BlogCompany Formation in Saudi ArabiaStart A Business in Saudi ArabiaKey Requirements for Setting up a Manufacturing Business in Saudi Arabia

Introduction to Manufacturing Business Setup in Saudi Arabia

Saudi Arabia is fast becoming a favored destination for manufacturing industries because of the favorable rules and regulations of the government in the wake of the Vision 2030 initiative of the country.

Setting up a manufacturing business in Saudi Arabia requires clear understanding of the local rules and regulations, government incentives available and complying with specific entity regulations concerning local labor. Some steps and opportunities available to investors to establish manufacturing businesses within the Kingdom are explained below.

 

Major Manufacturing Industries in Saudi Arabia

Significant manufacturing opportunities exist in Saudi Arabia’s major sectors, including:

1. Petrochemicals
2. Pharmaceuticals
3. Food and Beverage
4. Automobile Parts and Assembly
5. Construction Materials

 

Legal Framework

The Saudi government has streamlined the processes of setting up a manufacturing company. Below are the key regulatory bodies involved in this process:

1. Ministry of Investment for Saudi Arabia (MISA): The principal body responsible for licensing foreign investment in Saudi Arabia.
2. Ministry of Industry and Mineral Resources: Supervises the manufacturing sector and ensures compliance with industry regulations.
3. Saudi Customs: Oversee the import and export of materials necessary for manufacturing.

 

Licensing and Other Requirements to Setup a Manufacturing Business

To establish a manufacturing business in Saudi Arabia, businesses must first obtain the necessary licenses. The licenses can be fully or partially owned by a non-Saudi national. The types of licenses necessary and other requirements are given below:

1. Industrial License from the Ministry of Industry: Required for all manufacturing operations.
2. Foreign Investment License from MISA: Mandatory for foreign investors to legally operate within Saudi Arabia.
3. Municipal License: Issued by the local municipality where the manufacturing plant will be located.
4. Share Capital: The Company must have share capital as required for company’s operations.
5. Financial Condition: The company must be financially sound.
6. Saudi Market requirement: 30% of the products should be sold in the Saudi Market.
7. Labor Law: It is crucial to comply with Saudi labor laws, which govern working hours, employee benefits, and occupational health and safety standards.

 

Steps to Secure Licenses

1. Business Plan Submission: Detailed information about the proposed manufacturing operations must be submitted, including product lines and production capacities.
2. Location Approval: Manufacturing plants must be situated in designated industrial zones; the municipality’s approval is essential.
3. Environmental Impact Assessment: Certain industries, such as chemicals and heavy manufacturing, may require an environmental impact study before approval.

 

Financing and Incentives for Manufacturing Businesses in Saudi Arabia

The Saudi government provides various incentives to attract investment in the manufacturing sector:

1. Saudi Industrial Development Fund (SIDF): Offers medium- to long-term loans to industrial projects at competitive interest rates.
2. Tax Incentives: Reduced or waived corporate taxes for certain manufacturing sectors.
3. Land Allocation: Industrial zones provide ready-to-occupy land at competitive rates, with advanced infrastructure.
4. Exemption from Import Duties: Certain machinery, equipment, and raw materials are exempt from import duties to encourage manufacturing operations.

 

Establishing Supply Chains and Logistics

To maintain competitive manufacturing operations for automotive, electronics and aviation industry, establishing an efficient supply chain is crucial. Saudi Arabia’s strategic location at the crossroads of Europe, Asia, and Africa offers excellent logistics networks supported by modern infrastructure, including ports, airports, and roadways.

 

Import and Export Procedures

1. Customs Clearance: Saudi Arabia has implemented an efficient electronic customs clearance system
2. Export Financing: The Saudi Export Program (SEP) offers financial assistance to manufacturing companies exporting their goods abroad.
3. Free Zones: Manufacturing companies in Saudi Arabia can benefit from special economic zones allowing exemptions from certain taxes and customs duties.

 

Conclusion                                                                                       

Helpline Group will collaborate with you to establish a framework for tapping into government initiatives and the positive development of the industrial environment in Saudi Arabia. 

Helpline Group will deliver professional guidance in setting up a manufacturing business in Saudi Arabia, facilitating the process of securing licensing, facility hire, partnerships, enterprise structure setup, regulatory compliance, and efficient operational management.

You can count on our team to create both a framework and foundation for your entry into the flourishing manufacturing space in Saudi Arabia.