According to Article 22 of the Basic Law of Saudi Arabia, economic and social development “shall be achieved in accordance with a methodical and equitable plan.” Article 76 read that the budget is to be issued, one month before the commencement of the fiscal year, by Royal Decree. If a new budget is not promulgated by this time, the old budget is to be extended until an updated budget is enacted. At the close of every fiscal year, basic accounts are to be submitted to the Prime Minister. Article 20 of the Basic Law states that taxes and fees “shall only be imposed on the basis of fairness and when the need arises.” Saudi citizens’ businesses pay no tax on income and are only liable for zakat, an Islamic tax of 2.5 percent on one’s net worth. Non-Saudi citizens and businesses are subject to tax on income up to a maximum that was reduced in January 2004 to 20 percent.
The Saudi finance ministry is improving the compilation of data at the consolidated general government level (including local and public sector authorities and universities).
The General Auditing Bureau was set up 1953 (1373 AH) to serve the Council of Ministers. It monitors the performance of the executive units of government in order to ensure that the state's revenues are correctly used and efficiently deployed in the implementation of the development programs for the general benefit of society.
Government procurements are governed by the Tenders Regulation and its Implementing Rules. The Regulation passed in June 2003 promises better publicity and greater transparency in the award of government contracts. Competitive bidding is required for procurements greater than SR 1 million ($267,000). Preferences given to Saudi and GCC nationals are exempted from Saudi Arabia’s new obligations resulting from joining the World Trade Organization in December 2005.
Established in 1952, the Saudi Arabian Monetary Agency (SAMA) serves as the kingdom’s central bank and supervises a system of ten private sector commercial banks within the Kingdom, some of which provide Islamic-oriented as well as conventional commercial services. The Al-Rajhi Banking and Investment Corporation is an exclusively Islamic bank in that it pays no commissions on deposits. Foreigners may own no more than 49 percent of any Saudi commercial bank. Late in 2003, King Fahd granted Deutsche Bank permission to enter Saudi Arabia, the first of several foreign-owned bank operating in the country. Joint ventures with Saudi banks may be up to 60 per cent foreign owned under SAMA’s new liberalized licensing guidelines.
SAMA’s Banking Control Commission prepared the Money Laundering Law, Royal Decree No. M/39 of August 23, 2003, in compliance with international standards on Anti-Money Laundering/Combating Financing of Terrorism. SAMA established an Anti Money Laundering Unit and also required all banks to set up their own specialized units. SAMA also completed a Financial Sector Assessment Program (FSAP) sponsored by the International Monetary Fund in 2004.
The Competition Law enacted by Royal Decree No. M/25 is one of several ongoing reforms designed to create a level-playing field between domestic and foreign companies and attract foreign direct investment. Royal Decree No. M1 dated 5/1/1421H (April 10, 2000) approved new Foreign Investment Regulations that liberalize the foreign investment laws in the Kingdom, and on the same day the Council of Ministers approved regulations for setting up the Saudi Arabian General Investment Authority (SAGIA), with responsibility for licensing all new foreign investment in Saudi Arabia. Foreign investment regulations allow loans from the Saudi Industrial Development Fund (SIDF) to be made available to wholly foreign-owned businesses, whereas the rules previously excluded businesses that were not at least 25 percent locally owned. In June 2001, for the first time in over two decades, eight foreign companies were allowed access to lucrative upstream operations: they were awarded three large concessions to explore and develop natural gas deposits. Partial privatization of the Saudi Telecommunications Company (STC) took place in 2002, and Saudi Arabian Airlines and the Saudi Basic Industries Corporation (Sabic), a petrochemicals group, in which the government holds a 70% stake, were candidates for further privatization.
The Saudi Arabian stock market is an over-the-counter market, in which the commercial banks buy and sell shares by means of an electronic trading system, established by the Saudi Arabian Monetary Agency in 1990. The Electronic Securities Information System (ESIS) operates a “floorless” stock exchange, concentrates all local securities into one single market, and supports data flows for investors. In addition, it makes data available to investors and in the securities market. The Capital Markets Law (Royal Decree No. M/30 of July 31, 2003) established a Capital Markets Authority for an integrated regulatory reference, separating the control and supervisory functions from market operations.
At the end of 2004 a total of 73 companies were listed on the Saudi stock exchange, with a market capitalization of over $300 billion. The turnover ratio for stocks was over 200% of capitalization of traded shares, a sharp increase over previous years.
Gulf Co-operation Council (GCC) nationals were permitted to trade in Saudi equities in 1994, but the market had traditionally been closed to non-Saudi investors. In 1999 the finance and national economy minister, Ibrahim Abdel-Aziz al-Asaf, allowed foreign investors to invest in Saudi stocks through open-end mutual funds, of which 122 were registered with SAMA by March 2000.
The Jeddah Economic Forum meets annually and functions an economic think tank for regional and global financial growth. It provides a platform for debate among local business representatives, government agencies, academics, ministries as well as International Politicians. The Forum has grown greatly, both in participation and its involvement in assessing and promoting business in Saudi Arabia and the region.
International Transparency Standards
Saudi Arabia joined the International Monetary Fund's General Data Dissemination System on March 4, 2008. It also participated in 2004 in the Financial Sector Assessment Program (FSAP) sponsored by the International Monetary Fund.
Saudi Arabia scores highest of any Arab country, 5 out of a possible 6, on the World Bank’s Credit Information Index. The index “measures the scope, access and quality of credit information available through public registries or private bureaus.”
Moody’s has rated the country.