Saudi Arabia’s New Tourism Development Fund | Jones Day
Saudi Arabia’s Vision2030 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 the government capacity and capacities necessary to establish the legal and physical infrastructure necessary to achieve the goals of Vision2030.
In the context of the Saudi tourism sector, the TNP aims to promote Saudi Arabia as a regional and global tourism destination through the development of advanced infrastructure, the preparation of the necessary regulations and legislation and the strengthening of institutional capacities, which should all of them contribute to job creation and increase 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 in their qualities;
- The need to increase 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
- Insufficient infrastructure of a number of national heritage sites to accommodate tourists.
The Tourism Development Fund
Preliminary comments. The Tourism Development Fund Act (“Law”) provides in part that the law will not come into force until 90 days after its publication in the Saudi Official Gazette. The law was published on June 26, 2020 and therefore entered into force on September 23, 2020.
Investment, financing and advice. The power of the Fund includes (but is not limited to) the power 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 gives the Fund the power to invest, hold 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 the means to act alone or in cooperation with others to invest in projects aimed at addressing one of the challenges that the Saudi tourism sector is 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 the controls set. by the Board of Directors of the Fund headed by the Minister of Tourism (“Council”).
The Board is the authority responsible for establishing the policies of the Fund. Until such policies are established, the conditions under which the Fund can provide funding will remain unknown. However, we would speculate (and this is only speculation) that the Fund will be to the Saudi tourism industry what the Saudi Industrial Development Fund is to the Saudi industry: a source of medium and long-term soft loans. the conditions of which will vary depending on the location and size of the funded project.
- Advice. The law empowers the Fund to provide advisory services to companies operating in the tourism sector, operating in areas supporting the tourism sector or developing technologies and infrastructure to serve different tourism activities. Although the conditions under which such advisory services will be provided are currently not known, it seems likely that such advisory services will be provided on a commercial basis, as the law provides that funding for the Fund will come (among others) from consideration received for the services and works 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. confronted. Companies (whether national or international) involved in the tourism sector or related sectors should closely monitor the development of the Fund.