Saudi Arabia has witnessed a remarkable surge in Foreign Direct Investment (FDI) inflows during the third quarter of last year. This highlights the continuing success of the kingdom’s ambitious Vision 2030. The rise in FDI is correlated with Saudi Arabia’s comprehensive legal, economic, and social reforms aimed at attracting significant external funding.
Key initiatives
Multiple strategic initiatives have been instrumental in driving FDI growth. Among the most pivotal reforms and strategies are:
- The National Investment Strategy
- The Regional Headquarters Program
- New tax incentives like zero levies for foreign companies
These initiatives are some of the driving factors that have contributed to the surge in Saudi Arabia’s FDI.
At the heart of Vision 2030 is the National Investment Strategy, which seeks to propel economic growth and diversification. Under this strategy, the kingdom aspires for FDI to contribute 5.7 percent to its gross domestic product (GDP). This would position Saudi Arabia among the top 10 economies in the Global Competitiveness Index by 2030.
Foreign investments decline
While FDI experienced a substantial uptick, the kingdom’s total investment in foreign countries has witnessed an 8 percent dip in the third quarter of 2023, totaling SAR17.21 billion. This raises questions about Saudi Arabia’s global investment strategy amid the domestic FDI boom.
Moreover, in February 2021, the Saudi government announced its intention to limit contracts with foreign companies lacking regional headquarters in the kingdom. As of January 2024, government agencies face restrictions in dealing with companies without a presence in Saudi Arabia. This underlines the country’s commitment to strengthening the local business ecosystem.
Read: Saudi Arabia approves 2024 annual borrowing plan
Methodological revamp
Recently, Saudi Arabia’s Ministry of Investment adopted a new methodology, endorsed by the IMF and praised by UNCTAD, to enhance the accuracy of FDI reporting. Analyzing individual financial statements of over 10,000 foreign companies from 2015 to 2022, the new methodology provides a more precise picture of FDI trends.
Under the revamped methodology, the FDI stock balance in Saudi Arabia has shown consistent growth from SAR413 billion in 2015 to SAR775 billion in 2022. FDI inflow, in particular, has seen a significant increase, reaching SAR122 billion in 2022 compared to SAR64 billion in 2015. This positions Saudi Arabia as the 16th largest recipient of FDI among the G20 economies.
For more economy news, click here.Â
