Sports Investment in the Kingdom

Sports Investment in the Kingdom of Saudi Arabia consists of an investment activity that aims to develop the sports industry and allows sports practices to generate revenues, which brings added value to the gross domestic product (GDP).

In order to achieve sustainability and generate revenue from sports, the Kingdom has been issuing laws for the development of the sports industry. In 2020, the Ministry of Sport regulation was promulgated. The second article stipulated that the ministry is the competent authority and main reference in the Kingdom in terms of regulating and developing the sports industry, enhancing its potential, expanding the pool of sports practitioners, and achieving excellence in Saudi sports locally and internationally. Moreover, the ministry oversees all sports activities.

To this effect, and in order to support sports investment and achieve its sustainability, the ministry promotes and develops sports investment, and attracts local and international investments to the sector as per the established legal procedures.

Between 2020-2021, the sports sector contribution to the GDP increased between 2020-2021, as it grew from SAR2.4 billion to SAR6.5 billion, thus constituting to a 170 percent increase. Moreover, seventeen investment companies for sports clubs and federations were established.

The Kingdom's sports investment increased the total value of non-governmental revenues for the Prince Mohammed Bin Salman Professional Cup League Clubs, which generated over those two years more than SAR1.8 billion. In 2021, revenues surpassed SAR1.1 billion after generating SAR747 million in 2020. The Ministry of Sport issued more than 1,904 licenses for gyms and sports centers, thus creating over twenty thousand direct jobs and sixty thousand indirect jobs within the sports sector. The ministry seeks to increase the contribution of the sports sector to the non-oil GDP to over 1.2 percent by 2030.

Sports investment efforts in the Kingdom are not only limited to the Ministry of Sport. In 2022, the Ministry of Investment signed a joint cooperation agreement with a sports company, in coordination with the Ministry of Sport, to promote investment in padel sports, and increase the number of sports sites through initiatives and enablers provided by the Ministry of Investment. The agreement seeks to prepare the investment environment and encourage investors in order to benefit the sports sector and activate the overall service role of the Ministry of Investment, thus providing services and facilities to investors.

Moreover, the agreement is fruitful in the field of sports investment. A new licensing service to increase investment opportunities with the private sector was launched. In 2020, a licensing platform was built, which issued more than eighty licenses until the end of 2020.

Sports clubs received the support that motivates them to invest in sports. With the establishment of the Cub Investment Platform, around thirty-nine applications were submitted on the platform in 2019, with eleven beneficiaries, while the number of applications had increased to 104 in 2020, with twenty beneficiaries.

In 2020, the Ministry of Sport organized the International Conference on Governance and Compliance to Promote Integrity in Sports. It shed light on governance, integrity and their implications on sports investment.

Efforts to organize investment processes in the Saudi sports industry led to the issuance of the Regulation of Land Investment Allocated to Sports Clubs, which aims to: - Drive financial returns for sports clubs to help them achieve their goals; - Regulate investment procedures conducted by sports clubs;- Maximize the financial adequacy of sports clubs to obtain investment opportunities at fair competitive prices; and - Achieve transparency at all stages of investment procedures conducted by sports clubs.

The development of sports investment also reflected on sports clubs. While no club in 2015 was affiliated with any private sports investment company, three private sports investment companies were established for clubs for the very first time in 2020 to ensure their financial sustainability.

Sports investment in clubs is subject to preconditions set by the Ministry of Sport before approving the establishment of investment companies, including: - Forming a club investment committee; - Clarifying the company's main purposes; - Complying with the ministry’s laws and regulations in terms of investments and sponsorship; and - Providing the ministry with all the clubs' existing investment contracts.

Sports investments offer clubs more opportunities to develop their capabilities. Investment companies – as the investment arm of those clubs – achieve their support strategy standards, apply governance, provide an investment environment that enhances their resources, invest company funds and club investment surplus, and collect revenue from such investments.

Advantages for clubs arising from these investment companies include: - Participating in investment, endowment, real estate and other types of investment funds; - Establishing an investment entity that governs the investment process and manages resources; - Activating all investment, sponsorship, advertising, leasing, and rental contracts; - Owning, marketing, operating and selling all investment rights of the clubs, as well as their players, programs and projects; - Managing all investor relations; and - Establishing wholly-owned subsidiaries (within the Kingdom or abroad), or in partnership with local or international investors.

Within the efforts exerted in sports investment and investor attraction, the Ministry of Sport approved the establishment of private companies by thirteen of Prince Mohammed bin Salman Professional League Clubs, as part of the governance objectives resulting from the ministry's Club Support Strategy.

This step promotes sports investment opportunities in the Kingdom and establishes an attractive investment ecosystem to encourage the private sector to invest in sports clubs, thus enabling them to invest their resources to stimulate the growth of the sports economy in the Kingdom and increase the clubs’ financial resources.

In order to promote integration between SMEs and sports clubs, the Kingdom organized events to support sports investment, including the "Unity Towards Change" (نكمل بعض ونصنع الفرق) campaign in 2021 by creating a stimulating investment environment for sports investment and club sponsorships.

The Unity Towards Change campaign seeks to raise SME sector investments in the sports field, as well as the number of club sponsors, thus enhancing their sustainability and increasing their resources. The number of sponsors for football clubs has reached 126 facilities. Moreover, the campaign develops innovative investment tools to enable SMEs to invest in sports.

The Ministry of Sport is also advancing the sports industry and increasing the rates of club investments, making them better equipped to address the challenges. In this context, raising the number of clubs, which reached around 170 until 2021, aims to enhance the capacities of Saudi sports talents.

The Kingdom has secured a position in the sports industry, which allows it to expand in sports investment. The Kingdom includes ninety-seven sports federations, committees and amateur associations. Moreover, the trend towards privatization will support sports and economic investment in sports activities, events and goods.

Sports investment development efforts in the Kingdom also resulted in the launch of the Nafes platform in 2021. For the first time in the Kingdom, a platform issues licenses to private sports gyms, clubs and academies, thus enabling the private sector to invest in Saudi sports and provide local and foreign investors with the opportunity to establish and develop private sports gyms, clubs and academies. This is done by requesting the necessary licenses through Nafes, in an attempt to achieve Saudi Vision 2030 and diversify the sources of economy.

Nafes achieves a number of benefits which stimulate sports investment in the Kingdom, such as increasing the number of private sports gyms, clubs and academies in order to raise the sports level and the quality of competition, in addition to enhancing the performance of athletes and supporting the growth of sports and the economy. The platform is expected to be a turning point in the Saudi sports industry, as it allows the private sector to invest in sports and contribute to its growth and prosperity by obtaining the necessary licenses to establish clubs, academies and sports gyms for various sports.

The development of Nafes is carried out in phases, which will allow it to include more sports within an integrated investment system. The first phase will involve a number of sports, in which licenses can be issued to establish clubs or academies according to the sports type, such as: basketball, squash, rowing, indoor rowing, gymnastics, judo, taekwondo, karate, jujutsu, wrestling, martial arts, horse riding, bicycle riding, football, fencing, tennis, boxing, Muay Thai, kickboxing, windsurfing, sailing, swimming, e-sports, chess, RC sports, shooting and badminton.