Jun 9, 2017 1:34 PMSaudi Arabia's (KSA) new Companies Law of 2015 came into effect on May 2, 2016. At JHI, we wished to see the new law in practice and how it would be enforced by Saudi authorities before commenting. In the meantime, much has already been written about the new law and we need not cover the same ground here.Of particular interest to clients and potential clients of JHI is, we believe, the law's provision of the option of Sole Proprietorships (or "Single-Shareholder" companies), and how applications for the licensing and registration of such by foreign investors are treated by the Ministry of Commerce and Investment and the Saudi Arabian General Investment Authority (SAGIA).As a general matter, the new law provides that SAGIA may continue to impose additionally stringent incorporation requirements on companies being established with the backing of foreign investors. While the process of approving incorporation applications has been somewhat streamlined at SAGIA, a certain level of uncertainty, especially at the beginning stages of such an application, remains.When considering establishing or reforming an entity in the KSA, JHI feels that if a foreign investor has a trustworthy local partner/ agent (or "sponsor") then, for the time being, it may remain prudent to make use of such local parties when doing business in the Kingdom. In addition to possibly enjoying a smoother approval process, one might avoid any potential bureaucratic pushback by some recalcitrant officials who may still be resistant to the Vision 2030 reforms more generally.The relationship with one's local sponsor can be further clarified via a side letter to the sponsorship agreement. Such sideletters have been enforced by Saudi courts with increasing regularity. And, JHI hopes that the provision for Single-Shareholder companies in the new Companies Law is not seen by the local judiciary as a rationale for reversing this trend.We will have more to say about the execution and enforement of the new Companies Law and other reforms as events (rapidly) progress. Speaking of events, recent news indicates a very real likelihood of a shift in the direction of investment capital flowing between the Untied States and the Kingdom of Saudi Arabia.Where the Riyals of the Sovereign Wealth Fund go, other Saudi-based investment capital tends to follow. With that in mind, JHI is seriously considering offering the shepherding of EB-5 (Investor) Visa applications to the menu of professional services our firm offers to incoming companies that invest in the United States, particularly New York, Pennsylvania and/ or New Jersey, where Mr. Huf is admitted to bar. JHI will have more to say on this in the near future as well.
Feb 9, 2017 7:12 PM
Near the close of 2016, while the West was focused on the High Holidays, a new American President and the NFL Post-Season that would culminate in a historic Super Bowl LI, the government of Saudi Arabia (KSA) leapt into the 21st Century - literally.
Under the direction of Deputy Crown Prince Mohammed bin Salman, with the full support of his father King Salman, the Saudi Government officially abandoned the Hijri Calendar (the Islamic, lunar calendar which begins with the Prophet Mohammed's trek from Mecca to Medina and the establishment of the first-ever Islamic state), and has adpoted the "Gregorian" calendar (named after Pope Gregory XIII, the solar calendar predominantly used as the civil calendar in the West and elsewhere, which begins one week following the Roman church's, and the day of the Eastern Orthodox churches', traditionally espoused birth of Jesus Christ; the civil calendar used in the West arbitrarily measures months as being either 28/29, 30 or 31 days in length).
Initially functioning as a budget cutting measure, with government employees receiving the same monthly salaries while working an additional eleven (11) days of the year, its the eternal questions of "what next?" that holds the world's attention as those with commercial ties to the KSA wait the other shoe(s) to drop. What are the other consequences, both intended and unintended, of the Saudi government's adherence to this new calendar? How, if at all, will this impact governance and/ or commerce in the Kingdom?
Saudi Arabia is, and was founded to be, an Islamic state. Its Constitution is the Quran. The change from a calendar that is dear to their faith and which honors the pilgrimage of their holiest and most revered prophet, to a calendar created by a Roman military dictator and revised by a Catholic Pontiff is, in and of itself, revolutionary.
