Doing Business in Saudi Arabia - International Franchise Association

Foreign-Exchange Controls Return to top
Saudi Arabia imposes no foreign exchange restrictions on capital receipts or payments by
residents or nonresidents, beyond a prohibition against transactions with Israel. Although
officially linked to the IMF’s Special Drawing Rights, Saudi Arabia in practice pegs its currency,
the Saudi Riyal (SAR), to the U.S. Dollar.
Saudi Arabia last devalued the Riyal in June 1986 when it set the official selling rate at SAR
3.745 = $1. Residents of Saudi Arabia may freely and without license buy, hold, sell, import,
and export gold, with the exception of gold of 14 karats or less.
In its latest Article IV consultation with Saudi Arabia, the International Monetary Fund (IMF)
indicated that it “saw merit in the authorities’ decision to keep the current pegged exchange rate
regime unchanged in the period leading up to the GCC monetary union in 2010, while keeping
an open mind about the choice of the exchange rate regime under the prospective monetary
union.”
U.S. Banks and Local Correspondent Banks Return to top
There are no American financial/lending institutions operating independently in Saudi Arabia.
Nonetheless, the Saudi Arabian Monetary Agency (SAMA) granted licenses to JP Morgan,
Morgan Stanley, Ernst & Young, Merrill Lynch, and Goldman Sachs to operate in Saudi Arabia
as a foreign investment banking entity.
Currently, 12 majority Saudi-owned banks and five regional banks are licensed to operate in
Saudi Arabia. The regional banks include Emirates Bank, Gulf International Bank, Muscat
Bank, National Bank of Bahrain, and the National Bank of Kuwait.
The Saudi Arabian Monetary Agency (SAMA) also granted licenses to international investment
banks, including, Deutsche Bank, BNP-Paribas, J.P. Morgan, the State Bank of India, and the
National Bank of Pakistan to open a branch office.
Because of its ownership structure, Saudi Investment Bank (SIB) has direct correspondent
relationships with its U.S. joint venture partner, J.P. Morgan Chase, which holds a 7.4% stake in
SIB. Other Saudi banks also have correspondent relationships with American institutions,
whether the home office in the United States or through the U.S. bank branches in Europe,
Bahrain, or Dubai.
Project Financing Return to top
In spite of falling oil prices, the Saudi Government released an expansionary 2010 budget,
which has alleviated fears among many contractors and investors in the region. Industry
sources believe that the SAG commitment to carry on with its infrastructure projects will offset
the slowdown in the private sector. The 2010 budget forecasts a 14% rise in spending, which
will spur public spending, especially for expansion projects at the Grand Mosque in Mecca,
military and security projects, transport, telecoms and water.
In 2009, the government awarded more than 2,300 contracts at a cost of $37 billion according to
a latest report released by the Ministry of Finance. In the 2010 budget, the government has