Joint ventures (JVs) in Saudi Arabia have become a cornerstone of the kingdom’s economic strategy, reflecting its commitment to diversification and modernization.
As part of Vision 2030, Saudi Arabia aims to reduce its dependence on oil revenues and to foster growth across various sectors, including energy, technology, manufacturing, and infrastructure.
Joint ventures play a crucial role in this transition by combining local expertise with global knowledge and resources.
- A joint venture in Saudi Arabia typically involves partnerships between local companies, international corporations, and sometimes governmental entities.
- These collaborations are designed to leverage the strengths of each partner, whether that be financial capital, technological prowess, or market access.
- By pooling resources and expertise, joint ventures help to mitigate risks, accelerate project development, and drive innovation.
One significant aspect of Saudi Arabia’s joint ventures is their alignment with national development goals. Projects often focus on high-priority sectors such as energy, where Saudi Arabia remains a global leader, and on emerging industries like technology and renewable energy.
The structure of these ventures varies, but they typically involve the creation of a new entity that is jointly owned and managed by the participating organizations. This new entity operates independently but benefits from the combined resources and expertise of its parent companies.
List of Joint Ventures in Saudi Arabia
Joint Ventures in Saudi Arabia are instrumental in fostering economic development and job creation. By partnering with international firms, local companies gain access to advanced technologies and best practices, which can enhance their competitive edge in the global market. Additionally, these ventures contribute to skill development and technology transfer, which are vital for the kingdom’s long-term economic sustainability.
The success of joint ventures is evidenced by their significant contributions to high-priority sectors, such as energy, technology, and infrastructure.
Through these collaborations, Saudi Arabia is positioning itself as a hub for investment and development, attracting international partners who are eager to participate in the kingdom’s growth story.
1. NEOM and DSV
NEOM and DSV have formed a strategic logistics joint venture valued at US$10 billion. This collaboration is designed to cater to the logistics needs of NEOM, an ambitious development in Saudi Arabia, by providing comprehensive ground, sea, and air logistics services.
NEOM and DSV announced their exclusive joint venture, aimed at supporting the extensive projects within NEOM. NEOM will hold a 51% stake, with DSV holding the remaining 49%.
The partnership will deliver end-to-end supply chain management, including the development of transport and logistics infrastructure. The venture is expected to create over 20,000 jobs, significantly boosting the local economy.
CEO of NEOM, Nadhmi Al-Nasr, emphasized the venture’s alignment with Saudi Vision 2030, highlighting its potential to drive innovation and sustainability in the logistics sector.
DSV’s CEO, Jens Bjørn Andersen, expressed enthusiasm about contributing to one of the world’s most complex projects, underscoring the growth opportunities in the region. The joint venture will also establish an innovation center at NEOM, fostering the development of next-generation logistics solutions.
2. Saudi Aramco and TotalEnergies
Saudi Aramco and TotalEnergies have collaborated on the Amiral project. It is a significant petrochemical complex integrated with the SATORP refinery in Jubail, Saudi Arabia. Saudi Aramco holds a 62.5% stake, while TotalEnergies holds 37.5%. The project, scheduled to begin construction in 2023, represents an $11 billion investment, with commercial operations expected to commence in 2027.
Amiral aims to convert feedstock from the SATORP refinery and will feature a mixed-feed cracker producing 1.65 million tons of ethylene annually, along with two polyethylene lines and units for extracting butadiene and aromatics.
This complex will also support a specialty chemicals park in the Jubail industrial area, fostering the production of carbon fibers, lubricants, detergents, and automotive parts.
Aligned with sustainable development goals, the project emphasizes reducing its environmental footprint. Hydrogen co-produced by the steam cracker will replace methane in the refinery’s furnaces, aligning with TotalEnergies’ carbon neutrality ambitions by 2050. The Amiral project is set to create 7,000 local jobs, with training provided by the partners.
3. Saudi Basic Industries Corp. (SABIC) and Saudi Aramco
Saudi Basic Industries Corp. (SABIC) and Saudi Aramco have launched a significant joint venture aimed at converting crude oil into high-value petrochemicals. This major project will be located in Ras Al Khair.
It will process 400,000 barrels of crude oil each day. Minister of Energy Prince Abdulaziz bin Salman announced this initiative. The venture addresses the growing global demand for petrochemicals which is expected to increase by 60 percent by 2040.