For now, its impact is seen strictly as a government austerity measure. Nonetheless, and predictably, the more conservative elements of Saudi society, including the clerics with whom the King shares and exercises power, are resisting this particular change. They presently appear to center their resistance around their concern that the masses will not adhere as faithfully as they have in the past to the holy month of Ramadan (which, like all months in the Hijri calendar, is measured by the lunar cycle).JHI is confident that good muslims will adhere to Ramadan, just as good christians adhere to Easter, the date of which is determined by the advent of the Jewish observance of the Passover holiday (the Jewish calendar measures months by lunar cycles, occasionally adding a month to make up the discrepancy in days between 12 lunar months and one solar year; thus, while Passover - and the subsequent Christian Easter - are celebrated on the same days of year, every year, on the Jewish calendar, they are celebrated at different times of the year on the civil, or "Gregorian", calendar).
Neverless, acquiescence to the Saudi government's new calendar will not occur overnight. As conservative elements tend to dominate the judiciary, and are well-ensconced in the various levels of the bureaucracy in the KSA, JHI feels that for the time being it remains prudent to continue to use language referencing the "Gregorian" calendar as controlling in the boilerplate of contracts and other documents pertaining to business in the Kindgdom of Saudi Arabia - including and especially those documents related to participation in government projects, whether as a contractor or sub-contractor.
JHI will continue to follow the evolution of this particular change, and other developments related to the Vision 2030 reforms, as the Deputy Crown Prince pulls his country into the 21st Century - both metaphorically and literally.
Dec 19, 2016 2:36 PM
During the last week of September, immediately following the opening of the United Nations (UN) General Assembly in New York, a series of seminars, workshops and interactive displays collectively coined "A Day in Riyadh" was showcased at the UN. This week-long "Riyadh Day" was sponsored by the High Commission for the Development of Arriyadh (Riyadh), and particularly featured the ongoing work of the Arriyadh (Riyadh) Development Authority (ADA). As a Representative (Observer) for a Non-Governmental Organization (NGO) to the UN, and an attorney with an office in Saudi Arabia, Mr. Huf, Principal of JHI, was pleased and excited to attend.
Focused on the capital city of Saudi Arabia (KSA, or the Kingdom) and the governate (province) of Riyadh, the series of presentations covered subjects relevant to the economy, culture, commerce and development of the entire Kingdom, and the Arab and Islamic worlds more generally.
Of particular interest to those who follow this space will be the planned reformation of Riyadh's transportation system which, if fully executed, may be the single-largest public works project on earth during the period of construction. However, we will list all of the subjects covered by the panel presentations at the UN between September 27 - 30, to provide a broad look at the planned continued development of Riyadh (one of the chief purposes of the conference) which, in turn, may give us a better view of the Kingdom-wide social and economic reforms known as Saudi Arabia's "Vision 2030".
9/27 "Riyadh: Planning for People" - the overall City Plan (by 2030) moving forward, including details on Riyadh's new "Smart City" initiative.
9/28 "Riyadh: A Sustainable & People-Friendly City" - details concerning the Sustainable Development of Riyadh.
9/29 "Riyadh: On the Move" - The King Abdulaziz Project for Riyadh Public Transport.
9/30 "Riyadh: Development of Civilization and Social Partnership" - Plans for the continued social, economic and intellectual development of the city's population in line with Islamic principles and the traditions of Arabia, particularly youth and especially young women, empowering them to take a more active role in the growth of the city and the future of the Kingdom as a whole.
(Jason Huf and Dr. Sana Alorf. Dr. Sana is extraordinary, but not unique. She is a medical doctor working in Riyadh who also participates in many charitable and civic endeavors. She volunteered, along with many other young Saudis, to travel to New York and talk about their culture, heritage and way of life in side bars at the exhibition. Many ladies are taking up professions [including and increasingly fields such as law, medicine and science], starting businesses and participating in life outside their homes in the Kingdom. Dr. Sana has a wealth of information that dispells many of the illusions concerning Saudi society and highlights the progress Saudi women have made - and continue to make.)
The public transortation project, scheduled for completion in 2018, is a massive affair that could revolutionize life in Riyadh. In addition to a new bus service, the project includes the construction of a commuter railway (Riyadh Metro) with six lines, dozens of stations, a main terminal for each line, and services areas at each stop, including large-scale shopping complexes at each of the main terminals. Anticipating use by roughly 3.6 million residents daily, over 3,000 transport stands will be constructed to accomodate waiting commuters.
