GUIDE ON SETTING UP A MANUFACTURING BUSINESS IN SAUDI ARABIA
This Article was updated on: April 17th, 2025.
This article has been researched and written by the Business Development Team at Creation Business Consultants. AI has not been used in generating this article.
Saudi Arabia has made massive strides over the years to open its market to international investors. The Kingdom of Saudi Arabia is much keen to diversify its economy and move away from oil dependency. As the needs of the region grow, Saudi Arabia aims to position itself as a central hub for production and manufacturing within the GCC.
To promote and attract international investors to the manufacturing industry throughout the country the Government of Saudi Arabia offers various incentives and programs across the country. Saudi Arabia’s manufacturing industry is booming, with over 10,000 factories spanning various sectors ranging from food and pharmaceuticals, production of metals, machinery, and equipment manufacturing.
Saudi Arabia’s Vision 2030 leads a series of giga projects which further transforms the industrial landscape and positions Saudi Arabia as a global leader in innovation and sustainability, shaping the future of the region. To name few of these projects:
Neom: A futuristic city with a valuation of $ 500 billion aims to be powered entirely by renewable energy. It comprises of sub-projects like The Line, a linear city that spreads upto170 kilometres, and Trojena, a year-round mountain tourism destination.
The Red Sea Project: A luxury tourism development that encompasses over 28,000 square kilometers. It features eco-friendly resorts and the world’s fourth-largest barrier reef system. By 2030, it aims to have 50 hotels and 8,000 rooms.
Qiddiya: It is an entertainment, sports, and arts hub near Riyadh, having the largest Six Flags theme park with record-breaking rides. It is set to be a leading destination for family entertainment.
Diriyah Gate: A cultural and historical destination near Riyadh, showcasing Saudi Arabia’s heritage with museums, galleries, and performance venues. It aims to attract cultural tourism and preserve historical sites.
CHOOSING THE RIGHT LEGAL STRUCTURE FOR YOUR MANUFACTURING COMPANY IN SAUDI ARABIA
Option 1 – Branch: When offering a quick setup, branches have limitations. They operate as extensions of their parent company or a foreign company, meaning the parent company bears full liability, and the branch may have to face restrictions on business activities that often require additional approvals.
Option 2 – Limited Liability Company (LLC): This kind of structure provides limited liability it protects the owners’ personal assets from the company’s debts beyond their initial investment. Moreover, LLCs offer a greater amount of flexibility in management and profit-sharing which makes them a more favourable option for expansion and attracting future investments. Despite the minimum capital requirement of SAR 50,000, the LLC’s financial protection and flexibility make it a preferred choice for foreign manufacturing firms entering the Saudi market.
WHAT ARE THE REQUIREMENTS FOR REGISTERING A MANUFACTURING LICENSE IN SAUDI ARABIA?
A manufacturing company can be 100% owned by a foreign shareholder (non-Saudi national) in Saudi Arabia. The primary licensing authority for these ventures is the Ministry of Investment (MISA). To secure a manufacturing license, it is obligatory for companies to be well established outside of KSA for at least one year and to submit all necessary documentation requested by MISA that includes audited financial statements demonstrating the parent company’s financial stability. The company structure can be established as either a subsidiary of a foreign company or a branch. There is a nominal share capital requirement based on the operation’s size, and at least 30% of production must be sold within Saudi Arabia. With a manufacturing license, companies can engage in selling their manufactured goods to businesses or distributors in the country and exporting them overseas. For more details on various licensing options, explore the different Business License types available in Saudi Arabia.
WHAT IS THE PROCESS TO SETUP A SAUDI MANUFACTURING COMPANY?
Setting up a manufacturing company that is 100 percent foreign-owned requires various steps.
Initially, the documents of the foreign company need legalization at the Saudi Embassy. After getting a manufacturing license from MISA, the company has to register with the Ministry of Commerce for Articles of Association (AOA) for drafting and Commercial Registration (CR) issuance. Securing a land contract, building permits, and registering with the municipality follows.
Once a company is commercially registered, it obtains its final industrial license from the Ministry of Industry and Mineral Resources, obtaining all relevant environmental permits, and completes post registrations with the governmental departments, including the Ministry of Human Resources, Zakat, Tax and Customs, and others. Once done, the company can now hire staff, open a bank account, and begin its operations. This is a general process, and any specific requirements may vary. Read our guide on successful post incorporation in Saudi Arabia.
WHAT APPROVALS ARE REQUIRED FOR A MANUFACTURING COMPANY IN SAUDI ARABIA?
Manufacturing business licenses in Saudi Arabia should be compliant with the environmental standards that are set in place by General Presidency of Meteorology and Environmental Protection. Each company needs to make sure that the environmental hazards are minimised or disposed of properly. For example, chemical manufacturing companies that produce harmful wastes that are hazardous and corrosive are required to collect them carefully and transport them to a government-approved waste management facility.
For all industrial and mining licenses in Saudi Arabia, the Ministry of Industry and Mineral Resources acts as the central regulatory body. It supervises the issuance of manufacturing permits for companies with registered licenses across the country’s 13 administrative regions.New incentives and reforms are promoted by the ministry from time to time to attract industrial investment and help businesses with funding.
The following are the steps and approvals required, particularly for manufacturing chemicals, medicines, or food products:
ENVIRONMENTAL APPROVAL: To make sure that the manufacturing process is following the required environmental standards, a business needs to secure a permit from the Ministry of Environment, Water, and Agriculture, especially if dealing with chemicals, medicines, and food.