The initiative is part of Saudi Arabia’s broader plan to enhance its petrochemical industry, integrating the entire value chain from basic to specialized petrochemicals. The minister highlighted that the Kingdom’s petrochemical strategy is nearing completion and involves converting four million barrels of crude and liquids into petrochemical products through both domestic and international projects. This development underscores the commitment of SABIC and Aramco to driving growth and innovation in the sector.
4. Saudi Telecom Company (stc) and the Public Investment Fund (PIF)
Saudi Telecom Company (stc) and the Public Investment Fund (PIF) have forged a significant partnership in a SR492 million ($131 million) deal to establish a joint venture focused on the Internet of Things (IoT).
This equally owned collaboration aims to meet the growing demand for IoT services and products, with an initial capital that can be expanded up to SR900 million within three years, depending on business needs.
Market research forecasts the IoT sector in Saudi Arabia will expand to SR10.8 billion by 2025, growing at an annual rate of 12.8 percent. This venture aligns with stc’s growth strategy and Saudi Arabia’s Vision 2030, which seeks to enhance the digital economy and foster technological advancements.
Yazeed AlHumied from PIF highlighted the partnership’s role in localizing advanced technology and creating high-quality jobs, while stc’s CEO, Olayan Al Wetaid, emphasized that IoT is a core part of their strategic investment areas, aiming to position Saudi Arabia as a regional hub for digital innovation in the MENA region.
5. Aramco, Sinopec, and SABIC
Aramco, Sinopec, and SABIC unveiled plans for expanded collaboration in the refining and petrochemical sectors. The companies signed heads of agreement for a greenfield project in Gulei, Fujian Province.
This ambitious venture will feature a refinery with a capacity of 320,000 barrels per day and a petrochemical cracker with an annual output of 1.5 million tons. The complex is set to begin operations by the end of 2025.
Furthermore, on December 15, 2022, the trio signed a Memorandum of Understanding (MoU) to explore the feasibility of a new petrochemical project in Yanbu, Saudi Arabia. This project aims to integrate with an existing refinery.
Mohammed Y. Al Qahtani, Aramco’s Senior Vice President of Downstream, emphasized that these initiatives will enhance the downstream sector in both China and Saudi Arabia. They also reaffirm Aramco’s commitment to being a dependable energy supplier to Asia. The collaborations align with Sinopec’s goal to be a global leader in energy and petrochemicals.
6. Saudi Aramco, Air Products, ACWA Power, and Gas Industry Co. (Air Products Qudra)
Saudi Aramco, Air Products, and ACWA Power have formed a significant joint venture to develop the Jazan IGCC Complex, the world’s largest Integrated Gasification Combined Cycle (IGCC) facility. This partnership leverages the strengths of each company to deliver a state-of-the-art energy solution.
Saudi Aramco, with a 20% stake, will supply the feedstock from its nearby refinery. Air Products, holding a 46% share, will provide the air separation unit, generating the oxygen needed for gasification and hydrogen production.
ACWA Power, owning 25% of the project, contributes its experience in power generation and project management. Gas Industry Co. (Air Products Qudra), with a 9% share, plays a key role in the venture, enhancing the project with its specialized knowledge in the gas industry.
The facility will operate under a 25-year Own-Operate-Transfer (OOT) contract, with a total investment of USD 12 billion. This collaboration aims to enhance power generation, benefiting both the Jazan refinery and the Saudi power grid.
7. Saudi Arabia’s Public Investment Fund and BlackRock
Saudi Arabia’s Public Investment Fund (PIF) and global investment firm BlackRock have signed a non-binding Memorandum of Understanding (MoU) to form a joint venture focused on infrastructure investment in the Middle East. This collaboration aims to anchor BlackRock’s Middle East infrastructure strategy and will primarily target Saudi Arabia.
Under this partnership, BlackRock plans to establish a dedicated infrastructure investment team in Riyadh. This team will work with PIF to explore and attract regional and international investors for various infrastructure projects, enhancing foreign direct investment in Saudi Arabia. The joint venture will concentrate on key sectors, including energy, power, utilities, water, environment, transportation, telecommunications, and social infrastructure.
The venture seeks to bolster PIF’s regional investment portfolio while facilitating additional investments from both regional and international sources. BlackRock will also collaborate with Saudi Arabia’s National Development Fund on an infrastructure fund with a projected investment target of A$53 billion over the next decade.
