About the Authority, ECZA Website \<About Us | ECZA>.
(16) Article (2) of the Regulation of the Economic Cities and Special Economic Zones Authority, amended by Royal Decree No. (A/240) dated 1/4/1441 AH.
(17) Article (3) of the Regulation of the Economic Cities and Special Economic Zones Authority, amended by Royal Decree No. (A/240) dated 1/4/1441 AH.
