Part of the opening ceremony of the Arar crossing between Saudi Arabia and Iraq in November 2020 (Reuters)

Saudi Arabia is considering establishing the first free economic zone with Iraq, in the border area in Arar, located in the north of the Kingdom, provided that the zone is not subject to taxes or fees, and does not apply entry visas, in order to serve investors in the two countries.

The plan is being studied by the Saudi Economic Cities Authority, which seeks to connect border areas and free zones with neighboring countries.

Saudi Arabia's northern border region includes about 100 new investment opportunities, worth 20 billion Saudi riyals ($5.3 billion), in addition to the existing ones, which are valued at 80 billion riyals ($21.3 billion). These opportunities focus on the mining, industry, transportation, logistics and tourism sectors.

The announcement of the establishment of the free zone with Iraq came during statements by Saudi Investment Minister Khalid Al-Falih at one of the sessions of the Northern Border Investment Forum held in the city of Arar last Saturday.

The Arar land port is one of the gateways for commercial movement between Saudi Arabia and Iraq during the past two years, as the volume of land trade exchange during the first half of this year amounted to about 913.1 million riyals ($ 243.5 million).

It is noteworthy that the Arar port between Saudi Arabia and Iraq was reopened in 2020 for trade exchange between the two countries, after being closed for 30 years following the invasion of Kuwait.

Al-Qasabi: The state will support investors by granting land and providing financing with facilities for 20 years (Saudi Press)

Investment Opportunities

In this context, Saudi Minister of Commerce Majid Al-Qasabi pointed out that huge investment opportunities await the private sector once the new logistics zone in Arar begins.

He pointed out during his speech - during the Northern Borders Investment Forum - that this area will be at the service of Saudi and Iraqi exporters, and the state will provide support to investors by granting land and providing the necessary financing with facilities of up to 20 years.

He stated that the Kingdom is a fertile environment for investment and rich in promising opportunities, and the state has developed legislation and paid attention to financing, and most importantly at the current stage marketing opportunities for investors to know.

Al-Qasabi stressed that the Kingdom is among the top 10 developing economies in e-commerce, and its total expected revenues will reach 260 billion riyals ($ 69.33 billion) by 2025.

Saudi Arabia's northern border region comprises 25 percent of the kingdom's mining wealth, worth a total of 1.2 trillion riyals ($320 billion), according to Khalid Al-Mudaifer, deputy minister of industry and mineral resources for mining affairs.

Saudi Arabia's northern border region also contains about 7 percent of the world's phosphate reserves, and the volume of investment in it is about 85 billion riyals ($ 22.66 billion) in two phases.

Noting the great opportunity available in the region thanks to the presence of phosphate resources, Al-Mudaifer stressed that the Kingdom has invested more than 120 billion riyals ($32 billion) in infrastructure development to support and enhance the success of projects.

The northern region is considered an international corridor for trade and transport through 3 axes: the first through Iraq and then East Asian countries, the second through Jordan and Syria, Turkey and Europe, and the third to the Arab Gulf countries.

Al-Falih (center) pointed out that there are 100 new investment opportunities in northern Saudi Arabia (Saudi press)

Many advantages

Commenting on Riyadh's decision to establish the Arar Free Economic Zone, Saudi analyst and economist Khalid Al-Ansari said that the northern Saudi border region has many comparative advantages that make it an attractive location for investment, including the distinguished geographical location, as the region is located on the border with Iraq, which provides opportunities for trade and trade exchange between the two countries, in addition to the fact that the region has large reserves of phosphate, uranium, natural gas, and oil.

Al-Ansari explains, in an interview with Al Jazeera Net, that the first free economic zone between Saudi Arabia and Iraq can provide the two countries with many benefits, most notably increasing trade and investment between the two countries, as the zone will allow investors from the two countries to benefit from the comparative advantages of the region, including exemptions from taxes and customs duties, and the lack of need for entry visas.

In addition, the zone will have new job opportunities for nationals in both countries, attracting companies and institutions from around the world, which will lead to an increase in demand for labor, in addition to strengthening economic cooperation between the two countries, according to Al Ansari.

As for whether Saudi Arabia intends to establish similar zones with other countries, the Saudi economist explains that according to statements by Saudi Investment Minister Khalid Al-Falih, the Saudi Economic Cities Authority is considering establishing a link between border areas and neighboring countries.

He pointed out that the establishment of the free zone between Saudi Arabia and Iraq comes as a reflection of the remarkable development in economic and trade relations between the two countries in recent years, as the volume of trade exchange reached $ 1.5 billion for 2022, an increase of 50% compared to 2021.

A year ago, as part of the Middle East Green Initiative, Saudi Arabia announced $10 billion in investments in Iraq in the renewable energy and green hydrogen sectors. It also announced the signing of a memorandum of understanding with Iraq to establish a joint industrial zone between the two countries.

Al-Ansari added that according to available information, the area of the free zone is expected to be about 200 square kilometers, and includes various sectors, such as industry, mining, trade, logistics and tourism, pointing out that estimates indicate that the cost of establishing a free economic zone between the two countries is about $ 10 billion, and the construction process is expected to take about 5 years and work will begin in 2027.

Batarfi stressed that Saudi-Iraqi economic relations have great potential for growth (Al Jazeera)

Strengthening economic cooperation

For his part, academic and professor at Alfaisal University, Saudi Arabia, Dr. Khalid Batarfi, said that the aim of the Kingdom's government decision is to enhance economic cooperation between Saudi Arabia and Iraq, attract foreign investments, and create job opportunities for citizens in both countries, especially since the economic relations of the two countries have great potential for growth, as well as the enormous natural and human resources that the two countries possess.

Batarfi explains, in a statement to Al Jazeera Net, that Saudi Arabia aims to make the region a regional commercial, manufacturing and service center, and to attract foreign investments from around the world.

He points out that the free economic zone between Saudi Arabia and Iraq has the potential to be an engine of economic growth in both countries. Achieving this requires efforts by government and private entities in both countries to remove the challenges facing the region.

Saudi economist Hussam Al-Dakhil stressed the importance of taking advantage of the promising investment opportunities and comparative advantages of the northern region.

Al-Dakhil told Al Jazeera Net that Saudi Arabia is looking to achieve investments worth more than $ 3 trillion in various economic sectors in the coming years. These investments include the mining sector, which is receiving more attention.

The Saudi economist explains that the northern border region plays a key role in achieving Saudi targets in the mining sector in general and the phosphate industry in particular, as it includes 25% of the Kingdom's mining wealth.

Source : Al Jazeera