Saudi Arabia is considering establishing the first free economic zone with Iraq, in the border region of Arar, located in the north of the Kingdom, provided that the region is not subject to taxes or fees, and no entry visas are applied, in order to serve investors in the two countries.
This plan is being studied by the Saudi Economic Cities Authority, which seeks to connect border areas and free zones with neighboring countries.
The Saudi northern border region includes about 100 new investment opportunities, worth 20 billion Saudi riyals ($5.3 billion), in addition to existing opportunities valued at 80 billion riyals ($21.3 billion). These opportunities focus on the mining, industrial, 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 during one of the sessions of the Northern Border Investment Forum, which was held in the city of Arar last Saturday.
The Arar land port is one of the gateways to the trade 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 it remained closed for 30 years following the invasion of Kuwait.
Investment opportunities
In this context, Saudi Minister of Commerce Majid Al-Qasabi indicated that there are huge investment opportunities awaiting the private sector once the new logistics zone in Arar is launched.
He pointed out during his speech – during the Northern Border Investment Forum – that this region will serve 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. The state has developed legislation and focused on financing, and the most important thing at the current stage is marketing opportunities for investors to learn about them.
Al-Qasabi confirmed 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.
The Saudi northern border region includes 25% of the Kingdom’s mining wealth, with a total value of 1.2 trillion riyals ($320 billion), according to Khaled Al-Mudaifer, Deputy Minister of Industry and Mineral Resources for Saudi Mining Affairs.
The Saudi northern border region also contains about 7% of the global phosphate reserve, and the volume of investment in it amounts to about 85 billion riyals ($22.66 billion) in two stages.
Al-Mudaifer pointed to the great opportunity available in the region thanks to the presence of phosphate resources, and stressed that the Kingdom has invested more than 120 billion riyals ($32 billion) in developing infrastructure to support and enhance the success of projects.
The northern region is considered an international corridor for trade and transport movement through three axes: the first through Iraq and then the countries of East Asia, the second through Jordan and Syria, then Turkey and the continent of Europe, and the third to the Arab Gulf countries.
Many advantages
Commenting on Riyadh’s decision to establish the Arar Free Economic Zone, Saudi analyst and economic expert Khaled Al-Ansari says that the Saudi northern border region enjoys many relative 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. 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 could 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 relative advantages of the region, including exemptions from taxes and fees. Customs duties, and no entry visas are required.
In addition, the region will provide new job opportunities for citizens of the two countries, as the region will attract companies and institutions from different parts of the world, which will lead to an increase in demand for labor, in addition to enhancing economic cooperation between the two countries, according to Al-Ansari.
Regarding whether Saudi Arabia intends to establish similar zones with other countries, the Saudi economic expert explains that, according to statements by Saudi Minister of Investment Khalid Al-Falih, the Saudi Economic Cities Authority is studying establishing a link between the border regions and neighboring countries.
He points out that the establishment of the free zone between Saudi Arabia and Iraq reflects 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 the year 2022, a 50% increase compared to 2021.
A year ago, Saudi Arabia announced, within the framework of the Green Middle East Initiative, pumping investments worth $10 billion into 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 adds 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 the free economic zone between the two countries is about 10 billion dollars. The construction process is expected to take about 5 years, with work starting in 2027.
Strengthening economic cooperation
For his part, academic and professor at Al-Faisal University in Saudi Arabia, Dr. Khaled Batarfi, says that the goal of the Kingdom’s government’s decision is to strengthen 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 About the enormous natural and human resources that countries possess.
Batarfi explained, in a statement to Al Jazeera Net, that Saudi Arabia aims for the region to be a regional commercial, manufacturing and service center, and to attract foreign investments from various parts of the world.
He points out that the free economic zone between Saudi Arabia and Iraq has the potential to be an engine for economic growth in the two countries. Achieving this requires efforts by governmental and private agencies in both countries to remove the challenges facing the region.
In turn, Saudi economic expert Hossam Al-Dakhil stresses 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 forward to achieving 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 economic expert explains that the northern border region plays a major role in achieving Saudi goals in the mining sector in general and the phosphate industry in particular, as it includes 25% of the Kingdom’s mining wealth.
