In April 2023 the Economic Cities and Special Zones Authority (ECZA) announced the launch of four new special economic zones (SEZs) that will have far-reaching implications for the Kingdom’s industrial sector, trade performance and the broader economy. These include King Abdullah Economic City (KAEC) SEZ in Rabigh, Ras Al Khair SEZ in the country’s north-east, Jazan SEZ on the Red Sea coast and the decentralised Cloud Computing SEZ.

Each of the zones has been designed with a unique focus and set of objectives and are part of longterm efforts to stimulate foreign direct investment and drive diversification. By establishing new SEZs, Saudi Arabia is boosting its credentials as a global investment destination and a centre for global supply chains. The SEZs aim to leverage the country’s advantageous position in global trade routes and create opportunities for businesses to expand their operations and tap into new markets. This move is in line with Vision 2030, which seeks to diversify the country’s economy and reduce its dependence on oil.


The SEZs offer a range of benefits, including a reduced corporate income tax rate of 5% for up to 20 years, 0% withholding tax for the repatriation of profits, 0% Customs duties deferral for goods within the SEZ, expatriate levy exemptions, 0% value-added tax for intra-SEZ goods and flexible regulations surrounding foreign talent during the first five years. To avoid double taxation, the SEZs offer special tax treatment in line with OECD principles. Attractive rates for utilities are also offered within the SEZs, with the availability of electricity at a competitive rate of $0.05 per KWh for businesses contributing to cost-efficiency.

Ease of establishment is a key priority across Saudi SEZs. Through a streamlined application and approval process and an integrated one-stop-shop service, the ECZA is aiming to provide a seamless experience for investors. The services offered encompass property development, real estate, company licensing and registration, employment, tax and Customs, legal and compliance, and residential services.


Each SEZ presents advantages inherent to its location and pre-existing industrial and service base. The KAEC SEZ, situated in Makkah Province, holds a pivotal position along global trade routes. Its strategic location on the Red Sea allows for convenient access to international markets, with 13% of global trade passing through this maritime thoroughfare. Leveraging existing infrastructure at King Abdullah Port, the KAEC SEZ offers a platform for entities to connect with global supply chains. Its main sectors of focus are automobile supply chain and assembly, consumer goods, ICT, pharmaceuticals, medical technology and logistics. Notably, US-headquartered Lucid, a leading player in the global electric vehicle (EV) industry, has chosen the KAEC SEZ as its regional production base, with plans to manufacture 150,000 EVs annually, a key step towards the government’s goal of 500,000 per year by 2030.

Ras Al Khair SEZ is located in the Eastern Province and builds upon the established maritime industries in the area, aiming to foster a thriving maritime cluster and propel future maritime capabilities. Thanks to its proximity to Ras Al Khair Port – the Kingdom’s newest industrial port, with extensive capacity for handling bulk cargo, and the MENA region’s largest shipyard – the zone offers an enabling environment for maintenance, repair and overhaul activities related to shipbuilding and rig platforms.

Jazan SEZ, located within Jazan City for Primary and Downstream Industries, capitalises on Jazan’s strategic position along the Red Sea shipping route. It enables the Kingdom’s mining industry to play a significant role in the global construction, processed metals and minerals markets. Adjacency to the region’s largest port, the Port of Jazan, facilitates efficient material delivery without incurring land shipment costs. Investors in Jazan SEZ can leverage regional socio-economic developments, including the NEOM giga-project and Belt and Road Initiative infrastructure projects across the Middle East and Africa. The key sectors of focus in this zone are food processing, metal conversion and logistics.

While the first three zones are location-specific, the Cloud Computing SEZ has a distinct model. Situated in the Innovation Tower of the King Abdulaziz City for Science and Technology in Riyadh, the zone serves as a centre for emerging technology, with a particular focus on cloud computing services. Differing from its counterparts, the Cloud Computing SEZ operates on a hybrid model that allows investors to establish physical data centres and cloud computing infrastructure throughout Saudi Arabia.

Innovation Policy

In 2019 there were more than 5000 SEZs globally, according to the UN Conference on Trade and Development. Some 75% of developing economies and almost all transition economies use SEZs in their early stages of industrialisation. The success of these zones is influenced by national policies, local capacities and global connectivity. Understanding these factors is crucial for identifying the strategic sectors to develop within the zones and designing effective value propositions.

SEZs are not a one-size-fits-all solution, however, and their success depends on various factors. A comprehensive analysis that considers connectivity, trade integration, cluster development, value chains, technology and innovation centres, and sustainable development principles is an essential tool for maximising zone potential. As such, Saudi SEZs are working to align their development strategies with global trends and assess their competitive advantages in order to maximise the potential for success.

With regards to global dynamics, the relocation of manufacturing activities from higher-cost regions to cheaper locations, such as Africa, coupled with evolving supply chain dynamics and the fragmented distribution of advanced manufacturing, demands adaptation and innovation. With two of the new Saudi SEZs located facing the African continent and one well positioned in the Gulf to access Asia-bound shipping lines, Asia and Africa are expected to be among the main export markets for companies based in the new zones. This aligns well with the South-toSouth cooperation growth paradigm.

From the point of view of competitive advantages, the SEZs in Saudi Arabia can capitalise on their strategic locations on the Red Sea and the Gulf, the burgeoning industrial base in the KAEC and Ras Al Khair, the availability of affordable raw materials such as hydrocarbons and minerals, and the possibility of developing governance structures that are more robust than in other developing jurisdictions.

Importantly, SEZs can target both manufacturing and services. By fostering innovation and specialisation in these areas, they can create synergies between different sectors and promote industry upskilling. This can be achieved by facilitating knowledge and supply chain integration within the zone, particularly as relates to efforts to establish integral logistics and transport solutions. The integration of advanced IT solutions is also central to connecting manufacturing and services activities. In this sense, the successful development of the Cloud Computing SEZ is set to be a key development enabler.

Developing a capable workforce is equally essential for the sustainable growth of SEZs (see Education & Training chapter). While flexible regulations surrounding foreign talent offer an advantage, efforts are also required to develop a local workforce with the necessary skills and expertise. Collaboration with educational institutions and vocational training centres can help develop a skilled labour force aligned with the specific sectors of focus in each SEZ.

The impact of mandatory Saudiisation ratios and the ensuing rise in labour costs is another factor that serves to impact SEZ development and workforce upskilling within the Kingdom. In this sense, it is important to note that an SEZ’s integration with the local economy can lead to linkages, knowledge spillover and technology transfer to local companies which, in turn, might boost employment generation and training opportunities for the Saudi population.


While Saudi Arabia’s four newest SEZs present significant potential for socio-economic development, ensuring an enabling environment for appropriate regulation, infrastructure and human capital development, and other sector-specific factors will be crucial to their success. By clearing the way for growth and leveraging the inherent advantages of each SEZ – such as their strategic locations, existing infrastructure and sector focus – Saudi Arabia can overcome hurdles and boost sustainable socio-economic development through these zones. The commitment of the ECZA and collaboration with public and private stakeholders will be instrumental in maximising the economic potential of each SEZ.