Saudi Arabia-Germany Trade and Investment Relations: Key Opportunities for German Businesses

As the fourth-largest supplier of goods to Saudi Arabia, Germany benefits from expanded trade and business opportunities across sectors like renewable energy, healthcare, and advanced industries. We discuss the strong partnership between Saudi Arabia and Germany, driven by economic collaboration and initiatives like Saudi Arabia’s Vision 2030, and further supported by recent agreements and investment prospects aimed at economic diversification.

By Giulia Interesse

Since formalizing diplomatic relations in 1954, Germany and Saudi Arabia have cultivated a robust partnership marked by regular consultations and growing economic cooperation. While rooted in early diplomatic ties, the relationship has significantly expanded in recent years, particularly within the economic sphere. Germany stands as Saudi Arabia’s fourth-largest supplier of goods, with exports ranging from machinery and motor vehicles to chemical and precision engineering products. Meanwhile, Saudi Arabia is Germany’s second most important trading partner in the Arab world, reflecting the depth of their economic engagement.

A key driver of this partnership is Saudi Arabia’s Vision 2030 reform program, which seeks to diversify its economy and reduce its reliance on oil. This initiative has opened new avenues for collaboration, particularly in sectors like education, tourism, and small and medium-sized enterprises (SMEs). The shared interest in economic diversification provides fertile ground for German investment, especially in emerging industries such as cultural and mining sectors. The German-Saudi Arabian Liaison Office for Economic Affairs (GESALO) and the Joint Economic Commission (GWK) further support these efforts by fostering dialogue between government and business representatives.

In March 2023, Saudi Arabia and Germany took significant steps to strengthen their investment cooperation, signing seven memoranda of understanding (MoUs) during a high-level Saudi delegation’s visit to Berlin. These agreements span various sectors, including:

• Chemicals;
• Waste management;
• Renewable energies;
• Engineering;
• Advanced industries;
• Automotives; and
• Technology.

The MoUs were signed at the German-Saudi Investment Forum, reflecting both countries’ commitment to deepening economic ties. Notable collaborations include partnerships between Saudi Chemical Holding Co. and Germany’s Hellman in the chemicals sector, and initiatives in waste management with HTCycle, as well as water innovation with Wilo Group.

The Saudi delegation, led by Minister of Investment Khalid Al-Falih, engaged in bilateral meetings and events across multiple German cities, including Munich and Hamburg, aimed at fostering private sector partnerships. The visit follows a growing momentum in bilateral cooperation, highlighted by German Chancellor Olaf Scholz’s 2022 visit to Saudi Arabia and reciprocal engagements. With an increasing presence of German companies such as BMW, Siemens, and medical device manufacturer Karl Storz in Saudi Arabia, the two nations are actively exploring new opportunities, particularly in the fields of healthcare innovation, advanced technologies, and tourism.

This article explores the dynamic bilateral relations between Germany and Saudi Arabia, with a special focus on emerging opportunities for German businesses and investors.

Saudi Arabia-Germany bilateral trade

Saudi Arabia ranks as Germany’s second most significant trading partner in the Arab world, following the United Arab Emirates, while Germany holds the position of the largest goods supplier to the Kingdom.

According to the United Nations COMTRADE database, in 2023, Germany’s imports from Saudi Arabia reached approximately US$2.51 billion. The import composition from Saudi Arabia is diverse, with key products including vehicles other than railway and tramway, machinery, nuclear reactors, and boilers, which together form a substantial part of the import portfolio.

Meanwhile, Germany’s exports to Saudi Arabia reached US$8.89 billion. The primary categories of exports included vehicles other than railway and tramway, machinery, nuclear reactors, and boilers. Other significant exports comprised pharmaceutical products, aircraft and spacecraft, and optical, photo, technical, and medical apparatus. This diverse range of exported products underscores Germany’s commitment to enhancing its economic partnership with Saudi Arabia.