8. Dussur and General Electric
Dussur and General Electric (GE) formed the GESAT joint venture in 2017, combining their expertise to advance gas turbine manufacturing in Saudi Arabia. Dussur holds a 55% stake, while GE owns 45%. This collaboration focuses on producing heavy-duty gas turbines, accessory module skids, and related components.
The venture aims to enhance Saudi Arabia’s manufacturing capabilities, specifically around GE’s H-class heavy-duty gas turbines, which improve operational efficiency and flexibility.
Since its launch, GESAT has exported over 120 gas turbine accessory module skids, supporting power plants that generate approximately 9 gigawatts of electricity i.e. sufficient to power seven million homes worldwide.
With a Saudization rate of up to 70%, the project has created more than 90 direct jobs. Despite the disruptions caused by COVID-19, GESAT maintained its operations, delivered over sixty accessory modules, and secured gas turbine upgrades, establishing itself as a significant player in both local and global markets.
9. Dussur, Saudi Aramco Development Company (Mukamala), and Hyundai Heavy Industries (HHI)
Dussur, Saudi Aramco Development Company (Mukamala), and Hyundai Heavy Industries (HHI) signed a landmark joint venture agreement in July 2019, to establish the first marine engine manufacturing facility in the MENA region, named Makeen. Under this agreement, Mukamala holds a 55% stake, Dussur owns 15%, and HHI, through Korea Shipbuilding & Offshore Engineering, controls 30%.
Incorporated in November 2020, Makeen began its equity injection in early 2021. Once fully operational, expected in the first quarter of 2025, the facility will generate over 720 jobs and transfer vital technical knowledge to Saudi Arabia.
Makeen will produce 2-stroke and 4-stroke marine engines, electric power plant (EPP) engines, and marine pumps essential for commercial vessels, cargo oil pumps, and offshore rig operations.
Located in Ras Al-Khair, Eastern Province, the facility will leverage Saudi Arabia’s strategic position on major international trade routes, enhancing the Kingdom’s role as a key logistical hub for global maritime trade.
10. Saudi Arabian Military Industries (SAMI) and Figeac Aero Group (FIGEAC AERO)
Saudi Arabian Military Industries (SAMI) and Figeac Aero Group (FIGEAC AERO) formed a strategic partnership in 2021 to establish SAMI FIGEAC Aero Manufacturing (SFAM) in Saudi Arabia.
This joint venture aims to develop a high-precision manufacturing facility dedicated to producing aircraft structural components. The facility will specialize in working with lightweight alloys like aluminum and hard metals such as titanium.
SFAM supports Saudi Arabia’s Vision 2030 by focusing on training Saudi engineers and technicians and advancing the localization of military and civil aviation industries. With a Saudization rate of up to 90%, the project is set to create over 100 direct jobs.
Situated within the Aircraft Complementary Equipment Company Limited (AACC) in Jeddah, a subsidiary of SAMI, the facility will benefit from AACC’s production expertise and capabilities, enhancing its manufacturing processes.
How to Establish a Joint Venture Company in Saudi Arabia
In Saudi Arabia, establishing a joint venture company involves collaboration between two or more individuals or legal entities. This partnership allows investors to engage in commercial activities under a structured framework.
Each partner is personally liable for their investment and shares responsibility for the company’s debts and obligations. To facilitate this process, several key steps and requirements must be fulfilled.
Key Steps in the Process
Platform Access and Service Initiation
Investors must log in to the Saudi Business Center platform and select the option to establish a joint venture company. Following this, they should click on “Start Service” to begin the application process.
Service Application Details
The application requires details on the number of partners, the company’s status (optional), and other relevant information. This includes specifying the record duration, company location, activities, and objectives, as well as providing partner data, commercial registry data, company management details, and contract information.
Essential Registrations
- Commercial Register and Articles of Incorporation: The commercial register and articles of incorporation are essential for the legal recognition of the company.
- Commercial License: An immediate commercial license can be obtained optionally.
- Establishment File: Opening an establishment file with the Ministry of Human Resources and Social Development is necessary.
- Zakat Registration: Register the company for zakat via the electronic portal of the Zakat, Tax, and Customs Authority.
- Social Insurance Registration: Register with the General Organization for Social Insurance.
