Entrepreneurship Policies in Saudi Arabia

This article covers the best practices and needs for reform in entrepreneurship policies in Saudi Arabia.

Entrepreneurship enjoys high level of support in Saudi Arabia, according to Jonathan Ortmans. The Kingdom has been leading in the Arab region in terms of regulatory reforms related to entrepreneurship. According to the latest report of Doing Business (DB), the country ranked 13th globally and maintained its position in the first place in the region on the ease of doing business. Saudi Arabia’s consistent improvement in DB's six indicators propelled it to its latest ranking from 35th since 2004, using French law as a model in revising its policies. In the latest World Economic Forum (WEF) Global Competitive Index (GCI 2010-2011), it moved up by seven places from 28th to 21st place which resulted in a strong and solid institutional framework, efficient markets, and sophisticated businesses places. Real activity (real GDP) in Saudi Arabia was expected to grow at 3.4 percent in 2010 and 4.5 percent in 2011. Enactment of a new foreign investment law, establishment of the Saudi Arabian General Investment Authority (SAGIA) as well as privatizations of public companies in recent years have encouraged investments in the country.

However, businesses still face difficulties, enforcement of contracts and labor issues within the regulatory system in the country. Based on a Global Entrepreneurship Monitor (GEM) survey conducted from May to October 2009, among the factor-driven economies in the region, Saudi Arabia had the lowest total entrepreneurial activity (TEA) rate, only 4.7% of the adult population (18–64 years old) were actively involved in the start-up of a new business or owned a young business of less than three and half years old. A study by Michael Porter in 2008 noted that Saudi Arabia could build a competitive economy and diversify beyond natural resources if it was willing to take a strategic approach, make multiple improvements in its business environment, truly open up competition and entrepreneurship in the private sector, and embark on a sustained effort to equip Saudi citizens with new skills, attitudes and mindsets.

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