Trade and investment treaties

Germany-Saudi Arabia bilateral investment agreement

In 1996, Saudi Arabia and Germany signed a bilateral investment treaty (BIT) to establish a framework designed to promote, facilitate, and protect investments between the two nations. The treaty aims to create favorable conditions for investors by ensuring transparency, fairness, and legal protection. Below are some of the key provisions from the agreement:

• Promotion and protection of investments: Both parties agree to encourage and create favorable conditions for investors from each country. This includes the assurance that investments will be treated fairly and equitably, providing a stable legal environment for businesses from both Saudi Arabia and Germany.
• National treatment and most-favored-nation treatment: Investors from either party are guaranteed treatment no less favorable than that accorded to domestic investors or investors from any third country. This ensures non-discriminatory access to investment opportunities, safeguarding the rights of foreign investors.
• Expropriation and compensation: Investments will not be nationalized or expropriated except for public purposes, in accordance with legal procedures, and with adequate compensation. The agreement provides investors with the right to seek legal recourse, ensuring that expropriation is conducted transparently and fairly.
• Repatriation of profits: The BIT allows for the unrestricted transfer of investment-related funds between the two countries. Investors can freely transfer their capital, profits, dividends, and other financial assets, guaranteeing liquidity and financial flexibility.
• Dispute resolution: The agreement establishes mechanisms for resolving disputes between investors and the contracting states, emphasizing amicable negotiations. Should disputes remain unresolved, they may be referred to international arbitration bodies such as the International Centre for Settlement of Investment Disputes (ICSID), ensuring a neutral forum for dispute resolution.

Multilateral treaties

Germany and Saudi Arabia, both members of the WTO, are signatories to various multilateral treaties concerning trade and investment. These include:

• TRIPS, which mandates WTO members to extend intellectual property rights to owners in any member state. It incorporates a most-favored-nation (MFN) clause, ensuring equal treatment for IP rights protection across all member countries. Additionally, it provides mechanisms for dispute resolution and compensation.
• The Agreement on Trade-Related Investment Measures (TRIMs), which prohibits the implementation of investment measures that restrict trade between members. This includes measures like local content requirements, which mandate the use of locally-produced goods or services by companies operating in a market.
• GATS, which grants most-favored-nation status to service providers of any WTO member, excluding governmental services such as social security, public health, education, and certain services related to air transport.

Opportunities for German businesses and investors in Saudi Arabia

Saudi Arabia favorable investment conditions

Germany’s strong trade ties with Saudi Arabia are poised to deepen further, particularly as the Kingdom advances its ambitious Vision 2030 agenda. A core pillar of this vision is economic diversification, aimed at attracting quality investments across emerging and strategic sectors. For German businesses, this presents significant opportunities, especially in areas like green energy, digital transformation, and advanced manufacturing.

Under the newly introduced 2024 Foreign Direct Investment (FDI) Law, Saudi Arabia has eliminated the requirement for foreign investors to have a local partner in most sectors, allowing up to 100 percent ownership. This reform creates a more attractive and flexible investment environment for German enterprises. The tax incentives and benefits provided by the new law, including reduced corporate tax rates and exemptions for certain sectors, enhance the Kingdom’s appeal as a destination for foreign direct investment.

Additionally, Saudi Arabia’s National Investment Strategy (NIS) is focused on integrating investments that align with sector-specific strategies and Vision Realization Programs. The NIS places a strong emphasis on private sector engagement, with a notable push to increase the participation of local and foreign private companies, including leading German firms. German investors can benefit from strategic incentives while the investment ecosystem continues to mature, gaining a foothold in high-potential sectors like renewable energy, healthcare, and smart infrastructure.

The Saudi Investment Promotion Authority (SIPA), established in 2024, further supports foreign investors by simplifying regulatory procedures and enhancing investor protections. With new regulations offering streamlined licensing processes and stronger dispute resolution mechanisms, German businesses are well-positioned to explore long-term, secure investment opportunities in Saudi Arabia.

Key investment areas

Machinery and equipment exports

Germany remains one of Saudi Arabia’s key trading partners, and machinery exports have seen significant growth, increasing by 24.1 percent in 2023 compared to the previous year. German machinery, especially in sectors such as material handling, construction, and food processing, is highly sought after. According to recent data from Germany Trade & Invest (GTAI) and the German Engineering Federation (VDMA), material handling equipment accounts for 13.8 percent of Germany’s machinery exports to Saudi Arabia, followed by construction equipment at 11.8 percent, and food processing and packaging machinery at 6.5 percent.