- National Address Registration: Ensure registration at the Saudi Post’s national address service.
- Chambers of Commerce Registration: Register with the local Chambers of Commerce.
Service Conditions
To establish a joint venture company, certain conditions must be met:
- Minimum Age: All partners must be at least 18 years old. If a partner is a minor, a guardianship deed is required.
- Employment Status: Partners cannot be government employees.
- Commercial Registration Status: The commercial registration should not be canceled, suspended, or terminated if any partner is a corporate entity.
For companies classified as professional, additional requirements include:
- Professional License: Partners must hold valid professional licenses.
- Saudi Partner Proportion: In mixed companies, the Saudi partner must hold at least 25% of the company shares. For professional licenses, the proportion of licensed partners should be no less than 70%.
Required Documentation
The following documents are necessary:
- Legal Documents: If a partner is a government agency, civil institution, charitable association, or endowment, legal documentation proving their right to establish or participate in a company is required.
- Central Bank License: If the company’s activities necessitate it, a license from the Central Bank of Saudi Arabia must be obtained.
The Saudi Business Center streamlines the process of establishing a joint venture company by guiding investors through a series of well-defined steps and ensuring compliance with all necessary regulations. This service supports investors in setting up their business operations efficiently and in accordance with Saudi Arabian laws.
Key Considerations for Navigating Joint Ventures in Saudi Arabia
Saudi Arabia has become an attractive destination for foreign investment, with joint ventures (JVs) emerging as a popular mode of entry. The Kingdom’s Joint Venture Law, coupled with its dynamic business landscape, provides numerous opportunities for foreign investors. Understanding the legal requirements and strategic benefits of forming a joint venture in Saudi Arabia is crucial for success.
Legal Framework and Requirements
Foreign investors must navigate several legal requirements when establishing a JV in Saudi Arabia. The Ministry of Commerce and Industry (MOCI) oversees the commercial registration process, while the Saudi Arabian General Investment Authority (SAGIA) issues foreign investment licenses.
It’s essential to comply with Saudi Arabian Commercial Law, which outlines the formation of entities like Limited Liability Companies (LLCs) and Joint Stock Companies (JSCs).
Joint Venture Agreement Essentials
A well-drafted Joint Venture Agreement (JVA) is vital. This document should cover the management structure, including the roles of the Board of Managers and the General Manager.
It should also detail the Articles of Association, Shareholders’ Agreement, and Statutory Reserved Matters. Key clauses, such as pre-emption rights, exit provisions, and dividend distribution, must be clearly defined to avoid future disputes. Arbitration clauses are recommended for effective dispute resolution.
Market Opportunities and Strategic Alliances
Saudi Arabia offers diverse market opportunities across sectors such as energy, construction, and technology. Forming strategic alliances or commercial partnerships with Saudi firms can provide significant advantages.
These partnerships help navigate local regulations and capitalize on market knowledge. Foreign investors should carefully select their Saudi partners, considering factors like business alignment and local expertise.
Investment Strategies and Regulatory Compliance
Investment strategies should align with Saudi Arabia’s Vision 2030, which emphasizes economic diversification and foreign investment. Understanding Saudization requirements and the Nitaqat program is crucial for compliance. These programs mandate employing a certain percentage of Saudi nationals, impacting the workforce structure of JVs.
Tax and Zakat Considerations
Foreign investors must consider tax implications, including corporate tax and Zakat obligations. Proper tax planning and compliance with local regulations.
Looking Ahead
Joint ventures in Saudi Arabia exemplify the kingdom’s dynamic approach to achieving its Vision 2030 objectives. By forming strategic partnerships with global and local entities, Saudi Arabia is not only advancing its economic diversification but also enhancing its position as a leading player in various industries.
These ventures facilitate the transfer of technology, spur innovation, and create new opportunities for economic growth. Moreover, the alignment of joint ventures with national development goals ensures that they play a crucial role in fostering long-term economic stability and sustainability.
As Saudi Arabia continues to navigate its path towards a diversified economy, joint ventures will remain instrumental in driving progress and achieving strategic objectives.
They represent a powerful mechanism for leveraging global expertise and resources, while simultaneously empowering local businesses and industries. In essence, the success and proliferation of joint ventures in Saudi Arabia highlight the kingdom’s commitment to embracing collaboration and innovation as key drivers of its economic future.