MUNICIPAL APPROVALS: Adherence to zoning and land use regulation is crucial for setting up manufacturing facilities, which requires obtaining approvals from the local muncipality for the chosen industrial sites.
CIVIL DEFENSE APPROVAL: Getting approval from Civil Defence. This approval makes sure that the manufacturing facility meets fire safety and emergency preparedness standards, which are particularly important for chemical and pharmaceutical manufacturing due to the risks involved.
SAUDI FOOD AND DRUG AUTHORITY (SFDA) APPROVAL: Obtaining approval from SFDA is necessary for manufacturing medicines and food products. This includes rigorous testing and validation to ensure that products are safe and meet efficacy standards.
MINISTRY OF HEALTH APPROVAL: Pharmaceutical manufacturing requires approval from the Ministry of Health. This makes sure that the manufacturing process and the products meet health regulations and standards.
SAUDI STANDARDS, METROLOGY AND QUALITY ORGANIZATION (SASO) CERTIFICATION: All manufacturing industries need to obtain SASO certification, which is important to ensure that products meet the national standards of quality and safety.
MODON LEASE AGREEMENT: Signing a lease agreement for the designated industrial land is necessary if it is operating within a Modon-managed industrial city. This includes following Modon’s infrastructure and operational guidelines, ensuring the manufacturing facility is well-supported by the provided infrastructure and services.
MODON AND THE INDUSTRIAL CITIES IN SAUDI ARABIA
MODON, or the Saudi Authority for Industrial Cities and Technology Zones, is responsible for the planning and development of industrial cities in the Kingdom of Saudi Arabia. Currently in 2023 MODON oversees 36 industrial cities, which combine the area of more than 209 million square meters of developed land, containing in excess of 6,443 factories and 7,946 industrial, logistical, and investment facilities.
AVAILABILITY AND POWER COSTS IN INDUSTRIAL CITIES
The availability of industrial land includes such cities as Riyadh, Jeddah, and Dammam. Each industrial city has its own unique attributes and facilities:
RIYADH INDUSTRIAL CITIES: There are three major industrial cities in Riyadh. The first city is accessible and premised on the city center, the second is on the Al-Kharj Road, and the third is somewhere in the southern part of Riyadh. Power costs in Riyadh’s industrial areas average around SAR 0.18 per kWh.
JEDDAH INDUSTRIAL CITIES: Jeddah has three main industrial cities. The first is located southwest in Al Jibla, the second to the north of the region and the third also to the coast, making them ideal for logistics and export activities. Power costs in Jeddah are approximately SAR 0.20 per kWh.
DAMMAM INDUSTRIAL CITIES: Dammam’s industrial cities are strategically scattered around the Arabian Gulf, which is of local and international trade. Thecost of power here is approximately SAR 0.19 per kWh.
OTHER CITIES: Other cities, such as Taif, Sudair, Waad Al-Shamal, and Najran also contain large industrial areas. Each has different advantages because of its geographical location, available resources, as well as transport and business needs. The cost of power in these cities is usually between SAR 0.17 and SAR 0.21 per kWh.
By December 2023, MODON had also built over 1,301 factories which also cater to the industries.
MADE IN SAUDI” PROGRAM: BOOSTING LOCAL PRODUCTION AND GLOBAL COMPETITIVENESS
The “Made in Saudi” program is a national program focusing on assisting the locals to produce more and strengthen the position of Saudi made goods in the international arena. For this purpose, local producers are required to observe strict quality guidelines to earn the so-called “Made in Saudi” designation which is a mark of Saudi goods’ supremacy and originality. This helps in elevating the status of products that are produced in Saudi, and creates a sense of patriotism, as well as aids in economic diversification.
Said program falls within the context of the Vision 2030 framework, which targets decreasing the Saudi Arabia’s oil exports while increasing the country’s non-oil exports and supporting local industries. In order to receive the “Made in Saudi” badge, a product must be accepted and acknowledged as fitting the following criteria:
LOCAL CONTENT: A minimum of 40 percent of the value of the finished good must be spent within the boundaries of Saudi Arabia. This encapsulates the available raw materials, available labor, and the manufacturing itself.
WHAT IS SAUDISATION & WILL THIS APPLY TO A SAUDI MANUFACTURING COMPANY?
Saudisation is the scheme Saudi nationalisation aimed to increase the employment of Saudi nationals within the private sector and diminish the reliance on foreign workers.
SAUDISATION RATES DEPENDS ON THE FOLLOWING FACTORS:
Activity.
License type.
Regulating Government Authority.
All manufacturing firms in the Kingdom of Saudi Arabia are obliged to observe the laws pertaining to Saudisation. As stated before, the Saudiisation rate differs depending on a company’s headcount, the level of specialization of a given industry, and the geographical region. Businesses are mandated to assess and conduct extensive studies on the land needs, land use as well as construction costs, labor, including targets for Saudization, provisions for staff accommodation, utilities, availability of raw materials, and the logistic distribution, together with overlying operational costs to guarantee efficient and sustainable business operations within the country.
TAKEAWAY
With the appropriate clearances from the pertinent ministries and other bodies, enterprises can seamlessly and legally establish their manufacturing operations under the umbrella of Saudi Arabia’s ever-evolving industrial landscape. This approach ensures adherence to all pertinent legal frameworks, including environmental and safety requirements, which will underpin successful manufacturing activities in the Kingdom.
Reaching out to professionals like Creation Business Consultants can help navigate the application process smoothly. Contact our team at [email protected] or call us at +966 56 865 2329 to learn more about setting up a company in Saudi Arabia. With professional advice, you can establish and operate a successful manufacturing firm in Saudi Arabia.