This highlights the demand for German expertise in sectors that are critical to Saudi Arabia’s infrastructure and industrial growth. The country is investing heavily in mega-projects such as NEOM, the Red Sea Project, and other initiatives aimed at building smart cities, tourism infrastructure, and sustainable urban spaces. These developments require cutting-edge machinery, which opens doors for German companies specialized in construction equipment, drive technology, and specialized industrial machinery.

Renewable energy and green technologies

Saudi Arabia’s push for sustainable development also creates new opportunities in renewable energy, where German technology is well-positioned to play a leading role. The Kingdom aims to increase the share of renewable energy in its energy mix to 50 percent by 2030. With projects such as the Sakaka Solar Power Plant and the Dumat Al Jandal Wind Farm already underway, there is a strong demand for advanced solar and wind technologies, areas in which German companies have a competitive edge.

Additionally, Saudi Arabia’s Public Investment Fund (PIF) is spearheading initiatives in green hydrogen and carbon capture technologies, areas where German firms can offer expertise. Collaboration in these fields could provide long-term investment opportunities, particularly as both countries are committed to reducing carbon emissions and fostering green industrial growth.

Automotive and e-mobility

The automotive industry is another promising area for German companies in Saudi Arabia. As the Kingdom moves towards modernizing its transportation sector, electric vehicles (EVs) and e-mobility infrastructure are gaining traction. Germany, as a global leader in automotive engineering, can capitalize on this transition by supplying advanced vehicles, batteries, and charging systems. In the first seven months of 2024, Germany exported €4.8 billion worth of motor vehicles to Saudi Arabia, underscoring the importance of this sector in bilateral trade relations.

With the Saudi government investing in EV infrastructure and setting ambitious targets for electric vehicle adoption, there are numerous opportunities for German automakers and component manufacturers to enter this growing market.

Healthcare and medical technologies

Saudi Arabia’s healthcare sector is undergoing rapid modernization, with the government prioritizing the development of a world-class healthcare system. German companies specializing in medical technology and pharmaceuticals are well-positioned to benefit from this. In 2024, Germany’s medicinal and pharmaceutical exports to Saudi Arabia saw a 13.9 percent growth, reflecting the increasing demand for advanced healthcare solutions.

With the Vision 2030 plan emphasizing the need for quality healthcare services and a shift towards privatization in the healthcare sector, there are significant opportunities for German companies to invest in healthcare infrastructure, medical devices, and digital health solutions.

Potential for Saudi Arabia-Germany cooperation

Saudi Arabia is emerging as an attractive market for German businesses, driven by the ambitious goals set forth in Vision 2030 and the National Transformation Program 2020. These strategic initiatives open a myriad of opportunities for German companies to contribute their expertise in key sectors, including renewable energy, manufacturing, infrastructure, water management, healthcare, and waste management. The alignment of these sectors with Germany’s industrial strengths positions both nations for a productive partnership.

The evolving regulatory framework in Saudi Arabia, along with a gradual easing of austerity measures and a revitalization of major investment projects, has fostered a positive outlook among German businesses. The growing pool of skilled labor in Saudi Arabia is increasingly recognized as a significant asset for employers, enhancing the country’s appeal as a vital regional market. As the largest market in the Gulf region, Saudi Arabia offers German companies an excellent opportunity to establish manufacturing bases and regional sales offices, facilitating access to broader markets.

By leveraging their strengths in technology and innovation, German businesses can play a crucial role in supporting Saudi Arabia’s development objectives while benefiting from the robust economic landscape of the region.

Dezan Shira & Associates presence in Europe

Europe maintains substantial trade and investment connections with Asia. As various regions in Asia experience rapid development, and with the EU actively pursuing trade agreements with Asian counterparts, there is a wealth of opportunities for European investors in the region.

Incorporated in Munich in January of 2021, Dezan Shira & Associates’ European presence serves as a first point of contact for European companies wishing to do business in Asia. In both the Munich and Milan offices, our European-based team works with a variety of partners to educate businesses on the economic performance and regulatory environment of developing Asian economies.

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