Recent landscape on foreign direct investment in Medtech/Pharma in Saudi Arabia

Monday 29 April 2024

Christina Sochacki

Senior Consultant, Al Tamimi & Company, Jeddah


The healthcare and life sciences sector is one of the most significant sectors in Saudi Arabia and is a key focus of Saudi Vision 2030. Of the SAR1,251bn (approx. US$333bn) 2024 budget allocation, healthcare and social development expenditure accounts for SAR214bn (approx. US$57bn), and is the third-largest item after general items and military spending. Increasing private sector participation in the healthcare sector from 25 to 35 per cent is part of Vision 2030, which also seeks to provide free and quality healthcare to over 33 million Saudi citizens. The Vision 2030 strategic objectives include goals dedicated to healthcare, including targeting the privatisation of 290 hospitals and 2,300 primary health centres by 2030. Through the various Vision 2030 programmes, Saudi Arabia seeks to introduce new strategies to fulfil public health needs through insurance-based financing and increasing private sector participation.

Sector background

Saudi Arabia’s national healthcare system, where the government is responsible for both the financing of healthcare and its delivery, is largely publicly financed. The Ministry of Health (MOH) is the largest provider of healthcare, accounting for approximately 60 per cent of healthcare services, delivered at primary, secondary and tertiary levels. The other government healthcare providers (such as the Saudi Arabian National Guard and the Ministry of Defence and Aviation) provide comprehensive health services to their targeted population, usually employees and their dependents, and represent around 20 per cent of health services. The private sector provides the final 20 per cent of the healthcare services, but this is expected to increase due to a variety of factors, including the implementation of favourable foreign investment legislation.

As part of its recent Vision 2030 initiative, Saudi Arabia has been amending its laws and regulations with the aim of becoming a worldwide business hub for foreign investment. As part of these recent updates, the permissibility of foreign ownership in the healthcare sector has been expanded and a number of business vehicles are available to foreign investors.

Opening the doors to the private sector

The Saudi government views healthcare as the sector with the best privatisation potential. Consequently, a restructuring of the public sector in underway, through decentralisation and digitalisation initiatives, with the goals of increasing efficiency and reducing costs. Simultaneously, privatisation of public health services is ongoing, aiming to create a more competitive healthcare environment to attract investment and improve service delivery and outcomes. Saudi is seeking to make increased use of private healthcare provision and develop third sector organisations (such as charities and nongovernment organisations) to cover gaps in its healthcare system.

There has also been a shift towards public-private partnerships (PPP) and build-operate-transfer (BOT) contracts. PPPs are one of the main pillars for driving reform in Saudi Arabia. An array of regulatory and legal reforms have been made in recent years to accommodate more foreign investment and PPPs.

The MOH incudes in its strategy a private sector participation initiative, aims to establish partnerships with the private sector for the financing of capital and operational projects and increase the role it plays in the development and management of health units. Current projects include one related to medical cities and another to radiology.

From the perspective of the Saudi Food & Drug Authority (SFDA), laws were changed to allow foreign ownership of up to 100 per cent of a general polyclinic, a hospital, and a telemedicine and telehealth centre. However, foreign ownership remains restricted in single specialty clinics and pharmacies. As the Saudi Arabia Commercial Agencies Law restricts commercial agencies to Saudi nationals, foreign ownership of pharmaceutical and medical device distribution companies, where such companies are acting as agents of third parties, is not permitted. However, changes to the commercial Saudi Arabia Commercial Agencies Law are expected later in 2024, and we will be looking to see their impact of such arrangements.

The 2019 Private Health Institutions Law is off particular significance. It permits foreign investors to own, operate, and manage hospitals and health centres in Saudi Arabia through PPPs and BOT models. While private sector contribution to publicly funded projects is not new within Saudi, it had traditionally been largely restricted to certain sectors, and not permitted in healthcare. Moreover, the MOH now allows foreign ownership of hospitals and medical centres, if certain foreign investment requirements are met. The SFDA also now permits foreign ownership in certain pharmaceutical establishments, excluding pharmacies. The ownership of a pharmacy continues to be restricted to Saudi nationals, unless an exemption is granted.

Additionally, in March 2021 the National Centre for Privatisation & PPP (NCP) issued the regulatory base for private sector participation and PPPs in Saudi Arabia: the Private Sector Participation Law and its implementing regulations (PSP Law). The PSP Law aims to increase private sector participation in infrastructure projects and in the provision of public services to citizens and residents, through PPPs and the privatisation of public sector assets. All contractual relationships between the public and private sector relating to infrastructure or the delivery of public services are covered by the PSP Law, if they meet certain parameters.

Another highlight of the PSP Law is that it permits international arbitration as a dispute resolution forum. One of the challenges to foreign direct investment in Saudi Arabia was typically that foreign parties were unable to subject their government contract disputes to binding international arbitration. The PSP Law allows PPP contracts to specify that disputes arising out of such contracts will be referred to arbitration. The Board of Directors of the NCP is specifically provided authority to: approve the inclusion of an arbitration clause in the PPP contract; enter into an arbitration agreement to settle an existing dispute arising from the PPP project; or approve the inclusion of an arbitration agreement or clause specifying a foreign law to be the governing law for the subject matter of the dispute.

The MOH has issued a number of opportunities through its PPP programme, charged with increasing private sector involvement in eight strategic areas: primary care; hospital commissioning; the construction of medical cities; rehabilitation; radiology; long-term care; home care; and laboratories.

Privatisation programme

As part of Vision 2030, Saudi’s Privatisation Programme was launched in 2018. Its aim was to identify government assets and services which can be privatised in a number of sectors, including healthcare. The Programme has identified nine different areas that would benefit from privatisation and/or a PPP, including. These are the development of health centres; hospital operations; new medical cities; radiology services; rehabilitation and extended care; home care; laboratories; pharmacies; and healthcare logistics.

The NCP is responsible for enabling the Privatisation Programme, including issuing regulations, creating the strategic framework for privatisation, and advancing the government assets and services earmarked for privatisation. As discussed, the NCP issued the regulatory base for private sector participation and PPPs – the PSP Law.

Other responsibilities of the NCP include tendering various privatisation initiatives including those for: the Saudi MOH; the Saudi Health Council; and the King Faisal Specialist Hospital and Research Centre.


As per the Vision 2030 initiative and the ongoing updates to Saudi laws and regulations, it is now, more than ever, convenient for foreign investors to set-up shop in Saudi Arabia. We expect continued updates to laws and regulations, and further announcements in 2024. These are all aimed at attracting worldwide investment to further position Saudi Arabia as an investment hub in a variety of sectors, including healthcare and life sciences.