With billions of Saudi Riyals being invested into the project, and given the rather brief time frame, this will generate a labor boom in the capital for qualified Saudis and expatriates. Mr. Huf asked Eng. Hassan Al Musa, Deputy Director of the Transport Planning Department of the High Commission for the Development of Riyadh, if resources had been allocated to process what should be a substantial spike in Visa applications. Potential contractors and subcontractors will be interested to know that the Deputy Director responded that his office is in touch with the Ministry of Labor on a regular basis as they set up for this contingency. So long as employers comply with their filing requirements, he said, there should be no delays in the project caused by a labor shortage brought about by paperwork backlogs.
(Eng. Hassan Al Musa and Jason Huf. Mr. Huf found him to be capable, earnest and modest. Although entrusted with day-to-day management of a massive public works project, with a tight schedule, he always gives credit to others, refering to his "Army" of dedicated public servants. "That makes you a General", responded Mr. Huf, who later added, "Eng. Hassan is a nice guy".)
In addition to the lifestyle transformation and relief of traffic congestion that will take place once this project is complete, young Saudis who are lacking in resources such as cars of their own will be able to much more easily venture beyond the confines of their own neighborhoods to look for satisfying work and important educational opportunities. And, everyone who lives in Riyadh should enjoy the benefit of cleaner air arising from fewer cars on the highways.
The entire program provided a window through which one could sample Saudi Arabia's Vision 2030, the rapid modernization and other wide-ranging reforms ordered by King Salman and spearheaded by Deputy Crown Prince Mohammed bin Salman, with the aim of guiding a modern but authentically Islamic Saudi Arabia that remains true to its people's history and traditions into a future "Post-Oil" economy.
These reforms include the KSA's Sustainable Development program, which closely follows the UN's Sustainable Development Goals while keeping in conformity with Kingdom's Islamic principles; increased opportunities for youth & women; and, Saudi Arabia's nuclear power program.
At JHI, we have offered our own modest suggestions for the shaping of such sweeping reforms, with an emphasis on attracting increased Foreign Direct Investment in the Saudi market.
With an incoming US Administration that seems keen on utilizing America's energy resources; and, (if feasible) working with Russia to defeat ISIS (which, in addition to commiting henious atrocities, has been fighting forces led directly or indirectly by the Iranians), some may see such investment from the West as slow in coming, and the KSA's reception of it to be less-than-enthusiastic.
Seen by some as signalling potential push-back against the further development of US energy resources and other recent or possible future policy changes, Prince Alaweed bin Talal of Kingdom Holding Company (Saudi Arabia's soverign investment apparatus) suggested selling holdings previously classified "not sellable" (such as shares in Citi Group and US Treasury bonds), which would be a divorce from Saudi Arabia's long-standing policy of having "buy-ins" in important American economic institutions and, thus, the American economy - effectively giving the US a stake in the KSA's existence and continued success.
Noises concerning such potential push-back seem unlikely to stem the increased exploitation of US energy resources (another dip in the price of oil, for example, would seem more likely to give pause to an increase in US production). And, the US-Saudi alliance of over seven decades, while fraying a bit over the last several years, should remain rather tightly tethered: after ISIS is destroyed, a check on Iranian ambition will have been eliminated, and the US and the KSA will more clearly and simply share strong interests in containing Iran and managing increasingly complicated relationships with Russia.
In fact, the strong relationships the KSA enjoys with the West, the interest Western countries have in seeing the continued modernization of Arab states, and Western companies' keen eye to continue - and, possibly increase - their investments in the Gulf region were reinforced recently by UK Prime Minister Theresa May in her mid-December visit to the Gulf Cooperation Council summit in Bahrain.
