Time for a Change

Business Reform

New rules and legislation across the board aimed at streamlining business in the Kingdom have resulted in an impressive jump in the country's Doing Business ranking.

Saudi Arabia has, in recent years, doubled down on its business reform efforts, in line with the Kingdom’s overall dive to diversifying its economy away from oil, increasing entrepreneurial activity, and building a knowledge-based economy. Among the growing number of indicators of the country’s improvement to this end have been its ranking on the World Bank’s Doing Business Report, which, after years of steady growth, climbed significantly in the 2020 edition. Saudi Arabia initiated a record number of reforms leading up to the 2020 report, ultimately earning it a spot among the top 10 global business climate improvers that year. In 2020, the Kingdom made reforms in eight of the report’s 10 areas, indicating the country’s most dedicated reform agenda since Doing Business study began in 2002. Saudi Arabia ranked 62nd among 180 countries in 2020—moving up an impressive 30 spaces—earning it an overall score of 71.6 out of 100.

The country made its greatest improvement in the area of starting a business, ranking 38th and earning a score of 71.6. According to the report, it now costs an entrepreneur only 5.4% of their income to start a business—a figure considerably lower than the MENA average of 16.7%. This is an especially significant improvement: the country’s gradual reductions in minimum capital requirements over the years have reduced costs to zero from more than 1,000% of income per capita in 2004. Much of Saudi Arabia’s jump in the 2020 ranking was due to its establishment of Meras, a one-stop shop within the Ministry of Commerce allowing entrepreneurs to obtain, notarize, and approve a number of licenses and forms related to opening a business, as well as allowing them to pay fees online rather than in person. Additionally, the country eliminated requirements for certain documents needed for married women, in line with its overall efforts to increase female participation in the workforce.
The Kingdom has also secured top rankings in the area of protecting minority investors. The 2020 report saw Saudi Arabia move to the number three slot, equal to that of Singapore and New Zealand, the top two easiest places to do business in the world. Among advances cited in this area were increased access to evidence at trials, increasing shareholder rights in major decisions, requiring greater corporate transparency, and clarifying rules on liability of directors.

The Kingdom has also earned impressive scores in registering property, at 19th, and in dealing with construction permits, at 28th. The process of registering land was simplified by the country’s creation of an online platform to check for ownership and encumbrances as well as streamlining overall registration procedures. Land dispute resolution mechanisms were also improved, and land records and the fee schedule were digitized and published. Additionally, registering property transfers is free, unlike all other countries in the region, and it takes only a day and a half, with only Georgia and Qatar offering faster turnaround times. In regard to obtaining construction permits, companies now need only 100 days to get all necessary authorizations and permits in order to build a warehouse thanks to a new online platform. The streamlined process has lowered the cost of procedures to just 1.9% of the warehouse value, less than half of the regional average of 4.4%.

Further improvements made by the Kingdom on the report were in the area of getting electricity. Business can now get a permanent energy connection in the country in less than half the time they could one year ago. Getting connected in the country now takes only two steps, placing Saudi Arabia in a group of only six countries worldwide where connection can be made in just two steps. The reliability of supply has also been improved, largely due to a new compensation scheme motivating utility providers to enhance continuity of service. The Kingdom also increased its score in the area of getting credit through the introduction of two new laws regarding transactions and insolvency. The new pieces of legislation give creditors absolute priority inside a bankruptcy, allow for out of court enforcement of security interests, and all require all kinds of obligations and debts to be secured among all parties.

Trading across borders has also been made easier thanks to new regulations. The country made improvements to its electronic trade window, creating an online platform to certify imported goods and allowing for risk-based inspections. Improvements to Jeddah Port, one of the largest ports in the region, such as increasing hours of operation at customs, also helped boost Saudi Arabia’s ranking. Resolving insolvency was additionally made easier in the country, helping it increase its ranking. A newly introduced rule allows for debtors to initiate their firm’s restructuring, helping improve businesses’ continuation of services as well as their treatment of contracts.