New Saudi Arabia Tourism Development Fund – Finance and Banking
The situation: On June 21, 2020, Saudi Minister of Tourism Ahmed Al-Khateeb announced the establishment of a Tourism Development Fund (“Fund”) with an initial capital of SAR 15 billion (approximately SAR 4 billion). dollars).
The goal: The National transformation program(“NTP”) aims, among other things, to market Saudi Arabia as a tourist destination regionally and globally.
Look forward: The Fund is likely to play an important role in attracting and supporting investment, encouraging the development of the Saudi tourism sector and overcoming some of the challenges it faces.
Saudi Arabia’s Vision 2030 is a strategic framework to reduce Saudi Arabia’s dependence on oil, diversify its economy, and develop public service sectors, including tourism. As part of Vision2030, the NTP, a coordination unit involving 24 Saudi government entities, aims to develop government capacity and capacity to establish the legal and physical infrastructure needed to achieve the Vision2030 goals.
In the context of the Saudi tourism sector, the NTP aims to market Saudi Arabia as a regional and global tourist destination through the development of state-of-the-art infrastructure, the preparation of necessary regulations and legislations and the strengthening of institutional capacities, all of which should contribute to creating jobs and increasing the contribution of the tourism sector to the economy of the Kingdom. But the NTP recognizes that the development of the Saudi tourism sector faces a number of challenges, including:
- The lack of diversified tourist destinations and services in the Kingdom and the disparity of their qualities;
- The need to improve the preparation of tourism infrastructure, such as transport and hotels, to meet the needs of different segments;
- The inability of the tourism sector to meet the growing demand for tourism services; and
- Inadequate infrastructure of a number of national heritage sites to accommodate tourists.
The Tourism Development Fund
Preliminary comments. The Tourism Development Fund Law (“Law”) provides in part that it will not enter into force until 90 days after its publication in the Official Gazette of Saudi Arabia. The law was published on June 26, 2020 and therefore entered into force on September 23, 2020.
Investment, Financing and Advice. The authority of the Fund includes (but is not limited to) the authority to invest its funds in assets, to provide financing to companies operating in the tourism sector or related sectors, and to provide advice to companies operating in the tourism sector or related sectors. .
- Investment. The law grants the Fund the power to invest, own and dispose of assets; invest in securities; and to contribute to the development of tourist areas, alone or in partnership with the public or private sector. The Fund therefore has the authority and means to act alone or in cooperation with others to invest in projects aimed at addressing any of the challenges facing the Saudi tourism sector, as identified by the NTP. .
- Funding. The law gives the Fund the power to provide financing to companies operating in the tourism sector, operating in areas supporting the tourism sector, or developing technologies and infrastructure that serve different tourism activities, in each case subject to controls. established by the Fund’s Board of Directors. headed by the Minister of Tourism (“Council”).
The Board is the policy-making authority for the Fund. Until such policies are established, the conditions under which the Fund can provide funding will remain unknown. However, we believe (and this is only speculation) that the Fund will be to the Saudi tourism industry what the Saudi Industrial Development Fund is to Saudi industry: a source of medium and long-term concessional loans term whose terms will vary depending on the location and size of the funded project.
- Advice. The law gives the Fund the power to provide advisory services to companies operating in the tourism sector, operating in areas supporting the tourism sector or developing technologies and infrastructure that serve different tourism activities. Although the terms under which these advisory services will be provided are currently unknown, it seems likely that these advisory services will be provided on a commercial basis, given that the law provides that funding for the Fund will come from (among other things) financial resources consideration received for the services and work it provides.
Tourism is a key driver of Vision2030, and the Fund can reasonably be expected to play an important role in attracting and supporting investment, encouraging development, and overcoming some of the challenges facing the Saudi tourism sector. Companies (whether national or international) involved in the tourism sector or related sectors should closely follow the development of the Fund.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.