Pending changes to the Kingdom's commercial and corporate laws, which continue to be rolled out, and given at least one or two geopolitical uncertainties, JHI presently and on the whole views it likely that the environment for Foreign Investors will become even more attractive as the Vision 2030 reforms are implemented in the KSA. As to the Great Social & Economic Reformation of the Kingdom known as "Saudi Arabia's Vision 2030", Mr. Huf doesn't think its on par with the Maji Restoration (the radical transformation experienced in Japan during the late 19th century), but he does see it as the most significant series of reforms in the history of the KSA since the reign of King Faisal (perhaps in the Kingdom's entire history - we'll see) and the most positive collection of developments to take place in the Arab world thus far in this new, turbulent 21st century - and, he certainly viewed the exhibition at the UN positively.
Aug 23, 2016 5:50 PMYou are about to see a rapid-fire (for this space, anyway) succession of as yet unpublished updates covering a period from Spring 2016 to present. We will start with an initial discussion of Saudi Arabia’s “Vision 2030”, touted as the most sweeping series of reforms in the Kingdom’s history.In a nutshell, Saudi Arabia’s Vision 2030 is a collection of planned economic and social reforms designed to construct a “Post-Oil” Saudi Arabia, in line with globally-held concepts of Sustainable Development. King Salman has invested his son, Deputy Crown Prince Mohammed bin Salman, with broad, sweeping powers to enable him, his advisors and other subordinates to design and execute these reforms between now and the target date of 2030.Within the stated goals of weaning the Kingdom (KSA) off of being an Oil-based economy and becoming an industrialized state, with greater Foreign Direct Investment (FDI), full employment for working-aged males, improved access to high-quality education, greater rights for women and a more liberal social structure generally, two items are immediately obvious: we are seeing Riyadh’s intent to finalize the end the era wherein OPEC, the powerful cartel of oil-producing states, has been the world’s definitive maker of oil policy; and, a rapid and intense military build-up intended to strengthen a block of states that includes the KSA, Egypt and the smaller Gulf States determined to withstand growing Iranian and Russian influence in the Gulf region following continued declining US influence and interest there and in the greater Middle East.While JHI is not a policy think tank, we feel it is important to know the backdrop and overall purpose of any upcoming reforms.Our principle concern is FDI, and the impact any reforms may have on the attractiveness of FDI in the KSA. This program is still young, so specific laws and regulations impacting FDI are not yet in effect. For the time being, there is nothing set in concrete that a law firm can dissect for the benefit of its clients.Therefore, in our typical less-than-modest fashion, JHI offers some suggestions on how to make FDI in the KSA more attractive to potential investors:1. The Corporate Income Tax should continue to be (gradually) lowered, and personal income tax should remain zero. Although declining oil revenues and their impact on the national government’s budget needs to be addressed, increasing the number of companies investing in the KSA, rather than increasing the tax existing companies pay, seems the best way to address the current budget shortfalls giving rise to the KSA’s national debt.2. Saudization is seen, by and large, as a form of tax by potential foreign investors. The best way to address the employment crisis in the KSA is not by compelling investors to hire Saudi nationals, but by making the hiring of them more attractive. Foreign investors ordinarily love to avail themselves of a local workforce – after all, importing staff and finding housing for them is pretty darned expensive! Many such imported workers do not know the language or withstand the culture shock very well. Unfortunately, fairly or unfairly, the idea of hiring Saudis is generally considered unattractive, thus the current Saudization requirements. Rather than increase these requirements, education should be improved and made more accessible, and a sense of work ethic (rather than entitlement) needs to be instilled in the Kingdom’s youth. And, the world needs to actually KNOW of the existence of such an educated, hard-working labor pool – numbering in the millions, and proud of real accomplishment at the workplace. Do this, and Saudization will no longer be necessary at all.3. Make the process of obtaining a business license less burdensome and more efficient. Telling clients that it could take a minimum of six (6) months to obtain the necessary documentation before proceeding with business activity tends to be something of a turn-off for them. Additional agencies designed to steer and otherwise regulate foreign investment eases nothing and are simply additional "layers” of bureaucracy. Streamlining, rather than adding to, the process of licensing incoming businesses would be a productive step.4. Women’s rights, and human rights generally, should be broadened – and, can be without offending the Kingdom’s religious sensibilities or its historical traditions. It is much easier, on multiple levels, for a company to invest in a country whose culture is not the focus of controversial discussions centered around notions of equality and individual human dignity. Additionally, it is essential that people throughout the Kingdom feel some sense of “ownership” in their country and their respective futures (see, 2. above). They need to feel that their rights are being protected by their government, not denied. This isn’t a call for the overnight imposition of Jeffersonian democracy. Quite the contrary: JHI asserts that the keys to unlocking a more liberal social structure (without rocking the stability of the KSA) lay within the old tribal and other cultural traditions of the modern Kingdom.5. The labor market, and the regulation of such, should be loosened, and greater rights should be provided to foreign “unskilled” laborers and household staff. As above (see, 4.), this is a matter of conscious for many potential investors, as well as foreign professional staff who visit the KSA.6. Banking reform is a must. The KSA is one of the most – if not the most – “underbanked” markets on the face of the earth. While new banks and fresh capital and competition need to be allowed in, stronger regulation and monitoring needs to be in place, giving rise to stronger internal compliance programs. While banking needs to be more readily available in the KSA, companies and governments around the world also need to have more confidence in the country’s banks.7. For local and foreign companies alike, receivables can be something of a headache in the KSA. Its no secret that debt, and the collection of debt, can be problematic there. As the Kingdom undertakes judicial reform, it should continue to consider the importance of the confidence a company can have in the investment it makes in Saudi Arabia.8. One of the most crucial assets in play when investing in any country is a company’s intellectual property. Intellectual property protections and anti-piracy measures need to be greatly strengthened, and quickly. It is important for any company (say, you sell shampoo and find yourself competing with a counterfeit knock-off of your product – that’s not good), but when looking to attract high-tech industries, especially, it is absolutely fundamental that such companies have confidence that intellectual property worth hundreds of millions, perhaps billions, of US dollars will not be stolen from them and effectively rendered next to worthless overnight.These are eight basic principle points upon which JHI would like to see the building of any reform package affecting FDI in the KSA.JHI will track any concrete steps within this subject, and Mr. Huf hopes to learn more when “Riyadh Day” (its actually a week of symposiums, workshops and other such meetings), sponsored by the KSA’s High Commission for the Development of Riyadh, is held at the United Nations in New York at the end of September.
May 25, 2016 1:50 PM
By R. Jason Huf
Its been quite some time since JHI's last Note or Comment, but that doesn't mean that there hasn't been anything to write about. And, its certainly too much to write about all at once.
With Ramadan just around the corner, should the usual business cycle associated with the Holy Month and High Summer come about, I will make maximum use of the time and write more often:
April was a pretty busy month, inside the office and out. Saudi Arabia's "Vision 2030" was unveiled by Deputy Crown Prince Mohammed bin Salman on April 25. JHI will provide analysis of the KSA's plan for a "post-Oil" economy, and any changes to the laws of the Kingdom resulting therefrom. We will also continue to track legal developments elsewhere in the Gulf region.
Also, as UN Representative for an NGO, I enjoyed the opportunity of hearing United Nations (UN) Secretary-General Ban Ki-moon speak about the UN's Sustainable Development Treaty, the Sustainable Development Goals, and what the private sector (including the Legal Community) can do to help achieve those goals. This was followed by attending several open forums at the UN, and hosting a talk on 'Conflict Minerals' with an expert on the subject.
I also moderated two very successful Continuing Legal Education panels, one on the Foreign Corrupt Practices Act (FCPA) and the other an Ethics course on Attorney "Branding" for international practitioners.
Almost forgot! In March, I had the pleasure of hosting a New York State judge who discussed the Qatari Commercial Courts after returning from his experience teaching new, young Qatari lawyers in Doha.
More recently, after months of deliberations and conversations with colleagues and others I respect, I have come to a decision on JHI's future in the Middle East - and, beyond.
[ for some of the backstory, click here ---> ].
Further details concerning our expansion of capabilities and services, as well as the other topics outlined above, will be distributed in due course.
In the meantime, Happy Memorial Day -- enjoy the start of summer!
- Jason Huf
Wednesday, May 25, 2016
New York, NY
Jason Huf International, pc
"Exploring the Boundaries of Your Business."