Investment laws in Saudi Arabia : restriction and opportunities

The Kingdom of Saudi Arabia follows the holy Qur’an as its Constitution, and virtually every sphere of human activity is governed by the Shariah. Owing to the particular nature of the tenets of Shariah, several forms of business activity are held to be illegal and forbidden, including anything that pertains to gambling, pornography and alcohol. Moreover, the Shariah has its own code with regard to loans and investments, and the charging or paying of interest are both prohibited. Foreign direct investment (FDI) is almost universally regarded as significant for the growth of an economy. Nations vie with one another to attract FDI from multinational corporations. Numerous studies have suggested a link between FDI and the growth rate of the GDP or gross domestic product of a nation. Globalisation has caused a marked degree of homogeneity in the world economy and the Kingdom of Saudi Arabia offers various business opportunities to foreign investors. However, the intricacies of the workings of the Shariah need to be clearly understood by overseas investors. In this thesis, an attempt is made to study the investment climate of the KSA, and to explore the various key factors of the Shariah, the desirability of FDI for development, the forces of globalisation, and the mechanisms by which the KSA can uphold its laws as well as profit from an increasing infusion of funds by overseas investors. The research yields several interesting insights into various aspects of the KSA investment climate, and concludes with a series of recommendations that are designed to reconcile the apparently conflicting interests and pressures