Today as we look into the planned and existing economic zones in GCC, they will cover 100,000 hectares of land combined in 2040. Put into context, this is a size larger than the Kingdom of Bahrain. The wheels of economic diversification and transformation started rolling in 2016 in the Kingdom following the launch of Saudi Vision 2030. One of the objectives is to provide investor-friendly economic zones, enhance competitiveness, and support investments. The investment prospects resulting from Vision 2030 is $1.3 trillion in foreign investment within 10 years. To realize this ambitious target, the Kingdom set a new investment route in the form of special economic zones (SEZ). The new SEZ were announced on April 2023 and brought a raft of goodies to investors including:

• 5% corporate income task for up to 20 years
• 0% unlimited withholding tax for repatriation of profits from SEZ to foreign countries
• 0% Custom duties deferral for goods inside the SEZ (for Jazan – only on capital equipment and inputs)
• 0% VAT for all intra-SEZ goods exchanged within and between zones

The New SEZ in the Kingdom

5 new SEZs in Saudi Arabia are expected to drive the investment agenda.

King Abdullah Economic City (KAEC) is a flagship SEZ that covers 170 km2 near the Kingdom’s major shipping routes. Various industries including pharmaceuticals, MedTech, electronic light manufacturing, and logistics. KAEC is strategically placed enabling access to global markets and a gateway to international trade.

Jazan SEZ is also located along the Red Sea with proximity to mines and industrial facilities. Given its location near the mines, Jazan SEZ will have an impact on the construction industry.

The third SEZ is Ras Al Khair which targets the maritime industries in the Kingdom expected to reach USD14 billion. This SEZ is an opportunity to develop the maritime industry and access key global markets.

The fourth Industrial zone is Cloud Computing in King Abdulaziz for Science and Technology (KACST). This is a special SEZ in the sense that it does not have a physical location. Comparatively, we can say, it’s the virtual Silicon Valley that will support businesses through advanced technologies in the Kingdom. The cloud computing SEZ is expected to grow by $13 billion in investment across AI and data sectors.

The last SEZ Riyadh Integrated Special Logistics Zone (RISLZ) was established in 2022. It is located 8km from King Khalid International Airport. The uniqueness of RISLZ lies in its proximity to the international airport which allows businesses to seamlessly access global air routes.

Importance of SEZ

Well, having discussed the various SEZs in the pipeline and their location in the Kingdom, you should now wonder how they add value to the people.

The SEZ provide special incentives in a bid to attract investments into the Kingdom. For instance, goods imported into SEZ from outside Saudi Arabia are treated as outside the VAT scope. It implies an increased ease of doing business.

Additionally, there will be a zero-rated VAT applicable to all intra-SEZ goods to limit costs in exchange between and within SEZs.

In sum…

As people wait for regulations that will guide business operations within the SEZ, there are already hopes of reduced costs and ease of access to global markets that are making Saudi regain its rightful position as a giant in the GCC. To those in the RE sect, two of these zones are KAEC and Jazan which improve access to construction and building materials.